Unpaid Business Debts
When a company or individual fails to pay the money they owe for services or products, the legal claim is usually for payment of a debt under Colorado law. The failure to pay is also a breach of an oral or written contract. However, a claim for payment of a debt is subject to a 6-year statute of limitations while a claim for breach of contract must be brought in 3-years. Colorado law generally categorizes a claim as a payment of a debt as opposed to a breach of contract when the only action required to be performed under the agreement or contract is payment.
Sometimes there is not a written or oral agreement but a person or business received goods or services. If these goods or services were knowingly accepted, this can give rise to a claim for unjust enrichment. An unjust enrichment is usually a fallback claim if there isn’t a contract or agreement that governs the transaction between the parties. Unjust enrichment can also be used to recover money if the contract or agreement is determined by the court as unenforceable. There is not a specific statute of limitations for unjust enrichment but courts apply the statute of limitations of claims of “like character”. For example, this means that if the claim is just for payment of money, the 6-year statute of limitations for payment of debt applies.
Things to Remember
It’s importation to document the products or services provided; your attempts to collect the debt; and comply with any pre-suit notice requirement. Sometimes a contract will require notification on an intent to sue before going forward with it. I’ve also seen contracts that require a mediation before suing. In addition, there may be a requirement for arbitration and entitlement to attorney’s fees for pursing the debt.
Others that May be Liable for the Debt
Other things to consider include the entity or person required to pay the debt. Just because a company may have no assets, it doesn’t mean the owners or non-owners cannot be pursued for the debts. Sometimes owners can be pursued for the debts of a company and, sometimes, even non-owners can be pursued for the debts of the company.