What should an early stage tech startup do if the client refuses to pay the promised money? Is it wise to drop the project or finish it at whatever sum the client agrees to pay?
There is hardly anything which can be done except beg and cry, if there is no contract drawn between the service provider and client.
It is imperative for even early stage startups to not cut corners and ensure all legal due diligence while working with clients, first and foremost of which is drawing a contract for any work awarded by a client.
While it is ok to believe that all companies and hence women and men are benevolent and would keep their words, it is wise to believe otherwise and have some sort of protection.
Due to the tangled judicial system in the country with huge backlogs it is expected that people believe that drawing up contracts or such safeguards is both a waste of time and money, specially in an early stage startup, where the resources are limited and most probably the only employees are the founders.
However, while beinging people to justice may be a very costly affair (time + money) in India, the legal instruments do provide a psychological edge to the executing party and it is a very big advantage. While there are hardly any merits for pursuing a legal case, unless the sum involved are huge, drawing a contract means, the avenues are open, if the push comes to shove and this itself is a big deterrent for the other party/parties to follow the right path and honour the commitments made.
If the client is refusing to pay the money and tries to bring the service provider into submission, then they should be politely told that any further work and handover of work being done so far would happen only, when the requisite payments are made. This too can be done only when there is some kind of document, like an email, which has documented the promise.
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