Consumer Law, Warranties Valid contract?

[boone08]

I have this situation that I don't know if it warrants going to a corporate lawyer. Basically, we took on this contract about a year ago with someone who wanted us to develop some technology. We signed the contract and set it to expire after a few months (it already expired almost 10 months ago!) in thinking that we would have it ready by then. It turns out that the they wanted to add more and more stuff to what needed to be developed and so eventually it became too hard for us to give him what he wanted (which was beyond what the contract stated). I tried to help throughout this year and introduced them to people that could help get the idea off the ground with our help. At the end of August we got really frustrated because they were demanding too much and just delivered to the best of our abilities what we could give them. Now, they want their deposit back ($2k or 50% of our fee for the project) and they're threatening to sew us for $20k. I know it's not a lot of money and hence why I'm hesitant to seek too much legal help (will probably end up costing a lot more).

I'm thinking that they have no claim on this and based on 2 things:
1) Contract expired already and there is nothing about post-contract life unless there is a written notice which there isnt
2) On our contract they had 30 days from the day the product was delivered to make any claim and they didnt.

So here are my questions:

1) If the contract expired almost a year ago, can they have any claim that we "breached the contract" now??

2) If the contract still is valid, if when we delivered in August of this year they didn't say anything, the 30 days to say something passed, and only now (2 months later) wants to claim something, is it valid??

I'm trying to figure out how to respond to the arbirtration letter. Let me know if any of you guys can help me out! Thanks!!

 

[dee_dub]

Without knowing your jurisdiction and the terms of the contract, this is purely speculative.

1) Yes. The statute of limitations probably hasn't expired yet.

2) Who's to say you "delivered" in August? What were the criteria for delivery? Did the client sign off?

For similar reasons, your "expiry date" may not have terminated the contract. If you kept working, and they kept paying, then quite possibly you implicitly agreed to extend the contract. I would be more inclined to pursue the "they kept changing the scope" angle.

What is the $20K for?

 

[boone08]

The jurisdiction is the state of California. The limitation of liability say in the contract that no party can be held liable for breach of contract, negligence, etc, or anything that is not "indemnifiable" such as misuse of licenses, abuse of content, etc.

When I delivered in August, I sent the email with the product, and said that we considered it to be what the contract stipulated. It was clearly a delivery, he never signed off, but by not saying anything about the email he implicitly "signed off" according to our contract - he had to send a written claim that that was not what he wanted?

I can send a copy of the contract if that's helpful! Thanks so much for the help!

 

[boone08]

Oh and the $20k is for his "expenses" ranging from "courses he took to start this idea" to trips that I didn't even know he took.

 

[dee_dub]

So respond to the arbitration letter as follows:

1) The contractual limitation of liability clause excludes his claim entirely.

2) The product as delivered in August exceeded initial spec, and must be deemed to have been "delivered" within the meaning of the contract, and he did not bring his claim within 30 days.

3) (Assuming you haven't been paid beyond the initial deposit) You've provided him with a working product and haven't been fully paid for it. Counterclaim for your full amount.

4) You are not liable for expenses he undertook. These are unrelated to any rights or obligations under the contrat. He would have taken the courses anyways (or maybe HAD already taken the course prior to the contract).

 

[boone08]

So his letter was just a demand for $20k, he said I need to advise whether or not I want to use arbitration as a way to solve this or that otherwise he will move forward in the way that benefits him the most legally.

I am going to respond to his written notice with another one saying all of the above points and asking him to accept the deposit and leave us alone.

 

[dee_dub]

Sounds fair. Good luck to you.