The client hasn't paid me and now the client is saying I've broken the contract!

[rocket90]

I need some advice on a small contract law issue we’re currently trying to resolve. We’re a graphic design company and we have a retainer contract with a public organisation. They haven’t paid us for nearly 60 days and our usual payment terms are within 30 days. This payment is for work carried out in December. They have promised several dates over the course of February when we would receive payment but every time they have passed and no payment has been made.

So because of this, we have taken the decision to cease work until payment is made. However, they haven’t taken that well and are saying that we’ve effectively terminated the contract by ceasing work. In our opinion, they have broken the contract first by not paying within our 30 days payment terms. As the contract is coming to an end at the end of this month they are also threatening to not pay us in full for this months work. We hold all of their design work currently and they have asked for it to be transferred over however we’ve decided that we won’t do that until full payment has been made for the retainer contract.

When we started the retainer the client signed our contract where all of this is outlined

Have we done the right thing? and what are the next steps to get this all resolved?

[james_law]

Hi,

It would be best if you retracted all the personal information from the contract and posted it. You may not need to post it all but just the remedies part or relevant part to the issue(s).

The first point of call is always the contract and then if its silent on a matter we can look to case law and statute.

[4737 Carlin]

What provisions are there in the contract that set out the circumstances in which you would be entitled to cancel the contract? Is non-payment a specified reason?

Does the contract make any provision for you to retain the work you are retaining until all sums due are paid up? Can you exercise a lien?

[rocket90]

Hi,

Ok, no worries, this is what is stated under the Ownership and Usage rights section of the contract:

I've replaced my company name with 'Designer' and the client is referred to as 'Client'

4. OWNERSHIP AND USAGE RIGHTS

The rights to be granted by 'Designer' under this Agreement will be transferred to the Client once full payment for services has been made by Client to 'Designer'. Upon receipt of full payment, the Client is hereby granted exclusive and unlimited usage and reproduction rights to the final designs prepared for Client as part of the Project. Except for the foregoing license, all right, title and interest to all designs and artwork (whether draft or final versions) remain with 'Designer' or its contractors or vendors, as applicable. This includes, but is not limited to, layouts, animations and designs created by 'Designer' or its contractors or vendors, computer drives containing such layouts, photography or illustration created by independent photographers or illustrators commissioned by 'Designer', and photography or other images purchased by 'Designer' from a stock agency on the Client’s behalf.

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This is what it states under Project suspension:

7.1 Project Suspension

We sincerely request that you allow us to have creative freedom so that we can deliver the best outcomes for your projects and that you will take on board our suggestions, and ideas, to be in your best interests. We too will take on board your feedback and comments to work together towards a successful project outcome.

We do however reserve the right to suspend any project if a client demonstrates a continued lack of trust and inability to move forward after showing more than a reasonable number of unique design ideas/concepts, and/or shows reluctance in paying the final payment.

Fair notice will always be given with fair chance to remedy the situation without resorting to project suspension or termination. Any suspension, or termination, will not result in any refunds and all designs and work thus developed remain the full ownership of 'Designer'.

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