Is this your situation? You provide a service that involves servicing products that your customers own. For example, you fix broken construction equipment, make alterations to clothing, frame customers’ art or a repair computers. Let’s say you provide the service, but a customer does not respond to phone calls and e-mail messages after you notify him that his product is ready for pick up. Since payment is due at the time of pickup, you are not paid for your service and the customer’s property remains on your premises.
What should you do? There are certain steps you need to take before you can resell the property to another customer.
Let’s assume there was a written contract. In the contract and on a receipt or invoice, you would have protection if there is language similar to this:
If a customer fails to accept delivery or pick up a product within 60 days of the shipping date, Company A will consider the property abandoned and has the right to sell, dispose of, or use any such products in any way it chooses.
Language such as this would protect you from customers coming back six months or a year later to say that the property is theirs and they want it back. (If there is no written contract, then it would be an alleged oral contract with an alleged breach.)
For practical purposes, it is best to provide notice of your intent and provide the customer a reasonable time for pick up. That way, you have evidence that you acted in good faith.
Note: Your business may inherently have a security interest in the property because you provided financing but that is not an issue because it is already in your possession. Also, keep in mind that commercial contracts are governed by the Uniform Commercial Code as adopted in your state.
Reasonable notice could involve taking steps such as using registered mail, return receipt requested of a letter informing the customer to pick up the property. The letter should state that as previously stated in the written contract, if the customer fails to accept delivery or pick up a product within 60 days from shipping date, your company has the right to sell, dispose of, or use any such products in any way the company chooses. Of course, since you may have already given notice in the form of an earlier phone call or e-mail, it could be reasonable to say that with this new registered mail notice, the time to pick could be less than 60 days. But to play it safe, keep it close to the amount of days first cited to the customer.
Payment for the Service
What if you do not want to sell the property to another customer and want your payment? Then, you would have to seek judicial or other intervention to obtain payment. It would be in your best interest to provide a demand letter for the payment of the services, and include the storage cost and any other costs you have. This sometimes gets the customers attention to pay and pick up their property. Also, for significant amounts, you may be able to sell the product and bring a lawsuit for the difference in cost.
In some cases, a previous customer might have been a company that has gone out of business and then, the same owners form a new business. You may be able to include both companies in the lawsuit as necessary parties. There may be dispute in as to joinder of the companies, but it is unlikely that a party can legally avoid a debt by dissolving one business and forming a new company.
If someone asks you to deliver a product to another company, you want to make sure that the party accepting and paying for the delivery is the same as the party making the request. Get the arrangement in writing, and possibly a release of liability from the president of the previous company.
If you have questions about these or similar situations in your business, consult with your attorney.