UNPAID invoice - Manufacturer

[yb9469789]

In NY, manufacturer has not been paid for goods he was hired to make handbags for a client. Client had not paid $12k of work done to produce the handbags for the client. Client has not picked up the merchandise and the merchandise bares clients logo. Can the manufacturer resell the unsold handbags, baring clients logo, to get compensated for the unpaid work?

 

[LdiJ]

In NY, manufacturer has not been paid for goods he was hired to make handbags for a client. Client had not paid $12k of work done to produce the handbags for the client. Client has not picked up the merchandise and the merchandise bares clients logo. Can the manufacturer resell the unsold handbags, baring clients logo, to get compensated for the unpaid work?

How long is the client overdue in picking up and paying for the merchandise? What does the contract say about the cures for breaching the contract?
What kind of business is the client? Small, Medium, Large, new, long established etc?

 

[adjusterjack]

Client's logo likely a trademark.

Selling the items with the logo might be trademark infringement and be a costly mistake.

 

[Taxing Matters]

The details of the contract matter as to the remedies the maker has. When making custom goods, it's generally best to get payment for most or all of the contract price upfront before making the goods since it can be difficult to unload custom made goods at a price that will come anywhere close to what the contracting party said it was willing to pay if the goods are able to be sold at all.

In order to sell the bags, at the very least you'd have to remove the buyer's logo. That logo would be a trademark of your customer, and you cannot sell goods with your customer's trademark on them without permission from the customer. Whether you could sell the bags after taking off the logo depends on whether the bag design itself is protected by copyright or trademark. I'd strongly recommend you discuss this with an intellectual property lawyer before you try selling the bags. If the bags are protected either by trademark or copyright, selling them without the permission of the rightful holder of the copyright or trademark could end up costing you money instead of making you money. These kinds of problems are the sorts of things I was referring to in my first paragraph and are the reason why I'd want the money upfront before making custom goods.

You may, of course, sue the customer for breach of contract. That may get your client moving to pay for and pick up the goods rather than risking a judgment against them and not getting the goods.

 

[yb9469789]

There was no formal written contract on either party. Just some texts back and forth regarding the order.

 

[yb9469789]

How long is the client overdue in picking up and paying for the merchandise? What does the contract say about the cures for breaching the contract?
What kind of business is the client? Small, Medium, Large, new, long established etc?

It's been several months and no response from the client. There was no written contract. Manufacturer and client are both small local businesses. Client primarily sold online (no store front) - business was handbags.

 

[quincy]

It's been several months and no response from the client. There was no written contract. Manufacturer and client are both small local businesses. Client primarily sold online (no store front) - business was handbags.

You can sue for breach of contract. That appears to be your only remedy. Trying to sell the handbags with the client’s logo opens you up to a trademark infringement lawsuit.

New York small claims actions have a $10,000 limit. If you want to collect all of what is owed, you should consult with a lawyer in your area.

Small claims information:
https://www.nycourts.gov/courts/nyc/smallclaims/general.shtml#:~:text=The Small Claims Court has,or in a different court.

 

[Litigator22]

You can sue for breach of contract. That appears to be your only remedy. Trying to sell the handbags with the client’s logo opens you up to a trademark infringement lawsuit.

New York small claims actions have a $10,000 limit. If you want to collect all of what is owed, you should consult with a lawyer in your area.

Small claims information:
https://www.nycourts.gov/courts/nyc/smallclaims/general.shtml#:~:text=The Small Claims Court has,or in a different court.

Why would it be deemed a trademark infringement when the proceeds of a sale under (UCC 2-703 (d)) would be to the credit of the owner of the trademark?

 

[quincy]

Why would it be deemed a trademark infringement when the proceeds of a sale under (UCC 2-703 (d)) would be to the credit of the owner of the trademark?

I am not sure it would easily be seen as trademark infringement. The client might claim the unauthorized sale of goods with his mark has weakened the value of the mark, though, depending on the quality of the manufactured product and the pricing of the goods. I don’t know.

Filing a breach of contract suit makes more sense, if yb9469789 can cobble together enough text exchanges with the client to show that an actual agreement/contract was formed between them to manufacture the handbags for $12,000.

I don’t see that anything prevents yb9469789 from selling the handbags minus the logos, though.

 

[adjusterjack]

I don’t see that anything prevents yb9469789 from selling the handbags minus the logos, though.

Might be embossed into the bags' material.

 

[quincy]

Might be embossed into the bags' material.

True. And I suppose there could be some rights-protected design element. But generally speaking, selling or re-selling legally acquired goods that have the actual trademark on them would not be trademark infringement.

Trademark infringement centers on consumer confusion. Trademarks are used to distinguish one company’s goods from those of all others. In the case of authentic handbags with authentic logos, the origin of the goods is not in question. The company that holds the trademark is being credited as the trademark holder. There is no deception as to the origin of the goods.

The above is assuming that the trademark holder granted the manufacturer with the rights to manufacture the goods. If yb9469789 did not have permission to manufacture the handbags with the logos, then you get into a possible counterfeiting problem.

There just aren’t enough facts given to say anything for sure. As described, this sounds like a breach of contract matter - and in my opinion that would be the best way to handle it. Sue the trademark holder for the $12,000.

 

[Litigator22]

I am not sure it would easily be seen as trademark infringement. The client might claim the unauthorized sale of goods with his mark has weakened the value of the mark, though, depending on the quality of the manufactured product and the pricing of the goods. I don’t know.

Filing a breach of contract suit makes more sense, if yb9469789 can cobble together enough text exchanges with the client to show that an actual agreement/contract was formed between them to manufacture the handbags for $12,000.

I don’t see that anything prevents yb9469789 from selling the handbags minus the logos, though.

I am not sure it would easily be seen as trademark infringement. The client might claim the unauthorized sale of goods with his mark has weakened the value of the mark, though, depending on the quality of the manufactured product and the pricing of the goods. I don’t know.

Filing a breach of contract suit makes more sense (?), if yb9469789 can cobble together enough text exchanges with the client to show that an actual agreement/contract was formed between them to manufacture the handbags for $12,000.

I don’t see that anything prevents yb9469789 from selling the handbags minus the logos, though.

I disagree.

Filing a breach of contract suit makes no sense! Not when compared with the "resale" remedies as afforded by Section 2-703 of the Uniform Commercial Code - which incidentally has been adopted by all 50 states.

No sensible manufacturer would risk exchanging its property rights in goods representing its expenditures for material and labor in creating them for a precarious lawsuit and an unsecured judgment. Or abandon them in favor of a trustee in bankruptcy? That is unless one mistakenly assumes that the maker can have his cake and eat it too; that is, keep the goods and recover the price.
____________________

With respect to the matter of trademark infringement, which you and others visualize as resulting from the maker/seller disposing of the goods by public or private sale - again as permitted by the UCC): Let it be noted that:

To prevail on a cause of action for trademark infringement the trademark owner bears the burden of not only demonstrating that it has a legally protected mark, but that the defendant's used the same or a similar mark in commerce in connection with the sale or advertising of goods or services without the plaintiff's consent.

Also, that such commercial use of the mark is likely to cause confusion as to the affiliation, connection or association of defendant with plaintiff, or falsely imply plaintiff's approval of such usage. (Treatise - Cornell Law School https://www.law.cornell.edu/wex/trademark_infringement)

And most decisive to the issue is that The Lanham (Trademark) Act 15 U.S.C. § 1114 et seq., defines the operative words "use in commerce"as:

“Bona Fide Use of a trademark in the ordinary course of trade.”

And no one is going to be heard arguing that a seller of goods exercising default remedies under the UCC is thereby engaging in the ordinary course of trade.

Lastly, litigation involving trademark law is said to be equitable in nature. And as such equitable defenses apply. Including the "clean hands doctrine"!

 

[quincy]

I disagree.

Filing a breach of contract suit makes no sense! Not when compared with the "resale" remedies as afforded by Section 2-703 of the Uniform Commercial Code - which incidentally has been adopted by all 50 states.

No sensible manufacturer would risk exchanging its property rights in goods representing its expenditures for material and labor in creating them for a precarious lawsuit and an unsecured judgment. Or abandon them in favor of a trustee in bankruptcy? That is unless one mistakenly assumes that the maker can have his cake and eat it too; that is, keep the goods and recover the price.
____________________

With respect to the matter of trademark infringement, which you and others visualize as resulting from the maker/seller disposing of the goods by public or private sale - again as permitted by the UCC): Let it be noted that:

To prevail on a cause of action for trademark infringement the trademark owner bears the burden of not only demonstrating that it has a legally protected mark, but that the defendant's used the same or a similar mark in commerce in connection with the sale or advertising of goods or services without the plaintiff's consent.

Also, that such commercial use of the mark is likely to cause confusion as to the affiliation, connection or association of defendant with plaintiff, or falsely imply plaintiff's approval of such usage. (Treatise - Cornell Law School https://www.law.cornell.edu/wex/trademark_infringement)

And most decisive to the issue is that The Lanham (Trademark) Act 15 U.S.C. § 1114 et seq., defines the operative words "use in commerce"as:

“Bona Fide Use of a trademark in the ordinary course of trade.”

And no one is going to be heard arguing that a seller of goods exercising default remedies under the UCC is thereby engaging in the ordinary course of trade.

Lastly, litigation involving trademark law is said to be equitable in nature. And as such equitable defenses apply. Including the "clean hands doctrine"!

You make some good points, based on the little we know from yb9469789. In fact, I made the same comments myself about trademarks and infringement.

My concern with yb9469789 selling the handbags would come in proving that an agreement actually existed between yb9469789 and the client, for yb9469789 to manufacture the handbags with the client’s logo. Text exchanges are not always the best proof of a binding agreement.

I would not want to see yb9469789 accused of selling counterfeit handbags or of selling inferior goods that harm the value of the trademark.

I still think that, if a contract can be shown to exist, it can be smarter to file a breach of contract suit. Most manufacturers are not in the retail sales business.

 

[Zigner]

I suspect the OP isn't in the retail trade and I don't think the OP will find another retailer who would buy the product for resale.

 

[quincy]

I suspect the OP isn't in the retail trade and I don't think the OP will find another retailer who would buy the product for resale.

I agree. Unless these are exceptional handbags, trying to unload $12,000 worth of them stands to be far more time-consuming than filing a lawsuit.