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Ask Terry L. Your Own Question

Terry L.
Terry L., Attorney
Category: Legal
Satisfied Customers: 2527
Experience:  Better Business Bureau. 13 Years bankruptcy experience. Member of the Chicago Bar Association
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I have an unpaid invoice from a client. The client has paid

Customer Question

I have an unpaid invoice from a client. The client has paid for goods to be delivered from overseas, but has not paid my invoice. We have a contract that outlines monies due to me. The inventory is arriving next week, and the customs forms and delivery are in my name. Can I legally hold on to the inventory until my client pays my invoice? Kind of a mechanics lien on inventory?
Submitted: 1 year ago.
Category: Legal
Expert:  Terry L. replied 1 year ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

I assume your contract has a clause regarding a possessory lien on the items until invoice is paid.

Terry L. :

Possession is 9/10ths of the law as they say, and since it is all in your name, you can hold the items

Terry L. :

If your contract has delivery terms, you should comply with them.

Terry L. :

You would be best to discuss it with the client, as you don't want to burn any bridges, and you don't want to be stuck with the inventory either.

Terry L. :

You will have a mechanics lien on the items until paid, yep.

Terry L. :

Let me know what questions you have

Customer:

hello, thank you. The contract is for our business agreement, not the inventory. He is refusing to pay for past sales after my last invoice, however he has paid two times previously. He is saying that he's thought about it, changed his mind, and now does not want to pay for my part of the sales.

Customer:

Because we don't have an explicit agreement about this inventory and the items to arrive are in my name, I want to hold the items until he pays. some of the items, however, are due to our distributor and I must send them out and invoice the distributor for them. So... I can hold the items and even sell them? Our business contract says I have control over distribution.

Customer:

Hi Terry.

Terry L. :

Each contract goes on it's face, so if there is no contract for sale for the new items yet, you can hold them.

Terry L. :

Obviously if you have other agreements with distributors, you should honor those agreements

Customer:

Do I need to file an official 'mechanics lien'?

Terry L. :

Read your breech of contract clauses, and move on those for the lack of payment

Customer:

There are no breach clauses other than arbitration.

Terry L. :

You can check with your local state office to file a lien sure, to protect yourself.

Terry L. :

Each state varies under the UCC on what constitutes a lien, so talk to a local attorney to properly protect the assets for your

Terry L. :

you

Customer:

When the money is sent from the distributor, do I hold that money until he pays, or can I take what i am owed out of that money?

Customer:

"until the client pays"

Terry L. :

I cannot advise you on that, as it would be giving legal advice

Terry L. :

which we are prohibited from doing here, sorry

Customer:

Ok. Thanks very much.

Customer:

Got it. thanks. :0

Customer:

:)

Terry L. :

talk to your corporate lawyer, they can definately look out for your best intersts

Terry L., Attorney
Category: Legal
Satisfied Customers: 2527
Experience: Better Business Bureau. 13 Years bankruptcy experience. Member of the Chicago Bar Association
Terry L. and 21 other Legal Specialists are ready to help you
Expert:  Terry L. replied 1 year ago.
If you have any followup questions, please let me know
Thanks!
Terry
Customer: replied 1 year ago.

The system is prompting me to rate you again.


 


 

Customer: replied 1 year ago.

Follow-up question: regarding my previous question, I'm worried there was some ambuguity. I have a business contract with my client. I do not have an explicit contract for the inventory in question. The inventory is to be delivered in my name, but my client is the one who paid the manufacturer's invoice. All the goods are in my name, the manufacturer's invoice was in my name, as well as the customs forms, however.


 


I want to hold the inventory until the client pays MY invoice--what we have contracted for. He has refused. In that case, can I withold the inventory until he pays me? And who "owns" the inventory?

Expert:  Terry L. replied 1 year ago.
Quite the confusing fact pattern.
If there is no specific contract for this shipment, and the past arrangement was for him to pay your costs, and they have done so in the past, that would strengthen your case here to hold goods until payment. Obviously, the client will argue that they paid for the goods, but your agreement, and past history included payment of your costs involved here. So, It would seem that you have 2 claims here. A) for past due amounts on prior shipments and B) the current amount due for the present shipment. I would think you can hold the goods as collateral until B) is paid with no issue. Holding them until A) is paid is dicier, since the amounts don't involve this shipment.

I would suggest updating the contract language for future deals to allow you to hold goods if prior invoices are not paid.

If you wish to do future business with this client, you should tread carefully here to avoid burning any bridges and to avoid any lawsuits.

Definitely meet with your corporate counsel, (or hire one)before you take any steps. Local and state rules and regulations that I am unfamiliar with could be at play here too.

Best of luck to you.

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