Breach of contract, so what are my options...
Discussion
me (contractor) --> middleman (agent) --> client
I raised an invoice for my services to the client with the middleman. The middleman didn't pay to the terms and conditions of the contract (within 14 days of receipt of invoice) and it got to the stage (2 months after invoice submission) where I instigated legal proceedings through the small claims court. The middleman capitulated and paid me before it got to court.
Am I in a position where I can terminate the contract immediately (ie ignore any notice period clauses) with the middleman because they were materially in breach of the contract? Can I then assume that any restrictive clauses (for example, not being able to go and work direct for the client) become null and void (irrespective of whether they are enforceable anyway)? In short, can I walk away from the existing contract because they broke one of the terms and start afresh through someone else. I know what common sense and logic tells me, but that ain't the law.
I raised an invoice for my services to the client with the middleman. The middleman didn't pay to the terms and conditions of the contract (within 14 days of receipt of invoice) and it got to the stage (2 months after invoice submission) where I instigated legal proceedings through the small claims court. The middleman capitulated and paid me before it got to court.
Am I in a position where I can terminate the contract immediately (ie ignore any notice period clauses) with the middleman because they were materially in breach of the contract? Can I then assume that any restrictive clauses (for example, not being able to go and work direct for the client) become null and void (irrespective of whether they are enforceable anyway)? In short, can I walk away from the existing contract because they broke one of the terms and start afresh through someone else. I know what common sense and logic tells me, but that ain't the law.
bigandclever said:
me (contractor) --> middleman (agent) --> client
I raised an invoice for my services to the client with the middleman. The middleman didn't pay to the terms and conditions of the contract (within 14 days of receipt of invoice) and it got to the stage (2 months after invoice submission) where I instigated legal proceedings through the small claims court. The middleman capitulated and paid me before it got to court.
Am I in a position where I can terminate the contract immediately (ie ignore any notice period clauses) with the middleman because they were materially in breach of the contract? Can I then assume that any restrictive clauses (for example, not being able to go and work direct for the client) become null and void (irrespective of whether they are enforceable anyway)? In short, can I walk away from the existing contract because they broke one of the terms and start afresh through someone else. I know what common sense and logic tells me, but that ain't the law.
I raised an invoice for my services to the client with the middleman. The middleman didn't pay to the terms and conditions of the contract (within 14 days of receipt of invoice) and it got to the stage (2 months after invoice submission) where I instigated legal proceedings through the small claims court. The middleman capitulated and paid me before it got to court.
Am I in a position where I can terminate the contract immediately (ie ignore any notice period clauses) with the middleman because they were materially in breach of the contract? Can I then assume that any restrictive clauses (for example, not being able to go and work direct for the client) become null and void (irrespective of whether they are enforceable anyway)? In short, can I walk away from the existing contract because they broke one of the terms and start afresh through someone else. I know what common sense and logic tells me, but that ain't the law.
Well, it isn't possible to advise properly without seeing the written agreement. Whilst I can understand why you want to bypass the "middle man", what isn't made clear is how the middle man came to be. Are they acting as agent to the "client"? If so, then if you don't like the middle man, then you cannot necessarily go straight to the "client", as the agent will have "introduced them to you", and will always remain in the loop in that regard.
Note, the breach of contract relates to the non-payment, not to any other part of the contract, which would probably be ongoing.
On what basis do you work "with" this middle man and client?
In this contract, there will always be a middle man; Government procurement policy is that suppliers have to be on a certain approved list which my company is not on. Therefore I will have to go through someone who is on that list. Esentially I provide services direct to the Government; I invoice the agent, the agent adds their percentage to this and then invoices the client, the client pays the agent, the agent takes their cut, and I get my invoice paid.
My question is, considering the current contract between me and the agent was broken by the agent, can I effectively tear up the existing contract and move to work with a different agent?
I guess your point about the non-payment breaking only part of the contract is what I'm getting at. I feel I am right to act in the best interest of my business at all times. Since the current contract has been broken through non-payment, logic tells me I can use this to terminate the existing contract, and start up a new contract with a new agent.
My question is, considering the current contract between me and the agent was broken by the agent, can I effectively tear up the existing contract and move to work with a different agent?
I guess your point about the non-payment breaking only part of the contract is what I'm getting at. I feel I am right to act in the best interest of my business at all times. Since the current contract has been broken through non-payment, logic tells me I can use this to terminate the existing contract, and start up a new contract with a new agent.
bigandclever said:
In this contract, there will always be a middle man; Government procurement policy is that suppliers have to be on a certain approved list which my company is not on. Therefore I will have to go through someone who is on that list. Esentially I provide services direct to the Government; I invoice the agent, the agent adds their percentage to this and then invoices the client, the client pays the agent, the agent takes their cut, and I get my invoice paid.
My question is, considering the current contract between me and the agent was broken by the agent, can I effectively tear up the existing contract and move to work with a different agent?
I guess your point about the non-payment breaking only part of the contract is what I'm getting at. I feel I am right to act in the best interest of my business at all times. Since the current contract has been broken through non-payment, logic tells me I can use this to terminate the existing contract, and start up a new contract with a new agent.
My question is, considering the current contract between me and the agent was broken by the agent, can I effectively tear up the existing contract and move to work with a different agent?
I guess your point about the non-payment breaking only part of the contract is what I'm getting at. I feel I am right to act in the best interest of my business at all times. Since the current contract has been broken through non-payment, logic tells me I can use this to terminate the existing contract, and start up a new contract with a new agent.
Without seeing the exact contract itself it is difficult to give definative advice.
However, if a party has breached a contract term, unless specifically stated otherwise or the breach itself was such that it made the rest of the contract meaningless, that the rest of the agreement legally still stands.
For example, if they had paid you an interim payment a day late, this is a contract breach, and you would be entitled to ask for compensation for your loss, and sue if necessary, however this would not allow you to nullify the rest of the contract.
Even if it has already been proved that they have breached the contract, you still must perform your side of the deal or you could be also sued for breach of contract. For example, the middle man will also have a contract with the govt to supply the work at a price. If you did not fulfil your agreement you could be sued for the middle mans losses due to your breach - loss of profits or compensation paid by the middle man to the govt.
In practical terms however, when these situations have arisen it is due to the fact that the working relationship has broken down and is irreparable. In this case it is probably best for both sides to agree to mutually terminate the contract - thus no-one is due to supply anything, and both sides responsibilities are discharged.
I would suggest that this is the best way forward. If they do not agree to this, as a next best option it would be best to renegotiate the contract terms to 'liquidate' the damages. That means there would be a contract term which specifically states that late payments are subject to an X% surcharge for X days, then so on an so forth. Failing this, I would get in writing that the middle man will without fail fulfil their side of the contract. Now... if they refuse to do this, *then* you will have some legal standing on negotiations not to fulfil your side of the contract and/or if it gets to litigation you have evidence that you stopped fulfilling your contract due to the problems and that the company refused to guarantee they would not breach again in future.
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