Legal Question in Technology Law in New Jersey
Website made, client won't pay
Ok, so this is my first big contract project. I'm a programmer by trade, and picked this up on the side. We have a contract, made by him, my first mistake. I'll try to keep this short.
Contract says we follow the laws of NJ. I am in NY. There is a binding arbitration clause that does not name a specific arbitrator. He outright says he will not pay the balance, $6k. I have already received $4k as down payment. The website, as loosely outlined in the contract, is about 95% complete, and the ''termination of contract'' notice by email came as a complete surprise. He claims it is because it is 4 months late. The contract states an ''estimated'' due date, and numerous emails after that due date never mention it again. We verbally agreed the date to finish was flexible.
So I tell him he has to pay or I'm taking it further. He basically says ''fine, go to arbitration, but give me back my $4k deposit''. Also, one of my many mistakes, is that he was the one paying for hosting, and therefore has the code still. He has the working website and my money.
I think ultimately I will go to arbitration, which I had never heard of before this contract. Should I do anything before that?
2 Answers from Attorneys
Re: Website made, client won't pay
I would not advise you to give back the deposit. There is no reason to do that whether you sue or go to arbitration.
Arbitration may be more expensive than the amount in dispute. So sue and let him try to force it into arbitration if he can. He has the same problem.
Another question is whether to deliver the remainder of the code. If you do, you will have performed all of your part of the bargain. The tactical issue is whether you will lose any settlement leverage by doing that. You are probably the best judge of that.
See also: http://info.corbettlaw.net/lawguru.htm
Re: Website made, client won't pay
I don't know anything about New Jersey law, but I know a lot about arbitration.
Arbitration may be expensive. If the clause seeks arbitration through the American Arbitration Association, the cost to arbitrate will exceed $4,000. That is also probably true of most other arbitration offices.
I have drafted many a contract for many a client. I agree that arbitration clauses have a benefit, especially if there is a large amount in issue. Therefore, if you are to draft a standard contract with an arbitration clause, I would seek arbitration in an amount "in excess of $5,000," which is the jurisdictional amount for small claims court. Of course, I would also place language stating that litigation must be held in NY, using New York law.
Mike.
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