B2B Invoice Legal Advice
Discussion
Just after a bit of advice, as something has come up at work which I'm genuinely not sure on the legalities of.
- We are company A.
- We subcontract a project to company B
- Company B in owned fully (by shareholder) by a much larger Company, which we will call C
- Company D is another subsidary of Company C, but has no link to Company B through any formal shareholding etc, so the common link is only they are owned by Company C
Company B carries out work for us (company A), to which we withhold 2.5% retention for a defects liability period which is standard practice. During the course of that 12 months company B is dissolved via voluntary strike-off.
6 months later, Company D invoices us for the 2.5% retention monies owed saying they acquired the rights for the projects of company B prior to their dissolution, and the debt is now owed to them. I have simply asked for evidence of such and nothing has been forthcoming. The wrote back saying that as both companies are/were owned by Company C, the right exists by law, but again have not demonstrated this.
I genuinely see no link which exists legally for company D to be entitled to the monies from company A. That said, if company C had chased the monies I think I'd have little or no grounds to question it as there clearly is a link between these companies.
The Contract they were under states no further payments would become due if they were insolvent, but I don't think that is relevant either as they simply chose to close the company seemingley to streamline business/s, and owed no monies, etc.
It's not a massive sum of money, but something just seems odd about the situation, and there unwillingness to provide any evidence that they bought the rights to the projects of the dissolved company. Surely there would be something in place in relation to novation of liabilities, etc.
- We are company A.
- We subcontract a project to company B
- Company B in owned fully (by shareholder) by a much larger Company, which we will call C
- Company D is another subsidary of Company C, but has no link to Company B through any formal shareholding etc, so the common link is only they are owned by Company C
Company B carries out work for us (company A), to which we withhold 2.5% retention for a defects liability period which is standard practice. During the course of that 12 months company B is dissolved via voluntary strike-off.
6 months later, Company D invoices us for the 2.5% retention monies owed saying they acquired the rights for the projects of company B prior to their dissolution, and the debt is now owed to them. I have simply asked for evidence of such and nothing has been forthcoming. The wrote back saying that as both companies are/were owned by Company C, the right exists by law, but again have not demonstrated this.
I genuinely see no link which exists legally for company D to be entitled to the monies from company A. That said, if company C had chased the monies I think I'd have little or no grounds to question it as there clearly is a link between these companies.
The Contract they were under states no further payments would become due if they were insolvent, but I don't think that is relevant either as they simply chose to close the company seemingley to streamline business/s, and owed no monies, etc.
It's not a massive sum of money, but something just seems odd about the situation, and there unwillingness to provide any evidence that they bought the rights to the projects of the dissolved company. Surely there would be something in place in relation to novation of liabilities, etc.
Hobo said:
6 months later, Company D invoices us for the 2.5% retention monies owed saying they acquired the rights for the projects of company B prior to their dissolution, and the debt is now owed to them. I have simply asked for evidence of such and nothing has been forthcoming. The wrote back saying that as both companies are/were owned by Company C, the right exists by law, but again have not demonstrated this.
It sounds like they don't actually have any evidence or they would have provided it. Their later argument seems to be a change of position and potentially tenuous (why would you, unless adopting a belt and braces approach, seek to acquire rights you already had).Ask them:
1) Again for evidence of assignment of rights; and
2) To clarify precisely which law they would place reliance on.
Have had it loads of time where people say "the law says..." but it turns out that it doesn't say that at all.
Always check a reliable reference too. Have even seen a public authority have the audacity to actually change a section of an Act in order to support their position!
LooneyTunes said:
It sounds like they don't actually have any evidence or they would have provided it. Their later argument seems to be a change of position and potentially tenuous (why would you, unless adopting a belt and braces approach, seek to acquire rights you already had).
Ask them:
1) Again for evidence of assignment of rights; and
2) To clarify precisely which law they would place reliance on.
Have had it loads of time where people say "the law says..." but it turns out that it doesn't say that at all.
Always check a reliable reference too. Have even seen a public authority have the audacity to actually change a section of an Act in order to support their position!
In relation to 'assignment of rights', they have provided a letter from company D (on their letterhead) which states that 'all contractual and financial transactions' will be novated across from company A to company D as effective from 'x date'.Ask them:
1) Again for evidence of assignment of rights; and
2) To clarify precisely which law they would place reliance on.
Have had it loads of time where people say "the law says..." but it turns out that it doesn't say that at all.
Always check a reliable reference too. Have even seen a public authority have the audacity to actually change a section of an Act in order to support their position!
Maybe I'm wrong, but I just assumed there would be some legal paperwork detailing this, not a simple letter. Surely a 'deed of novation' would need to have been draw up between company B, company D and ourselves (company A). They can't just novate contracts across without our permission under Contract Law would be my understanding of this (from having to be involved with novation of contracts when dealing with company insolvencies).
I just think they are trying it on personally, but aren't 100% sure.
Edited by Hobo on Wednesday 25th February 16:58
Have a quick google for novation vs assignment.
In brief, novation does require consent of the counterparty (you, not necessarily in writing), assignment does not (just notification). The former transfers rights and obligations, the latter only rights.
It sounds to me that (if the document specifically references notation) they perhaps thought they were being a bit cute with that letter but, as you say, don t really know what a novation involved (and should have sought to assign).
If so, they probably didn t take any legal advice at the time and can t now turn back time.
ETA: not a lawyer but have worked a lot on complex legals involving assignment of rights.
In brief, novation does require consent of the counterparty (you, not necessarily in writing), assignment does not (just notification). The former transfers rights and obligations, the latter only rights.
It sounds to me that (if the document specifically references notation) they perhaps thought they were being a bit cute with that letter but, as you say, don t really know what a novation involved (and should have sought to assign).
If so, they probably didn t take any legal advice at the time and can t now turn back time.
ETA: not a lawyer but have worked a lot on complex legals involving assignment of rights.
The letter most definitely states that the contract has been notated. No mention of assignment.
They have also confirmed in emails that the monies are due to the new company due to the contracts being notated across.
It would appear they have messed things up which is what I believed from the outset when they refused to provide any substantiation/evidence to their claims.
They have also confirmed in emails that the monies are due to the new company due to the contracts being notated across.
It would appear they have messed things up which is what I believed from the outset when they refused to provide any substantiation/evidence to their claims.
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