Factoring And Leading With Your Chin

Factoring agreements are very popular with subcontractors and suppliers in the construction industry,  assisting cash-flow by providing a line of credit against accounts receivable. However, like any financial product, factoring agreements can also present unique complexities, pitfalls and at times surprises when pursuing debt recovery and enforcement action.

Illustrating some of the problems that can arise is the not uncommon scenario of a dispute in relation to an alleged oral contract for labour hire by a subcontractor that is factoring its debts. In this scenario:

1. All of the subcontractor's invoices in respect of the work performed pursuant to the alleged contract will likely note that the debt the subject of the invoice has been assigned to the factoring company (this is a standard requirement imposed under the factoring agreement).