Legal Question in Business Law in California
Client Disupte over payment terms
Do I have to legally deliver data for work not fully paid for?
I provide accounting/bookkeeping services and charge by the hr. I provided a draft F/S, P&L, and Statement of Cash flows twice in Nov, and another in Dec due to incomplete data (18 month span). The information was provided to me over the course of months, and dragged on from July-Dec. The client changed the scope repeatedly so I repeatedly requested funds. Payment for August & Nov inv.(approx 25% services), but failed to pay Sept & Oct(bulk of work). Client declared payment terms was when everything was finalized. I don't accept those terms. Due to the rush and workload, I hired 3 other part time staff to assist me (they have been paid by my firm). No bill was provided to client for Dec services. I finally quit b4 Christmas. The client wants delivery of the detailed data first before paying past due invoices. I want the reverse. The books are on the web and client no longer has access. Due to nonpayment I was financially required to take on a lot more projects and work excessively (and continue to do so), which also delayed delivery. Even after explaining this, Client claims valuable business gain loss due to my delays. I contend otherwise.
2 Answers from Attorneys
Re: Client Disupte over payment terms
Lawyers are not allowed to withhold a client's file as an inducement to the client to pay; it's a rule of ethics of the profession rather than a matter of contract law. I don't know whether your profession would have a similar rule. If you belong to a professional society or are regulated by one, that might be the place to ask.
Otherwise, this is probably a matter of contract interpretation. If the contract terms call for, or can be interpreted to call for, invoicing and payment on a monthly (progress) basis, I'd say you are entitled to withhold delivery of the completed work product. On the other hand, if a fairer interpretation of the contract is that the client was to pay for a delivered set of documents, then your entitlement to being paid probably follows your delivery of the financials.
In view of the indefinite time for completion, uncertain number of hours required, his previous payment of monthly progress invoices, I'd say the facts point to the former.
One possibility would be for the client to put the money in the hands of an escrow holder. When you can verify that the escrow has the money, then turn over the work, upon which by prior agreement the escrow holder will deliver you the funds. A lawyer could provide this service.
Re: Client Disupte over payment terms
The answer to the unasked question is that: you either negotiate a mutually agreed resolution, or someone gets sued, depending upon who thinks they are the most aggrieved. You probably would be wise to get some legal advice now, rather than later. It may be possible for counsel to cut through the dispute and work out something that avoids a lawsuit, where you have too much emotion invested to handle it. Feel free to contact me if interested.
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