Client Owes us, we owe sub-contractor

[anlatona]

Our Ohio based consulting firm (LLC) is owed money for work performed for an Illinois based client. The client agrees that the money is owed, but refuses to pay pending proof that a sub-contractor (which the client has hired away from us) has been paid by us. The sub-contractor (a California based LLC) and us cannot agree on the amount we owe to the sub-contractor and the sub-contractor is threatening legal action (including damages). We have two questions: 1) can the client withhold payment pending payment of our sub-contractor? and 2) can our sub-contractor sue for damages?

 

[lwpat]

Yes and yes but they can only withhold for the claimed amount due the subcontractor.

 

[justjess]

From my experience, it depends on the wording of your contracts.