# Let's test our legal understanding of basic business law...



## Cleanupman (Nov 23, 2012)

Company "A" subcontract work to Company "B".
Company "B" in turn subcontracts the work to company "C".
All obligations by company "C" to be paid for services completed are met with no issues.
Company "B" never pays company "C"...
Company "C" sends Leter of demand to Company "B" cc'ing company "A" making company "A" aware there is an issue.
Company "A" continues to sub to Company "B"...after knowing that Company "B" is not following through on their financial obligations.

Can Company "A" be held liable for financial damages to companies for any issues of nonpayment after they have been notified of said activity?


Ok folks...what do you think??? I have posted this in a couple legal forum Im involved in and will bring any comments I receive there over here and the other places I post...so what do you think????


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## BPWY (Apr 12, 2012)

CAN they be???? I dunno the laws.


SHOULD they be????? yup.


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## wmhlc (Oct 8, 2012)

In michigan if it construction work company a has to be a licened builder in order to sub any work over $600 out. Company a is 100% liable in michigan. If company a is busted for sub work without a licensed it a $500 and up to 6 months in jail


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## Cleanupman (Nov 23, 2012)

Here is a response from an attorney in Australia...it is the same here...

In short, no. The contract is between company b and c, so although company a may presumably have some ethical obligations knowing company b is doing the wrong thing, those obligations are not legally enforceable. I doubt the position is any different in other jurisdictions but that is certainly the position in Australia applying basic contract law principles.

How Company "A" gets attached after the notification process is by placing the phrase..."et al" when filling your legal documents...

By CCing company "A" in all letters of demand to Company "B" you effectively place Company "A" on notice...they can no longer play the "I don't know" card....a lot of legal decision in business can be based upon knowledge......
There is a lawyer and paralegal in the discussion over on FB and we also posted the first video installment on contracts this morning....

Not sure about everyone else...my feeling on matters like this...
We all need to be knowledgable in how our contracts affect our businesses...
With open discussion site like this, and others I do believe that we can unite all PP folks on every education level and help level the playing field for service providers....
Have a great day everyone!!!


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## w-s (Oct 27, 2012)

Cleanupman said:


> Company "A" subcontract work to Company "B".
> Company "B" in turn subcontracts the work to company "C".
> All obligations by company "C" to be paid for services completed are met with no issues.
> Company "B" never pays company "C"...
> ...


I've had this happen to me as a "company D". I called company A directly, and company c paid me in full the next day.

Then they let me go, which was ok with me since they tried scamming me.

Company A called back and the issue was that company B never sent company A the completed order...it was 90 days out...

For all those wondering..

company a = carrington
company b = white van
company c = zvn


Back to point..if you want your money...call company a directly..just dont expect company b to give you any more work.


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## BRADSConst (Oct 2, 2012)

wmhlc said:


> In michigan if it construction work company a has to be a licened builder in order to sub any work over $600 out. Company a is 100% liable in michigan. If company a is busted for sub work without a licensed it a $500 and up to 6 months in jail


Can you clarify this for me?

Are you saying that every national, regional, sub of sub, etc. that hands out repair work (construction work) is required to be a licensed contractor in the state of Michigan? If so are all your clients licensed for Michigan?

I'm curious because I know some of my clients aren't licensed in Wisconsin. Then again, I'd have to check if Wisconsin requires them to be licensed.


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## wmhlc (Oct 8, 2012)

In michigan its the law, if you sub work out you need to a licensed conctractor period. don't tell to many people its my get out of free jail card if the crap hits the fan with a national. No national is licensed in michigan I check them all out. I pull all the proper permits so I would never get in trouble but the national could get in some trouble mostly a big fine becasuse they couldn't really find somebody to throw in jail.



BRADSConst said:


> Can you clarify this for me?
> 
> Are you saying that every national, regional, sub of sub, etc. that hands out repair work (construction work) is required to be a licensed contractor in the state of Michigan? If so are all your clients licensed for Michigan?
> 
> I'm curious because I know some of my clients aren't licensed in Wisconsin. Then again, I'd have to check if Wisconsin requires them to be licensed.


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## nurumkin (Sep 28, 2012)

*re*

If I remember my business law correctly from college company A has no financial obligation to company C. The contract is between B and C. The reason for this would be that you could theoretically increase company A's liability for a job because they may have already paid B, so what you would have done as company C is basically pass the buck of enforcement of your contact with company B onto company A. 

Another reason for this is that in order for you to be a subcontractor it is not ok for company A to tell company B who they can sub work to. So what if you just kept subbing work all they way to company Z you have then put the burden for making sure 25 different companies are paid onto company A. 

Honestly this is in place for a reason (and I would question the accuracy of the statements about Michigan law, but then again its MI so that would explain stupid laws) it is not company A's problem if you got screwed by another company, company A never had any dealings with you. But I would also hope that they would reconsider their dealings with company B if they found out this was happening.


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## Wannabe (Oct 1, 2012)

This argument that is made is invalid from the start. 

There is a big difference between Contract Laws and Construction Laws.

MI, among others, requires the "Entity that hires work to be done/subbed on a property, if different than the Property Owner, must be a licensed general contractor"

What most Nationals have done in the past is appoint 1 Contractor as their General Contractor for each State and will license as XYZ Contractor doing business FOR ABC Service Company. 

A Good Friend of Mine several years ago was the "appointed" General Contractor for a VERY Large National. He Reaped the rewards that came with this appointment for 4-5 years... Said National started to "not pay on some work" and guess who the Atty's came after? THE GENERAL CONTRACTOR. He quit fast. No longer in the business.


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## Cleanupman (Nov 23, 2012)

Good Input everyone....

The scenario...A to B...B to C....is rampant in the industry..
So I pose the qwuestion above...What I find is as stated above...

Once company "A" has been notified of the misdealings of "B"...there is an "ethical" obligation...However, that DOES NOT translate into a LEGAL obligation...
A is still at liberty to sub to B only difference is they will no longer be able to play the stupid card and say "We didn't know"

This is one of the reasons we will not work with a company that is "subbing" the work a second time....
It's gotten to the point that we all can tell by the pricing...


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## JFMURFY (Sep 16, 2012)

The scenario Cleanupman posts is no different than large scale government or private commercial contracts where a GC hires the trades to get a building built or renovated. 
Say the Site contractor is not qualified for the demo scope, so they need to hire a licensed demo contractor. The site contractor for whatever reason has financial issues and doesn't pay the demo guy... Although it a legal hassle becomes inevitable, the GC and the Owner of the property will (and thru my experience) end up paying the demo guy. 

Seen it numerous times, although we do most projects on a smaller scale... the scenario is the same. 

To avoid some of the pitfalls... it's recommended that: 
A. Know what your dealing with before you jump into bed with Company B
B. Don't get into deep with Company B, until you have established a favorable history
C. Require Company B to pay a retainer on large projects you can't carry.
D. On large scale projects - Require a payment guarantee such as P&P bonds or
money in escrow.


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## Cleanupman (Nov 23, 2012)

Most everyone knows how I feel about the Company's "B"'s out there.This issue ahs become rampant in the industry. While I feel that the nationals have put many of these regionals in play to cut their imediate overhead, never-the-less it is us that allow them to continue in business.
I do not have anything against anyones business model....What I do have is a problem with is a cpmpany removing a layer of revenue from the picture for trasnfering paperwork with out having any monitary risk...this is a middleman that does nothing but invite trouble and adds a layer of protection to the national or whomever the work is being generated from. 
It is very easy to say no to these companies....Everyone can make all the arguments they want about having to feed your family and pay your bills...I have those same issues and sorry I do not work for anyone that is willing to pay less than minimum wage when it is all said and done. When you do you have devaluated yourself so badly in addition to placing everyone else in the industry in peril for making a respectable living. I see the arguments everyday with someone calling me or someone else stupid for not taking the work...6 months later the ones that have some self respect, dignity and integrity are still here offering advise to those who ask and there is a new set of people calling us stupid....

Well we may be stupid but we are not in the unemployment line or filling bankruptcey.......


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