IOU’s – What Can You Do?

You may remember a couple of years ago now, that I published a number of articles on the issue of Debt Recovery and specifically, Debt Recovery in the travel industry.

It is hard to believe that, almost to the day, it has been two years since we entered our first national lockdown. Two years since we all started working from home. And two years since, as an industry, we battened down the hatches and entered survival mode – putting all of our time, focus and energy into facing one of the biggest challenges to ever come our way. It was a case of trying to prioritise every customer, every booking, every penny and in doing so, we sadly learnt that whilst many of us were prepared to comply with our contractual and legal obligations, others were not – thus leaving us with breached contracts and large sums of money owing.

Throughout the past two years, many travel businesses saw themselves let down by suppliers. Hotels, airlines, transfer companies, many of which outside of the UK, had closed their doors and simply stopped responding to calls or answering emails. But as the world of travel begins to reopen, and trade between hotels, airlines and other suppliers restarts, now is the time address those outstanding sums and also assess the relationships with these suppliers who, perhaps having shown their true colours, are suppliers with whom we no longer wish to work.

Communication and Negotiation

There is not a business within the travel industry that has not struggled over the past 24 months. That is a fact. Understanding and communication of the position is therefore key. Perhaps a hotel with which you have worked successfully for years was forced to close its doors and, despite holding thousands of pounds of your customer’s cash, was not in a position to refund. Now, as things stand, it is agreed that they owe you X, however they are reopen, and want to work with you again, as before, moving forward.

Rather than commencing legal action to recover the outstanding sums, perhaps consider an offset of the sums owing from monies due going forward. In addition, and in light of your goodwill, will the hotel agree to reduced rates for the 2022 season? Now that the hotel is reopen and making money again, can the outstanding balance be repaid over a period of time?

It is not always a case of jumping headfirst into a legal claim, or threatening winding up action as an ultimatum. Provided the other party is prepared to communicate and negotiate, matters like this can be resolved – however make sure such resolution is done properly and with the correct paperwork in place.

Contracts and Agreements

Probably one of the biggest and most common issues that we at Travlaw saw come to light as a result of COVID, was company’s contracts and terms and conditions not being up to scratch. Of course, two years ago we never could have imagined the predicaments that the industry would face, but we now know just how important repayment terms are. Indemnities. Jurisdictional clauses. Terms that, had they been included originally, would have saved a lot of time and hassle in recovering sums that were rightly due.  

I’ve said it before and I’ll say it again – now is the time to get your paperwork in order.

Even if you have worked with a supplier for years, without anything going wrong, there is no harm in a review and a refresh of your contractual agreements. Likewise, perhaps you have been working with suppliers without any agreement in place at all (it’s more common than you think!) – protect yourself and your business and ensure that this is not the case going forward.

Legal Proceedings

Not all negotiations can be successful and in many cases, despite the best efforts of travel companies, suppliers or other business entities are simply not prepared to address their debts or accept the reality of the monies that they owe. Foreign companies especially may believe that they are ‘out of reach’ of UK companies, and cannot be pursued; however that is most definitely not always the case. Whilst legal proceedings should only ever be used as a last resort, it may be that that is where we find ourselves. Commencing proceedings can be daunting, and there are many factors to consider (not least, time, cost and the risk involved). But for companies who are owed thousands, if not tens of thousands or more, and have themselves been struggling because of the failure of others – then legal action is most definitely a route worth considering.

If you would like to discuss sums owing to your business and need assistance or guidance in the debt recovery process, please contact;

krystene@travlaw.co.uk

or

0113 258 0033

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