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Contractual dispute

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ismtm

Guest
So. California

I have a company that sells wireless phones to businesses. Recently the wireless co. is claiming fraud on 40 accounts sold of the 10000+ total accounts sold in the past 2 1/2 years. In my contract it states that if fraud occurs I am to pay for the entire loss incurred including ran up bills. The total bill for these 40 accounts ran up to 73,000 dollars. These 40 accounts somehow slipped though the wireless companies credit check process (which is supposed to detect potential fraud by cross referencing names/addresses/phone#'s). My question is, is there anyway that they can prove my company is guilty without even showing me a trace of evidence we had anything to do with this? And is there a way we can stop them from withholding current commissions until we get proof and a fair hearing?
Without proper training and better safegaurds against fraud can this company hold us solely responsible for the fraud when obviously either the wireless co. or the credit check company fowled up somewhere in allowing these customers to run up such a ridiculus bill.
 


JETX

Senior Member
Q1) "My question is, is there anyway that they can prove my company is guilty without even showing me a trace of evidence we had anything to do with this?"
A1) They don't have to prove it (without a lawsuit). Your answer is in your own post, "In my contract it states that if fraud occurs I am to pay for the entire loss incurred including ran up bills.". Based on this, YOU are solely responsible for any fraud, even if it is THEIR responsibility to do background checks, etc. Your only recourse would be to ask to review the subject fraud charges and challenge those that you don't believe supported by the investigation.

Q2) "And is there a way we can stop them from withholding current commissions until we get proof and a fair hearing?"
A2) Not unless it is included in your contract.

Looks to me like you have signed a contract that gives you all the responsibility for the fraudulent acts of YOUR clients and you chose to not investigate or screen your clients before submitting them (that could have prevented a LOT of these claims). Further, it appears that you don't have anything listed in your contract as to how to handle any disputes of fraud claims made by the service provider. These issues should have been resolved BEFORE your signing this agreement.
 
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ismtm

Guest
Our contract was put together in 1999. Recently we got our hands on a newer contract that was not submitted yet. In the newer contract (which the wireless company updated) states that we have to be proven to have been directly involved with the fraud to held liable for ran up bills. Are we still bound to the old contract when updates have been made along the way without our knowledge?
 

JETX

Senior Member
Based on your follow-up ("Recently we got our hands on a newer contract that was not submitted yet"), that is not a contract (since it hasn't been signed by both parties).

You are still obligated by the current SIGNED contract(s).
 
I

ismtm

Guest
In an offical letter written by the national director of this wireless company, it states that they are recovering losses to the company.
My question is, can the wireless company also recover the profits as well from us? We are being held responsible for the retail value of the handsets, retail value of the rate plans, and overrage at .40 cents/min with no set spending limits or ways to stop the hemorageing.
My thinking is that, if I own a liquor store and an employee accidentally breaks a bottle of liquor on my floor, than as a company I lost the wholesale price of the liquor at $5.00 not the retail price at $30.00 and the possiblity that somebody was willing to pay $5000.00 for it.

This is probably my last question. I want to thank you for your honest opinions and spending the time with me.

Chris
 

JETX

Senior Member
To answer your question, we again have to go back to the contract. What, if anything, does it say about developing costs for fraud recovery???

If nothing, then I believe you have a solid claim against them that you are only liable for the ACTUAL losses incurred due to the fraud and not for the 'potential' loss.

This dispute is simply going to come down to 'who has the money' and 'who deserves the money'.

If they have the money, you will have to force THEM to justify their position of potential damages and that may cost a lot of money AND the potential right to work with them in the future.


However, if YOU have the money and they are trying to recover it from you, you have a stronger negotiating position than they, and try to force them to prove THEIR case for potential damages (either to you or a court).

I assume from your earlier post that YOU have the money ("is there a way we can stop them from withholding current commissions until we get proof and a fair hearing?"). Regretably, this will cause you to make a choice:
1) You can 'take your business elsewhere' and force them to take action against you to recover their REASONABLE losses per the contract, OR
2) You can negotiate an acceptable middle ground allowing them to recover PER the contract, OR
3) You can continue working with them and accept their claims against you, OR
4) You can have an attorney try to get an injunction to prevent their deductions until a court case is heard. (Obviously, this could lead you to #1 above).

All in all, looks like some pretty tough choices ahead.... and hopefully a new contract.
 

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