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Help! Client has cancelled a commissioned project and refusing to pay cancellation charges!

(32 Posts)
BIWI Wed 27-Feb-13 10:37:36

We are a small market research company. A client who was working as a freelance marketing/insight consultant for The Company commissioned us to conduct some market research for them.

We set up the project, agreed how much it was going to cost (all in writing, go ahead given by the client) and went to a briefing meeting with the client and the company's managing director.

We started all the set up work, working over the weekend (and had other people working over the weekend) to meet their timings.

We also have terms and conditions agreed and signed by the client.

However, yesterday The Company pulled the project. We are now, according to the terms and conditions that the client signed, entitled to charge a cancellation fee, of around £9000. We also use another agency who sources our respondents for us, and they will be charging us cancellation fees of around £2800. (This project would have been worth a significant amount of money for us if it had gone ahead)

However, The Company is refusing to pay the cancellation fees, saying that the client had no right to agree/sign our terms and conditions. This despite the fact that The Company's MD met us at their meeting.

As far as I can see, they don't have a legal foot to stand on here - but is this right?

If anyone can help me I would very much appreciate it.

If I have understood correctly, the client had ostensible authority to sign the contract (backed up by the fact the MD was present at a meeting), and so they should be bound by your T&C regardless of what their interval authorisation matrices say.

er, internal....

Collaborate Wed 27-Feb-13 12:00:11

See a solicitor about issuing proceedings against both of them (assuming your client is saying that The Company has the legal responsibility to pay you). If your client isn't saying that, just sue them. They will have to recover the cost from the Company.

BIWI Wed 27-Feb-13 12:28:31

Thanks.

At this stage, no-one is talking about legal action - The Company is simply refusing on the grounds that the client didn't have the authority to sign the terms and conditions - despite the fact that all the e-mails to us come from the client, with a company e-mail address. Whilst the client is in a contract/freelance position, his contract is with The Company, and it's not unusual for us to deal with freelance market research managers.

As far as I can see, given that everything is in writing, and cancellation charges are laid out explicitly in the terms and conditions signed by the client, it is irrelevant to us what the managing director might say about the client - we are still legally owed the money.

We haven't yet had in writing that they are refusing to pay, so this is our next step, before we mention anything about legal action. I just need to be absolutely sure that we are in the right here!

FloatyBeatie Wed 27-Feb-13 12:34:54

Sorry you are facing this BIWI. I hope you get it sorted without too much hassle. I must say that (speaking on the basis of my almost total ignorance of the law) it would be astounding if you didn't have a watertight case. Hopefully the company will see this and pay up without a fuss. Do you have any room to make a "goodwill" reduction in the cancellation fees to speed things along the way?

BIWI Wed 27-Feb-13 12:40:48

Thanks, Floaty.

It's a very difficult one, because the client is effectively saying 'please don't charge us cancellation fees because the company will come after me for the money' thus making it personal/emotional.

We aren't in a very strong financial situation at the moment to relinquish any/much of the money that is legally due to us, so I'm loathed to do it - certainly at this stage. That money is, effectively, our income for the next month.

I think we need to wait and see what the written response from the company is first - to see on what grounds they are prepared to state their refusal to pay.

And I suspect it's going to end up being a lengthy process before we see any money.

(Thank goodness we sent out our terms and conditions, as we have been a bit lax about doing this in recent years)

Is this a case of your Client running faster than his employer?

I fear The Company is right, if the freelance client had no authority to sign on behalf of the company, this could render the contract invalid. Ie the Company has not signed the contract, the client has. I would see a solicitor about this.

BIWI Wed 27-Feb-13 13:12:52

Not sure about running faster than his employer - as the fee had to be agreed internally (as it was higher than the initial budget), and the MD attended our meeting, so obviously aware of what was being commissioned.

But yes, we will be taking legal advice. Just waiting for a response from The Company first, stating

a) that they are refusing to pay
b) what their grounds for refusal are

Then we can decide the best next course of action

By running faster I did not mean running away, but being one step ahead of The Company.

BIWI Wed 27-Feb-13 19:09:18

Well we have taken some legal advice, and we have "a valid and enforceable claim for the cancellation fee". So hurrah!

Thank you everyone here for your help and support.

Watch this space ...

cumfy Wed 27-Feb-13 22:49:34

I would read your contract very carefully; who precisely is the contract with ?

But, basically, unless you've screwed up, go ahead and sue them both.

Probably easiest in small claims even if you don't get 9k.

BIWI Wed 27-Feb-13 23:25:04

Well, in our terms and conditions, which has been signed by the client, it says:

Commissioning Client: Name of The Company

Signed by: Signature of the client

We haven't screwed up, thankfully!

cumfy Thu 28-Feb-13 00:00:02

I think you may have a problem.

It seems that you may have to sue the consultant personally.

They may well just dissolve their business and leave you grasping at thin air.

Good luck though.

BIWI Thu 28-Feb-13 08:05:36

Why would that be though, when he was the representative of the company? His role for The Company is to commission market research. All correspondence from him came from the company's e-mail address.

And the signed terms and conditions had his name and signature on it, but it was clear that the commissioning client was The Company.

He may not have been an authorized signatory of The Company, though. All employees, and contractors may act on behalf of a company, but might not be authorized to sign anything, like contracts or T&C on their employers behalf. I think your problem may be with The Client, not The Company if that is the case.

Even if our employees commission work through our subcontractors, or purchase services, I will have to sign the contracts or T&C's. They cant do that, and they know it.

(Disclaimer: Not a legal bod)

From what I have read, it would seem that the Client had ostensible authority to sign, and as such the Company would be bound. This will apply whatever the internal procedures say.

If you are contracting with a big company, and someone who appears to be the cleaner signs the company - you could not rely on the signature.

If you are contracting with a company, and a senior contractor with whom you have met. alongside CEO signs a contract, it is reasonable to rely on that signature.

cumfy Thu 28-Feb-13 15:43:41

Yes, but from what I've read the contract was not signed in front of the MD, in which case it obviously would be clear-cut.

Kiriwawa Thu 28-Feb-13 20:20:26

If the contractor is authorised to commission MR on behalf of the Company and has done so before, then the Company hasn't got a leg to stand on I'd think. They must have authorised them to sign on other contracts that have progressed (with you?) or the Contractor no way would have put themselves in this position. So surely there's precedent? I don't know how that works in law.

I'm a contractor and working pretty much full time for a massive organisation at the moment. I hired someone on the company's behalf to do some consultancy work for the firm recently. While we didn't sign a contract, if we'd cancelled on the day or at the last minute, I'd fully expect the company to be liable for any cancellation charges because I had hired the consultant at the company's behest. I am in effect acting as an agent of the company - I have a corporate laptop, email address, phone number etc - to all intents and purposes as far as outside organisations are concerned, I am an employee.

The client in your case needs to get pissy with The Company I think.

tharsheblows Mon 04-Mar-13 16:15:34

BIWI, what ended up happening? I'm curious because I can see myself getting in the same situation.

BIWI Mon 04-Mar-13 17:08:01

Well, we took legal advice and apparently we have a clear case - The Company doesn't have a leg to stand on.

We have spoken to one of the directors who complained that we were taking a very aggressive stance hmm. No, we want what is legally ours!

We have submitted an invoice for the full amount we are due (they offered to pay half which we refused) and we are now waiting for payment within 30 days, according to our terms and conditions.

Which won't happen, I imagine, so then the lawyer gets involved. They get another invoice which they have 7 days to pay, and I think a court order of some kind happens then. <vague>

The Client was definitely acting as a representative of The Company - that is his role/remit, to commission this kind of work.

So we should get our cancellation fee as compensation - but it's obviously going to take a bit of time.

Hope it doesn't happen to you, tharsheblows. But if you're worried at all, make sure that you have everything in writing re commission go-ahead and that you have your terms and conditions signed by your client.

HecateWhoopass Mon 04-Mar-13 17:20:08

I've been in a similar sort of situation, years ago. Vaguely similar. grin

I ran a care agency and it was in our T&Cs that if homes offered a member of our staff a job, they had to compensate us. (it was more complicated than that, it had to be a direct offer as a result of them being sent by us, not someone applying for an advertised job. Rest assured it was a fair and legal condition at the time)

Well, they did. Over and over again. And although it was in the T&C that they had to pay a fee, if we pushed it - they'd simply never use us again. And we had more to lose by losing the company's other business than by letting them get away with yet another member of our staff.

I guess my point is - if you get this money, do you lose this company and/or client? Is that going to be a problem for your organisation?

I'm not saying you shouldn't go after what you're owed. It's just a dilemma we faced often.

Great News Biwi, piuh!

BIWI Mon 04-Mar-13 17:27:21

This company does very little market research, so we're not concerned about losing any potential future revenue. And, given the way they have dealt with this situation so far, we wouldn't want to work with them anyway!

Our only concern is the client who brought us in initially - we have worked them before, and we would like to do so again - but it's an important principle we're standing for here. And also our income. We haven't got any other income at the moment, so can't really afford not to fight this to the bitter end.

HecateWhoopass Mon 04-Mar-13 17:38:12

Ah. Crap, isn't it? Particularly the way they make you the bad guy. That always made me cross.

I hope they cough up.

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