Legal Question in Business Law in California

Customer can't pay--can I keep hard assets?

I've been a consultant for a certain co. for 4 years--no contract, but they pay when I turn in invoices. They tend to have cash flow problems a couple times a year and I just focus on other clients at that time until they can catch up financially. Now they seem to have real problems and I don't want to do any more work until they catch up--which I'm not sure they will be able to (there's talk of selling the co.) I supply all their technology support which makes the situation a bit sticky. I want to make sure I'm not risking some kind of exposure by cutting them off from support--what if any official notication would I have to give? Also, I was working on building a new network for them and have hardware in my posession which I'm hoping I can liquidate to satisfy their obligation to me if it turns out I won't get paid. What am I able to do and how do I proceed? One more thing, If they were to hire another consultant/company to support them, is it ''legal leverage'' for me to withhold the passwords to the network until I get paid? I'm very happy to pass along this account and would cooperate fully once they pay me or if I legally had to.

thanks, dk.


Asked on 11/28/05, 6:26 pm

1 Answer from Attorneys
Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Re: Customer can't pay--can I keep hard assets?

If you had your house in order, the answers to all of these questions would already be in your contract. I don't know what your existing contract (if any) says, but I would be glad to look it over. You could set up a meeting with the customer and politely request they sign a new contract - one that you had a lawyer write for you and which gives you the right to retain hardware, passwords etc. until paid. At this same meeting you could politely inquire (without threatening to withhold anything) as to when payment would be forthcoming.

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Answered on 11/28/05, 6:57 pm


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