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Zachary
Zachary, Attorney
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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I am a 1099 contractor (Virtual Assistant) and work with clients

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I am a 1099 contractor (Virtual Assistant) and work with clients in long term relationships for ongoing support needs. My fee structure is primarily retainer with some project work. Based on client needs, we agree on a block of time each month for a monthly fee. Any agreed to overage hours for current month get added to the next month's retainer invoice. I have language in my Policies and Procedures document about endings, communication, 30 days notice, etc. I also have some standard legal language about disputes and any mediation occurring in my state of CO. I have two instances where I haven't gotten paid:

1) Project work that consisted of many hours of my time. After initial down payment, client at that time still owed around $500 and didn't pay saying that all my work wasn't what she wanted. I've learned from that experience and now have a project scope document that they need to sign before work begins and at least 1/2 down for payment up front. I still don't know how to proceed if the second 1/2 doesn't get paid.
2) Currently, I've had a retainer client disappear on me after only 1 month. After many emails, calls and messages in February, I heard from her one time and she never made February's payment. Since she didn't make the February payment and I had taken everything as far as I could without some response to questions, I didn't do work for her in February. There is the 30 day 'endings' clause in my P&Ps and once I partner with a client, there is a lot of up front time on my end for the welcome packet, files, setting up systems, etc. So this client doesn't owe me for work already performed, but there is a retainer agreement in place.

I'm a solopreneur, barely getting by and when you trade hours for dollars, there are only so many clients that can be effectively served at a time. So when one disappears without payment, it makes a huge impact on what I had budgeted for. I'd like to know my rights and if there is a free to low cost way to pursue payment.

Thank you
Merri
Submitted: 1 year ago.
Category: Legal
Expert:  Zachary replied 1 year ago.
Hi,

Thank you for your question. Attorneys work in the same way and I completely understand the impact of a non-paying client.

You have stated that you have them sign an agreement. I would suggest adding the following language into your contract:

Entire Agreement - This Agreement, including any exhibits attached hereto, contains the entire agreement between and among the Parties and supersedes any prior understanding and/or agreements among or between the Parties with respect to the subject matter of this Agreement.

Agreement Binding - This Agreement may not be modified, changed or discharged, in whole or in part, except by an agreement in writing signed by the parties.

Amendment - This Agreement may be amended only by the written agreement of the Parties hereto.

Severability - Except as otherwise stated in this Agreement, any provision or article declared unlawful or unenforceable by a court of law or regulatory agency with jurisdiction, or deemed unlawful due to a statutory change, will not affect the otherwise lawful provisions of this Agreement.

Interest - Any invoice which is unpaid after 15 days shall incur interest at a rate of 10% per annum calculated on a monthly basis.

After your contract says this, lets assume that you are paid a retainer of $5000 to do work in one month. The work you perform exceeds that retainer by $2500. You send an invoice which delineates the work done and and requests an additional retainer amount. Your invoice needs to states "All charges for prior work performed are due immediately and shall incur interest if unpaid as stated in the client agreement".

The only way to actually collect from non-paying clients is to mount a collection campaign with letters and phone calls. The end result being communication of the point that if payment is not made, you will initiate legal proceedings.

In Colorado, the easiest way to legally collect from a client who owes up to $7,500.00 is to file a small claims court lawsuit. These lawsuits are inexpensive and very easy. All you would need to do is fill out the Notice/Claim form found at: http://www.courts.state.co.us/Forms/Forms_List.cfm?Form_Type_ID=237.

Then you take this form to your local small claims court and file it and pay the fee. Next the court will give you a hearing date. On that date, you take a copy of your signed agreement and your unpaid invoice and explain what the documents are and that you have not been paid to the judge. The judge will then hear the reasons why they did not pay you. If it is a valid defense, which it will likely not be (I'm not happy with your work is not a valid defense usually), then the judge will order payment.

Here is a guide to Colorado small claims: http://www.courts.state.co.us/userfiles/File/Media/Brochures/smallclaimsweb.pdf

Please let me know if you have any questions. Please also remember to rate my answer positively so that I am compensated for my work on your question.

-ZDN
Zachary, Attorney
Category: Legal
Satisfied Customers: 4007
Experience: Lead trial/International commercial attorney licensed 11 yrs
Zachary and 18 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

Thank you for the great answer! And thanks for the legal language and Colorado small claims court resources. I am wondering how it works if a client pays the first month's retainer, there are no overage hours that are due, but they disappear the 2nd month? Since it was a new relationship and I took every project as far as I conceivably could until I received some input from the client, the work stopped. So I used the retainer hours in our first month and awaited the retainer payment and communication in our 2nd month. Neither came. Left several BaseCamp updates, and emails as well as called several times and left messages with her staff and voice mails on her business and cell phones. She replied once saying we should schedule a call, I gave her four available times and she didn't reply. We had a retainer agreement, but no work was done in February since I was awaiting payment and communication. So, while we had an agreement for 30 days notice for endings/wrap up, no notice was given but no work was performed either. Would it make sense to try to collect on a final month's retainer (and then I would owe her a block of work in return) or do the courts only care about products or services already rendered?


 


Also, this may be a question for a CPA but for the 1st scenario where I did project work and services were rendered, can I write that unpaid balance off as a loss on my taxes? I thought I heard someone say that services/my time don't count toward a business loss.


 


Thank you!


Merri

Expert:  Zachary replied 1 year ago.
Hi,

A retainer agreement may only be enforced as to work performed. When the retainer has been exhausted and no further work has been done, then you cannot sue to have the retainer renewed.

What I suggest is also a liquidated damages clause in the 30 day cancellation statement. Like this:

"If client terminates this agreement without providing 30 days written notice, client agrees that this shall cause contractor damages which are difficult to quantify. Accordingly, client agrees that in such situation, client will pay contractor liquidated damages in the amount of 30% of the agreed retainer amount for that month."

That will provide you with some relief that you could sue on in court if they cancel early.
Customer: replied 1 year ago.

Thank you very much!

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