Q&As

If a customer of a supplier goes into an insolvency process, is it possible to recover debts owed directly from the customer’s end users? If not, what options are open to recover money owed?

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Published on LexisPSL on 21/11/2017

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • If a customer of a supplier goes into an insolvency process, is it possible to recover debts owed directly from the customer’s end users? If not, what options are open to recover money owed?
  • Privity of contract
  • Options to recover money as a creditor
  • ROT

If a customer of a supplier goes into an insolvency process, is it possible to recover debts owed directly from the customer’s end users? If not, what options are open to recover money owed?

Privity of contract

'Privity of contract' is a common law doctrine, which provides that you cannot either enforce the benefit of, or be liable for any obligation under a contract to which you are not a party. Therefore, if your client is not a party to a contract (ie they are a third party) then they cannot sue or be sued under that contract.

For further information, see Practice Note: Third party rights—the common law doctrine of privity of contract.

Options to recover money as a creditor

The fact that a company is insolvent and so unable to pay its debts as and when they fall due as defined by section 123 of the Insolvency Act 1986 means that there is usually only a limited pot of money available for

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