Contract Issue - What Would You Do?
Discussion
I've a really tiny interest in a business (company A) which has a contract with another company (company B). Company B should pay Company A (who market Company B's products) a revenue share (let's say 80% for this example) based upon gross-revenue.
However, one of Company A's staff, an ex-employee of company B, unequivocally stated that ahead of the revenue share calculation, the 'gross-revenue' figure is manipulated and a deduction of 15% made to cover company B's costs. This has now been found to be the case.
This deduction (meddling) is not stipulated in the contract - only gross revenue is stated. So in reality, after their 15% deduction, company A receives just 68% of the gross revenue (rather than 80%). Given the duration of the contract, the difference between 68% and 80% is significant. At the outset company A chose company B (over their competitors) due to their level of remuneration, now found to be fictional.
The contract is valuable to company A but their relationship with competitors is good and their remuneration better. The current options being touted are:
1. Company A's lawyers will win either way but are pushing to claim this revenue back.
2. Some of Company A's board want to renegotiate terms in light of this information.
3. Other board members want to just cut and run to a competitor.
I don't see any options as ideal but I'm not in a position to influence Company A's decision making. However, I am interested to hear what some of you wiser heads would do in this position.
However, one of Company A's staff, an ex-employee of company B, unequivocally stated that ahead of the revenue share calculation, the 'gross-revenue' figure is manipulated and a deduction of 15% made to cover company B's costs. This has now been found to be the case.
This deduction (meddling) is not stipulated in the contract - only gross revenue is stated. So in reality, after their 15% deduction, company A receives just 68% of the gross revenue (rather than 80%). Given the duration of the contract, the difference between 68% and 80% is significant. At the outset company A chose company B (over their competitors) due to their level of remuneration, now found to be fictional.
The contract is valuable to company A but their relationship with competitors is good and their remuneration better. The current options being touted are:
1. Company A's lawyers will win either way but are pushing to claim this revenue back.
2. Some of Company A's board want to renegotiate terms in light of this information.
3. Other board members want to just cut and run to a competitor.
I don't see any options as ideal but I'm not in a position to influence Company A's decision making. However, I am interested to hear what some of you wiser heads would do in this position.
sa_20v said:
At the outset company A chose company B (over their competitors) due to their level of remuneration, now found to be fictional.
I'm struggling to understand the relationship here. My automatic response would be to go after company B for the difference and then renegotiate the contract, BUT (this is the bit I don't really understand)...why is the marketing company the one who decides who it markets for? My, basic, understanding would assume that a company with a product takes it to a marketing company to increase its exposure and therefore B would be the one choosing A...?
AyBee said:
why is the marketing company the one who decides who it markets for? My, basic, understanding would assume that a company with a product takes it to a marketing company to increase its exposure and therefore B would be the one choosing A...?
Company A provides 'leads' of a sort. 
sa_20v said:
AyBee said:
why is the marketing company the one who decides who it markets for? My, basic, understanding would assume that a company with a product takes it to a marketing company to increase its exposure and therefore B would be the one choosing A...?
Company A provides 'leads' of a sort. 
In which case, I'd probably collect all monies due from B and retender my services in the market
If that employee hadn't blabbed, you'd have been none the wiser and working with a company who was happy to shaft you - not a company I'd want to work with.Gassing Station | Business | Top of Page | What's New | My Stuff