Our private Christian school had a parent "volunteer" to hardwire a computer lab. The board was under the impression from the Principal that this work was going to be performed to offset their unpaid tuition bill. The Principal was under the impression it was "volunteer" work - with our school being responsible for paying only for the wire/cable needed. There was no contract, no estimate, no bidding done. She subsequently sent us a bill for $3600 payable by check or $1800/cash. We were totally caught off guard by this bill. We did not know we were “hiring” her. She is currently an unemployed union electrician, on unemployment. She does not want to be given a 1099 - wants to be paid under the table. She is threatening to sue us if we don't pay her immediately. Side note - her children are no longer attending the school. She also said she did not owe the tuition because she had volunteered at a fundraiser we had last spring.
If this case goes to litigation, it sounds as though she has a lot more to lose than you do. If she does get paid, it might adversely affect her unemployment compensation. If the work was done to offset tuition, it is still income that should be reported for tax purposes, and you should not make any payment without filing a form 1099. A person who submits a bill for a significantly lower price in cash — presumably to avoid reporting for tax purposes — has less credibility in court. If she didn’t have an understanding, she may still be liable for all of the unpaid tuition that the school could raise in a counterclaim.
It sounds like you ought to talk to her with the Principal present to see if you can iron out the understanding. If there was a true miscommunication, and particularly if you explain her risks, you may be able to reach a compromise settlement.