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Client refuses payment and is disputing contract. Can I apply money I receive from third parties to this balance?

San Diego, CA |

I have a signed contract for fees for service and commission from sales. Client is now disputing contract and refusing past due payment, but has not initiated legal proceedings. I have money coming to me from vendors as payment for outstanding orders. May I subtract my commission and then apply the remaining money to the unpaid balance? Also, while the contract is in dispute, I am holding inventory. When can I dissolve this inventory to recover my holding cost? The contract does not outline non-payment contingency.

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Filed under: Lawsuits and disputes
Attorney answers 3

Posted

It depends on the language of the contract. Does the contract specify who you are to receive payment from? If so, you probably cannot pay yourself from the sales proceeds coming from the vendors.

Asker

Posted

I am to be paid fees from the client, but I also am in charge of sales and distribution for them and so I routinely collect money on their behalf and then credit them when I invoice. They have paid three previous invoices in this manner.

Posted

Without reading the contract and knowing much more about the dispute, it is simply not possible to advise you. Your strategy, however, sets you up to be the defendant on a claim, rather than the plaintiff. I would be cautious here.

If the amount in question warrants the expense and if I were you, I would pay for a consultation with an experienced commercial attorney before embarking on your proposed course of action.

Asker

Posted

The amount is less than $2000. According to our contract, I am in charge of sales and distribution for them and so I routinely collect money on their behalf and then credit them when I invoice. They have paid three previous invoices in this manner. Our contract says we must go to arbitration, if they want to dispute, but they have not initiated and I have not either. But I have the inventory and the money. Not sure what I can do.

Posted

You should obtain legal counsel before deciding on self-help tactics. If you cannot afford one, most law schools have legal clinics that may be able to read through the contract and advise you.

This is my opinion and should not be construed as legal advise for your specific case as there are many more facts which you have not provided.