Can a vendor legally hold money owed to a subcontractor on one contract with a second contract?

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Can a vendor legally hold money owed to a subcontractor on one contract with a second contract?

We recently made arrangements to return some parts to a vendor from a job completed a month ago. We had to locate parts and sent verbal agreement we would send parts ASAP. We always honor our word. We are currently owed for a separate job completed a month ago, we have a 14 day net agreement, the invoice was due July 1st. When we asked about the payment on second job, we were told it was being mailed out. Now, 2 weeks later, we still don’t have payment and when we asked again about the payment and told they would be holding on to the payment until they received the parts requested. I have been told you can’t cross contract payments like that?

Asked on July 16, 2015 under Business Law, Georgia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

You *can* "cross contract payments," but only IF the contract(s) between you and the vendor specifically stated that this could be done--that is, there is nothing inherently illegal about it, but it must be reflected in an explicit understanding or agreement between the parties, reflected in a contract, between the parties. If there was no such agreement, then the normal rule or expectation, that each contract is separate (and must be paid separately) would apply.


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