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  1. #1
    Join Date
    Sep 2017
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    3

    Default Middleman May Be Going Under, Taking Along Client's Payments for My Services

    My question involves independent contractors in the state of: Massachusetts.

    I am an IT consultant organized as S-Corp. I do not have a direct relationship with the client.
    Instead, the client has a relationship with a stuffing/consulting company (let's call it ABC LLC), and my corp is a sub-contractor.
    My contact with ABC is for $X/hr. They bill the client for $X+Y/hr and once they get the client payment, they pay my invoice for $X/hr.
    ABC's invoices to the client are specifically for my services, presented as hourly labor.

    Lately there has been organizational turmoil at ABC, and ever since my invoices are paid late. Currently they owe me $35K+.
    Not long ago the principal at ABC assured me that the client is timely, the problem is with the ABC staff and will be fixed.
    The issues however persist. Last invoice was paid late and partially, with the promise to pay the rest later.

    I am concerned that ABC is in financial trouble and may be using client payments for my services for something other than my invoices.

    How can I protect myself in this situation?
    Is ABC obligated to pass to me client's payments?
    Do personal assurances from the principal carry any legal weight?

    Thanks
    -Art

  2. #2
    Join Date
    Jan 2006
    Posts
    35,680

    Default Re: Middleman May Be Going Under Taking Along Client's Payments for My Services

    Does your contract with ABC provide for a payment timeline after monies earned by you, or is it actually tied into payment to ABC from their client or is there nothing speaking to when ABC must pay you?

  3. #3
    Join Date
    Sep 2017
    Posts
    3

    Default Re: Middleman May Be Going Under Taking Along Client's Payments for My Services

    Quote Quoting jk
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    Does your contract with ABC provide for a payment timeline after monies earned by you, or is it actually tied into payment to ABC from their client or is there nothing speaking to when ABC must pay you?
    It does provide a clear timeline defined in the way that does not depend on the client. But also includes the clause that makes it conditional on ABC being paid by the client. ABC says the client is timely.

  4. #4
    Join Date
    Mar 2013
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    14,305

    Default Re: Middleman May Be Going Under Taking Along Client's Payments for My Services

    Quote Quoting artmt
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    How can I protect myself in this situation?
    Nothing prevents bad things from happening. Your contract may give you a way to clean up the mess after they happen.

    Personally, I would quit doing any more work until my outstanding invoices were paid. In other words don't throw good money after bad.

    But you should have your contract reviewed by an attorney before you do something like that.

    Quote Quoting artmt
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    Is ABC obligated to pass to me client's payments?
    Not according to what you've written so far.

    Quote Quoting artmt
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    Do personal assurances from the principal carry any legal weight?
    What do YOU think?

  5. #5
    Join Date
    Sep 2017
    Posts
    3

    Default Re: Middleman May Be Going Under Taking Along Client's Payments for My Services

    Quote Quoting adjusterjack
    View Post
    Nothing prevents bad things from happening. Your contract may give you a way to clean up the mess after they happen.
    Is there anything I should be doing now to improve my legal standing when and if it does happen?

    What do YOU think?
    My guess is that at least with small companies individual obligations should tend to be more durable than corporate.
    But I don't really know. That's why I am here.

  6. #6
    Join Date
    Mar 2013
    Posts
    14,305

    Default Re: Middleman May Be Going Under Taking Along Client's Payments for My Services

    Quote Quoting artmt
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    Is there anything I should be doing now to improve my legal standing when and if it does happen?
    Have your contract reviewed by an attorney who can advise you how to prepare for the possibility of not getting paid.

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