My question involves business law in the state of: Arizona (3rd party company)
We are in California.
I have a question regarding a 3rd party company we contracted out to do some software & web development.
The contract states that the company was supposed to finish the product (Phase I) in ~ 5 months. This was in November, 2006. As a separate project, a website was also developed by them in 4 months (Feb. - Jun. 2007) and launched (this was severely glitchy but it was fixed). Due to glitches and errors on the website, we asked them to stop work on the other (first software product) project and demanded to see a demo of what had been developed so far before proceeding. They said "we don't have anything worth showing on something like WebEx" and gave us the run around. We said "give us all the files you have that we've paid for".
We got an email today from the CEO of the 3rd party company that they have filed for Chapter 11. This is appalling. What do we do now? They say they will give us the files but the product is incomplete! They claimed 80% was complete but were unable to demo anything. We have paid about $50,000 for this product thus far and totally we have paid the company ~ $90,000!!
WHAT DO/CAN WE DO NOW? PLEASE HELP!
This is simply fraudulent as no other software developer will take their files and work with it; they all usually start afresh. We have paid them an enormous sum and we are held hostage now! PLEASE HELP!
Any advice is appreciated.
Thanks.

