Legal Question in Credit and Debt Law in California
I want to know if it is legal for a a business to withhold payment to a vendor for services rendered just because the receiver of those services went bankrupt.
I billed a facilities maintenance company for work on Borders book stores. When they went bankrupt they sent me a letter stating that in a vendors package that I didn't sigh it states that they can withhold payment if they don't receive payment. Is this legal in California if I did sign..
2 Answers from Attorneys
Never sign a contract that says you don't get paid until the other party gets paid (you have no way of knowing, and you'll never get paid). Assuming it is Borders and not the maintenance company that went bankrupt, the maintenance company owes you for your work and you could sue them. Watch out for legal time limits.
If you didn't sign the provision that you only get paid if they get paid, there is no way to enforce it and they owe you the money. If you did sign it, it may or may not be enforceable. Such clauses are generally enforceable, but there are exceptions. The main one is for anyone who has mechanics lien rights. If you are a licensed contractor, or one of the other classes of service or material providers listed in section 3110 of the Civil Code, the provision would be void as against public policy.
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