Warranty of Performance - client refuses to pay - urgent!!!

[vik3001]

What is the name of your state (only U.S. law)? NJ

I am an IT consultant and have an S-corp with myself as the only employee. I am starting a project for a client. Client has agreed to pay me NET 30 days. I invoice monthly. What happens if the client refuses to pay at any point, citing any reason (performance or otherwise)? Does Professional
liability (E&O) insurance cover what client refuses to pay?

 

[Zigner]

What is the name of your state (only U.S. law)? NJ

I am an IT consultant and have an S-corp with myself as the only employee. I am starting a project for a client. Client has agreed to pay me NET 30 days. I invoice monthly. What happens if the client refuses to pay at any point, citing any reason (performance or otherwise)? Does Professional
liability (E&O) insurance cover what client refuses to pay?

If he doesn't pay, you sue.

 

[vik3001]

re:

thanks! will my Professional
liability (E&O) insurance cover what amount client refused to pay? say if the client owes me 2K, will E&O cover it?

 

[Mass_Shyster]

thanks! will my Professional
liability (E&O) insurance cover what amount client refused to pay? say if the client owes me 2K, will E&O cover it?

Liability insurance does not cover money owed to you.

You really should have a lawyer look at this contract. It seems a little one-sided to me.

According to this contract, you may be responsible to indemnify the client if you fail to do something.

What happens if the client doesn't pay you, so you discontinue work. According to this clause, you may end up liable for client's damages. Let's say he misses out on his Christmas sales because you didn't update his shopping cart software. He sues you for lost profits, even though the reason you didn't update his shopping cart is because he stopped paying you.

The one I heard of was when a company agreed to a performance bond. Company refused to ship second shipment because customer failed to pay for first shipment. Performance bond was awarded to customer because company failed to ship.

 

[vik3001]

re:

"Subcontractor further agrees that vendor will not be liable for any lost monies"

what does this mean? does it mean vendor is not responsible for money physically lost? or if client does not pay, vendor does not pay?

 

[ecmst12]

Liability insurance covers damage you cause to other people, money you owe THEM, not anything owed to you EVER.

 

[vik3001]

re:

thank you all. I guess the key thing I am trying to understand here is...

Lets say I start work at a client and work there for one month and the client tells me to leave. Since I worked there for a month, I should atleast get paid for the month. If the client does not pay, will E&O cover it? Based on the last post, I assume NOT.

But really I can have an argument that the client took my money as not being able to perform to their satisfaction...so in effect I am paying them correct. So shouldn't E&O cover it?

 

[HappyWanderer]

E&O will protect you from getting sued. If you are not getting sued, it will be of no use to you. Since a client will tend to not sue you if HE doesn't pay, E&O will not help you. Not a chance, in no way, not a little bit, no matter how you argue it, nothing. Do you understand? E&O is for when YOU do wrong. Period.

Just to be sure you have understanding, E&O will not pay you. They will not. Nope. Not a chance. No way. That's not what you are being insured against. Nope. No how. Uh huh. No, no, no.

Get it?

 

[vik3001]

re:

Got it!

>>E&O is for when YOU do wrong. Period.

Is not performing to clients expectations considered doing anything wrong?

 

[vik3001]

re:

Firstly, thank you all for replying...I really appreciate everyone helping out.

I am at the final leg of negotiation here: I am the subcontractor signing the clause below: Will E&O cover this?

Warranty of Performance. Subcontractor warrants that its services will be of professional quality conforming to generally accepted data processing practices and agrees to indemnify, defend and hold harmless Vendor from any loss, claims, damages, expenses incurred/suffered by Vendor as a result of any failure, omission, errors or delay in the performance of services by Subcontractor.

 

[Mass_Shyster]

Firstly, thank you all for replying...I really appreciate everyone helping out.

I am at the final leg of negotiation here: I am the subcontractor signing the clause below: Will E&O cover this?

Warranty of Performance. Subcontractor warrants that its services will be of professional quality conforming to generally accepted data processing practices and agrees to indemnify, defend and hold harmless Vendor from any loss, claims, damages, expenses incurred/suffered by Vendor as a result of any failure, omission, errors or delay in the performance of services by Subcontractor.

Ask your insurer.