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How can I ensure if my software development company subcontracts with a systems integrator who owns the customer, that I will get paid per my terms?

California

Often as a subcontractor the systems integrator can say, "I will pay you when my client pays me!" In this situation when I don't own the customer, I am at the system integrator's mercy. Short of holding their contracts hostage by directing my teams to stop software development if I don't get paid, what is the bay way to manage this situation and still maintain a good working relationship with my client, the systems integrator?

1 reply

Jun 27, 2019
That's a good question, and I should mention that at the Ask an Expert Center, we specialize in construction payment and in construction law. So, I'll admit I'm not well versed in the regulations affecting payment between businesses and independent contractors beyond the field of construction. Still, there are some general principles that should apply.

First, it's helpful to clearly set out payment terms and expectations in the contract and to reiterate what those terms are at the time the contract is signed. If everyone's on the same page from day 1, it's easier to avoid situations where payment talks get icy. It's typically easier to remind a customer about the previous payment conversation than it would be to point straight to the contract.

Beyond that, warning a customer that certain actions will be taken if payment isn't made (such as stopping work) could do the trick. And, if necessary, doing things like stopping work might do the trick or at least keep yourself from working on things that won't be paid for.

Ultimately, each business is different, and so is every customer - so it's hard to point toward a blanket solution. But, by communicating effectively and often, it's easier to build a collaborative relationship, and it's easier to talk about payment problems when they arise. And, once a payment dispute does pop up, it's important to communicate the issue and potential outcomes with the customer before taking drastic action.

I hope that was helpful! For answers that might be a little more pertinent to your industry and situation, posing this question on sites like Avvo.com or JustAnswer.com might be helpful. Each site has attorneys or other professionals available to answer questions on topics outside of construction payment and construction law. Good luck!
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