Legal Question in Business Law in California

I have a corproate client that requires all invoices be submitted throught their electronic Accounts Payable systems. The use of this system is not optional. They clearinghouse that processes these electronic invoices just began charging a $3 fee to process our invoices. The client at first said to increase our invoice amounts by $3 to offset this charge, but then recanted and will not allow us to increase our invoices by $3 to offset this fee. As a result of this involuntary service fee, in essence, every invoice submitted for payment is now being "short paid" by $3. There are no provisions in our contract allowing for the charging of such invoice processing fees. This fee now applies to all vendors using the required processing system (which is all vendors, sinc eit is not optional). This seems not only unethical, but fraudulent and (should be) illegal.

1) Is this charging of a fee in order to get paid monies owed legal in California (or any state)?

2) Can we assert that the client is in breach of contract for failing to make full and timely payment of monies owed as a result of this fee deduction from monies due us?

3) Does this violate any federal laws, or is this something that is so new that the laws have simply not yet addressed it?


Asked on 9/02/10, 5:12 pm

3 Answers from Attorneys
Terry A. Nelson Nelson & Lawless

It is not 'illegal' but the company should not be charging it and annoying customers and vendors. It seems poor PR. They probably could not enforce the surcharge unless you were put on notice of it in advance, but they can certainly add that to their disclosures for the future.

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Answered on 9/07/10, 5:45 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

I have a small business client whose CFO tells me they also have a customer that uses a third-party accounts payable servicer. If the servicer is a the same one -- a very big company whose name begins and ends with "A" - what they're doing is legal.

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Answered on 9/07/10, 6:19 pm

I agree that what they are doing is legal, but it is not payment in full. They are counting on the amount being small and the risk of losing their business being big enough that you will just put up with it. They are trying to shift their A/P expense to you, when the contract does not call for it. If you are willing to take them on, I'd say let the amount build up to the point where it's an amount that means something, and then sue them for non-payment.

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Answered on 9/07/10, 9:37 pm


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