Can a business keep property belonging to a customer as leverage for debt owed?

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Can a business keep property belonging to a customer as leverage for debt owed?

A customer owes the business money. The business has property belonging to the customer, in this case a molding tool. Customer wants the tool back. Can the business hold the tool as leverage in hopes of collecting monies owed?

Asked on May 11, 2017 under Business Law, Indiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

The business can only withhold the tool if:
1) The money owed is for the tool: the business does not need to turn over a tool or item which has not been paid for.
2) There is some agreement or clause in some agreement signed by the customer giving the business the right to do this and essentially making the tool security for any debts.
Otherwise, if the tool is unnconnected to the debt, the business has no right to withhold it.


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