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Are we liable for damages and costs incurred by our vendor to collect any outstanding balance?

Philadelphia, PA |

We are in negotiations with a vendor that we owe $$ to that is going out of business (not bankrupcty but a "wind down of operations". We're about to agree to pay 75% of what was originally owed. We requested a letter be drawn up on vendor letterhead that says our debt is paid in full if we pay the agreed amount on schedule (over 6 weeks). Letter arrives with a paragraph that says that if we do not make each payment as scheduled, they will take legal action to collect the entire remaining balance from us, calculated at the original balance (100%) and that we may be liable for damages and any costs incurred to collect any outstanding balance. Is this legal to include?

Attorney Answers 2


Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania, New Jersey or Federal law apply, unless otherwise specified.

That being said, that is a fairly common piece of language in an agreement that forgives a portion of a debt owed upon payment - it essentially says that if you pay the lesser amount in full, you are free of further liability, but if you don't, you owe the full amount and their costs in collecting it. It adds those collections costs to your debt, essentially, which you may not owe now. If you believe you can pay as agreed, you should be fine. I haven't seen the whole agreement so cannot be entirely sure, however.

If you would like to discuss this matter further, please feel free to contact me at the below address(es) or telephone number.

/Christopher E. Ezold/
The Ezold Law Firm, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585

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I agree 100% with my colleague. The language you quoted is quite typical and permissible. It is the only way the company can protect itself if you do not pay the debt as agreed upon.

You should consider having legal representation to review the document and make sure you are protected.

This response does not create an attorney-client relationship and is not intended to provide legal advice for your specific situation.

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