Best practices in debt collection: Acknowledgements of debt are the way to go

How can I optimise the recovery of my outstanding amounts?

In practice, many companies – often out of habit – do not follow a rigorous process for concluding their business deals. Often, the parties agree verbally on the services to be provided or the goods to be delivered and then simply confirm the subject matter of the contract by email, WhatsApp message or a unilateral letter unsigned by the beneficiary. Sometimes sending the invoice is the only formal step in the performance of the contract.

If the customer refuses to pay the amount owed after several reminders, the company usually issues a summons to pay via the debt collection office. In most cases, however, the customer will lodge an objection, which will block the collection procedure. One way of continuing the process despite the opposition is to file a request to set aside provisionally the opposition, which is a simple, quick and inexpensive legal procedure. Such a procedure reverses the role of the parties, since if the company wins its case, it is then up to the debtor to initiate proceedings on the merits (i.e. a relatively heavy procedure) and to pay the related costs. If the company obtains a provisory waiver of the opposition, it will be able to continue the debt collection proceedings once the judgment is final. It is common at this stage for the debtor to pay the amount due in order to avoid seizure or bankruptcy.

Obtaining that the court sets the opposition aside is possible in particular if the creditor is in possession of an acknowledgement of debt, which is never the case if the parties have proceeded as described above.

The right thing to do: make sure you have a valid acknowledgement of debt

An acknowledgement of debt is (i) a document (ii) signed (handwritten signature unless otherwise expressly provided for by law) (iii) by the debtor (or his/her/its representative), (iv) showing his/her/its willingness to pay the creditor, (v) without reservation or conditions, (vi) a specific or easily determinable sum of money that is due. Under certain conditions, it may be a set of documents.

An exchange of emails (without signature), the sending of an order confirmation or the notification of an invoice with only an acknowledgement of receipt by email do not constitute an acknowledgement of debt.

Particular care must be taken when drafting the document that will constitute the acknowledgement of debt. It is essential to include all the elements required by law and case law to be recognised as such.

Our recommendations

• At the start of the contractual relationship

We strongly recommend drawing up a contract and require the customer to sign it. It has to be noted that a qualified electronic signature recognised in Switzerland is also valid (for more information on this subject, see our newsletter of June 2024). In particular, the contract must state the amount due (or at least part of it, if the final amount cannot be determined) and the date on which it is due (e.g. 30 days after the invoice is sent). In this case, it is advisable to take the opportunity when drawing up the contract to mention all the other important elements, in particular the consequences of late payment (e.g. interest, termination of the contract, penalty clause, etc.).

• During the contractual relationship

If a contract has been concluded and a higher price is foreseen in the course of its performance (e.g. new services, delivery of different goods, etc.), it is important to conclude an amendment to the original contract, specifying in particular the additional price and the terms of payment.

If no contract has been concluded, there are a number of solutions, such as asking the other party to sign the order confirmation or the delivery note (if possible before the delivery is made). These two documents should define the goods/services provided, the price and, if possible, a statement that the customer accepts the amount shown on the document. A countersigned invoice or statement of fees may also satisfy the criteria for an acknowledgement of debt (provided that it contains certain elements). However, it is often more complicated to get them signed by the client.

• In the event of non-payment by the customer and in the absence of an acknowledgement of debt

The company may propose signing a debt recovery plan. In particular, the latter will specify the amounts owed, the interest, the due date for payment of each instalment, and that in the event of non-payment of one of the instalments, the entire debt will become due again, together with the related interest. The debt recovery plan, which will then constitute an acknowledgement of debt, may also include additional conditions, such as the waiver of the right to demand payment of interest in the event of regular payment of the various instalments, or the customer's commitment to cover specific costs (e.g. debt collection costs, contribution to legal fees, etc.).

Another option is to ask the customer to sign a letter/attestation stating that he/she acknowledges owing the outstanding amount, and then to initiate debt collection proceedings on this basis.

How can we help?

• Before a dispute arises, we will work with you to (i) set up a process to ensure that you have an acknowledgement of debt, (ii) if you have a process, review it and the relevant contractual documents, and/or (iii) draft the necessary documents (contract, invoice, delivery note, etc.).
• In the event of a dispute, we will help you to analyse the situation and determine, on the basis of the documents available to you, whether you have an acknowledgement of debt. Depending on the findings, we can (i) suggest solutions to help you to recover the amount due (e.g. formal notice, drawing up a debt recovery plan, etc.), (ii) explain how the debt collection proceedings works, (iii) help you to serve a summons to pay on the debtor, (iv) support you to draw up a request to set aside provisionally the opposition (if you wish to proceed alone) or refer you to someone who can assist you with the legal proceedings.