What to Do When a Business Partner Acknowledges Debt But Refuses to Pay?
Many companies, even after fulfilling their contracts and delivering products or services on time, find themselves burdened with unpaid debts because the other party fails to pay as agreed. Despite having a signed acceptance report and a clear debt confirmation letter, attempts to collect the payment are often met with silence, delays, or disappearance. In such cases, what are the legal and effective solutions to protect your business rights?
Obligations Arising from Commitments – When the Contract Is Done but the Money Is Not Paid
In reality, many businesses believe a contract is “closed” once the delivery is completed, but payment collection is delayed due to partners deliberately postponing or avoiding their obligations. Even with a debt confirmation letter, the amount remains outstanding.
So, when does this situation constitute a “dispute over financial obligation under a commitment”? And what legal grounds are available to demand payment?
Understanding Obligations Arising from Contracts
According to the 2015 Civil Code, financial obligations arising from sales or service contracts are considered civil obligations. The obligated party must pay the provider in full and on time. Once the contract is fulfilled, any delay or non-payment constitutes a breach of financial obligation.
If there is no specific agreement on late payments, the law allows the aggrieved party to claim the principal debt plus late payment interest or contractual penalties (if stipulated).
However, debt recovery through litigation is also subject to the statute of limitations—a factor many companies overlook, resulting in forfeited legal claims.
Beware of Statute of Limitations When Recovering Debt
One of the most common legal traps is the statute of limitations. Under Article 319 of the 2005 Commercial Law, the limitation period for initiating a lawsuit over a commercial dispute is two years from the date the legitimate rights were violated.
In other words, if the debtor fails to pay as per the contract or acceptance record, the creditor has a maximum of two years to file a lawsuit. After this, unless the limitation period restarts due to legal grounds, the creditor may lose the right to litigate.
For example, if the debtor signs a debt confirmation after defaulting, the statute of limitations may restart from that date. However, this must be clearly proven in court and cannot rely solely on a confirmation letter without accompanying actions or commitments.
Legal Solutions for Effective Debt Recovery
When a debtor drags out payment even after acknowledging the debt, companies should take the following steps to protect their rights and improve collection success:
Send a Demand Letter With a Specific Deadline
Before suing, send a demand letter specifying a payment deadline (e.g., within 15 days). This should be delivered via certified mail or email with delivery confirmation for use as evidence in court.
Sue Within the Limitation Period and Prepare a Complete File
If the debtor still refuses to pay, initiate legal action promptly. Essential documents include:
Contract, acceptance report, invoices, debt confirmation letter
Demand letters
Proof of fulfilled delivery or services
Suing within the limitation period not only helps reclaim the principal debt but also opens the door to claiming interest and penalties, if contractually agreed.
Be Cautious When Claiming Interest and Penalties
Courts may not always grant claims for late interest or penalties. If the statute of limitations has expired, only the principal debt may be awarded, while interest and penalties can be dismissed.
Therefore, it is crucial to identify the exact date of the breach and provide evidence that the limitation period is still valid or has restarted under Article 157 of the Civil Code.
Stay Legally Proactive to Protect Business Interests
A key lesson from real cases: delay or negligence in handling bad debts can lead to greater losses. Specifically:
Even with a debt confirmation, missing the statute of limitations means forfeiting interest or penalty claims.
Lack of clear documentation weakens your case.
Poor coordination among finance, legal, and operations can cause missed recovery opportunities.
To avoid these risks, businesses should implement debt tracking processes, manage litigation deadlines, and develop contract templates that suit operational realities.
Facing Difficulties with Overdue Debts?
DEDICA Law Firm specializes in consulting and representing businesses in debt recovery lawsuits—from preparing documents to participating in court proceedings. With experience in similar cases, we’re committed to defending your rights to the fullest.
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