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  1. #1
    Join Date
    May 2017
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    Default Contract Guarantees

    My question involves business law in the state of: New York but we do business across the US

    I own a 3rd party staffing agency. We find Clients/job orders and fill them with candidates/employees. Each contract with the Client is a little different and even if we use our own, Clients will negotiate. In most contracts we have a certain Guarantee for the placed candidate. For example, If the candidate leaves within 3 months, we'll refund or replace that candidate.

    Now my question is: If a Client don't pay on time (30 day pmt terms), and we have to chase for payment or they pay late. Do we still have to honor the guarantee if candidate leave in 75 days?

    Moving forward, I'll have it explicitly spelled out but my previous book of Client terms... it wont be explicit. My thought process is, If they are not honoring or upholding the payment terms, why would we uphold the guarantee period. Am I completely off here?

  2. #2
    Join Date
    Oct 2016
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    Default Re: Contract Guarantees

    If the client is in default the contract is void.

    If you allow them to get out of the default condition and continue the relationship the terms of the contract stand.

    You really need a lawyer to write your contract.

  3. #3
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    Jul 2018
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    Default Re: Contract Guarantees

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    Now my question is: If a Client don't pay on time (30 day pmt terms), and we have to chase for payment or they pay late. Do we still have to honor the guarantee if candidate leave in 75 days?
    Can't be completely certain without reading the contract, but the answer is likely yes. The client's failure to pay is a breach of contract, and your remedy is to sue for the failed payment. Failure to pay is virtually never a material breach that would allow for rescission (i.e., voiding) of the the contract.


    Quote Quoting scratchstick
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    Moving forward, I'll have it explicitly spelled out but my previous book of Client terms... it wont be explicit.
    Huh?

  4. #4
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    May 2017
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    Default Re: Contract Guarantees

    Quote Quoting PayrolGuy
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    If the client is in default the contract is void.

    If you allow them to get out of the default condition and continue the relationship the terms of the contract stand.

    You really need a lawyer to write your contract.
    Let me Clarify. If the contract states 30 day payment terms and they pay 50 days from invoice. Do I have to honor the guarantee period to give a refund or replacement

  5. #5
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    Default Re: Contract Guarantees

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    Let me Clarify. If the contract states 30 day payment terms and they pay 50 days from invoice. Do I have to honor the guarantee period to give a refund or replacement
    Once you take the money and they are no longer in breach of the agreement.

  6. #6
    Join Date
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    Default Re: Contract Guarantees

    Quote Quoting PayrolGuy
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    If the client is in default the contract is void.
    A breach (default) by the client does not make the contract void. It does, however, provide the non breaching party with remedies for the breach. Obviously if the client never pays then there is no fee to refund if the candidate quits in the first 75 days. It might also be grounds to excuse the performance of finding a replacement candidate. The exact terms of the contract would matter, as would the applicable state law. But if the client paid late then the OP still has the obligation to either refund or replace the candidate per the contract.

  7. #7
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    Default Re: Contract Guarantees

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    Let me Clarify. If the contract states 30 day payment terms and they pay 50 days from invoice. Do I have to honor the guarantee period to give a refund or replacement
    This does not change what I wrote previously ("Can't be completely certain without reading the contract, but the answer is likely yes.").

  8. #8
    Join Date
    May 2017
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    17

    Default Re: Contract Guarantees

    Got it. Thank you all for the comments. From the sounds of it, Even if they pay late, then I have to honor the contract because I've accepted the payment.

    Follow up question - Moving forward, if I state in the contract under the Guarantee clause that this guarantee is only applicable if the Client pays on time. Would that hold up in court in the same scenario (30 day pmt terms, they pay 50 days from invoice)?

  9. #9

    Default Re: Contract Guarantees

    That would depend upon the laws of the state where you are trying to enforce the contract

  10. #10
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    Default Re: Contract Guarantees

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    Follow up question - Moving forward, if I state in the contract under the Guarantee clause that this guarantee is only applicable if the Client pays on time. Would that hold up in court in the same scenario (30 day pmt terms, they pay 50 days from invoice)?
    I can think of no good reason why it wouldn't. If you want to do that, engage the service of an attorney.

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