Consumer Law, Warranties Non-Payment for Internet Service

[marscoweb]

I own a small business that just recently got incorporated as an LLC. The business nature is Internet & Network Solutions for individuals and small businesses.

About 6 months ago prior to either party being a business, we started with our 1st 2 clients, both agreeing verbally for Web Design, Hosting, Email Services, and Multimedia Services. The initial client being a local band, has been doing extremely well since our services with them started and they have been paying on time, up until 2 weeks ago when they signed on with a Management company, "Concrete Management". The local band incorporated about a month ago. The last invoice was sent out on October 15th, 2001 and has yet to be paid. The previous bills were paid within 1-2 weeks. The previous 'manager' cannot pay due to their new management companies' saying so. I've waited almost 30 days, send 2 e-mails demanding payment, sent a statement with demand for payment as a fax, and still haven't heard anything from them.
Initially, I did speak with Concrete after the local band signed over to them and they said I needed to provide them with a W-9, our price list, a receipt for our expenses for the band (we are resellers as well, so I'm not about to disclose our cost to them), and a written contract. As I said earlier, it was a verbal contract, and there were more than 5 people present during that agreement. We were paid on all of the invoices, except for this one.

Can someone tell me what procedures I should follow for getting the money, should I disconnect their services until payment is made, does a verbal contract hold in court if payments have been made for services rendered, any suggestions?

I would appreciate any help.

Scott Kammeyer

 

[Michael Wechsler]

Scott:

This is one of the most frequent issues that arises in this arena and why I always insist on written contracts -- it makes things easier when the variables change. Simply because a contract was not written does not mean it isn't enforceable -- it is except you will have to prove it. In this instance it may not be so difficult to prove since you (1) have numerous witnesses to the deal and (2) have checks sent to you and a service running for the past 6 months that indicate the parameters of the deal. Additionally, in most states the rule of the "statute of frauds" which governs proof of the deal by the plaintiff does not usually kick in unless the amount is over $500. It does not seem to be the case here but I can't be sure.

I'm assuming that the band pays $X per month for the service. At this point it seems that your service is month to month. You have given them notice -- the fax is most important since you should have a receipt that it was sent.

Here is what I would do, which is just me and you can decide what you want to do. I would send a letter, certified return receipt to both the lead member of the band who was in charge of the deal and to Concrete (someone specific such as an officer or someone in the legal department). It should state that you have given them 30 days notice as per all the different ways you gave them notice and that the service will be turned off within 10 days of the receipt of the letter unless they remit payment to you for services rendered. I'm assuming that the 10 days will get you past the 30 day mark from the date you sent your fax. This should keep you in a safe zone and you have also given them adequate notice of the situation.

On a legal note, the "statute of frauds" was designed to prevent people from making false claims of being owed money by requiring some written proof of a deal. The $500 limit is arbitrary and varies from state to state. Once you get to the $500 amount, the plaintiff must evidence some writing (and there are specific rules) which indicates sufficiently that there was a deal and the burden is on the plaintiff to prove his/her bargain. The plaintiff could have put the terms in writing.