Let's test our legal understanding of basic business law... - REO Property Preservation Forum
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post #1 of 12 (permalink) Old 01-10-2013, 07:47 PM Thread Starter
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Let's test our legal understanding of basic business law...

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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post #2 of 12 (permalink) Old 01-11-2013, 06:01 AM
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CAN they be???? I dunno the laws.


SHOULD they be????? yup.

Professionals are people who can do their job when they don't feel like it.
Amateurs are people that can't do their job even when they do feel like it.
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post #3 of 12 (permalink) Old 01-11-2013, 06:49 AM
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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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post #4 of 12 (permalink) Old 01-11-2013, 11:08 AM Thread Starter
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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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post #5 of 12 (permalink) Old 01-11-2013, 11:09 AM
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Quote:
Originally Posted by Cleanupman View Post
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????
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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post #6 of 12 (permalink) Old 01-11-2013, 12:36 PM
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Quote:
Originally Posted by wmhlc View Post
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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post #7 of 12 (permalink) Old 01-11-2013, 05:47 PM
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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.

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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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post #8 of 12 (permalink) Old 01-11-2013, 06:57 PM
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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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post #9 of 12 (permalink) Old 01-11-2013, 10:02 PM
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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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post #10 of 12 (permalink) Old 01-12-2013, 09:51 AM Thread Starter
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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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