Breach of Contract for Employment and Equipment

Note: The DearEsq free 'ask a lawyer' site is offered as a free informational service to the public and is not intended as legal advice. Laws vary from state-to-state, and in addition every situation is unique, and relevant facts may not be known. The answer to the question posed below may not apply to in your state or to your situation. For legal advice in your state and your situation you should consult with an attorney in your state who is familiar with the rules and laws in your state.

“Up until nine months ago I was an independent carpet cleaner. A local company, which was one of my customers, approached me and asked if I wanted a job. I explained that I didn’t need one but they told me that their janitorial company needed a carpet cleaning division and that I would be in charge of just this new carpet division. I had my own truck and carpet cleaning equipment and they said they would pay me for all my equipment in monthly payments. It sounded great. Within the two-year contract that I signed, I would be paid a salary, receive 3% commission on all sales, receive profit sharing and bonuses, and the monthly installment payments for my equipment, and they would take over my truck payment.

Now nine months later I have not received my 3% commission, I have not received profit sharing, have received only a few monthly installment payments, and my truck payments are not being paid, which is now affecting my credit. The truck and carpet cleaning equipment is still in my name since they have not paid me fully. I have continually tried talking to the owner of the company and my manager and keep getting told that the company can not pay me. However, since they have not met the original agreement, I want to leave this company and go back to my own carpet cleaning company.

Is the contract now void? Can I leave the company, keep my truck and equipment and go on my way?”

The contract is not void, however assuming that the facts are as you state them, the contract has been breached. Your legal choices are to sue for the breach of contract, while continuing to perform your obligations under the contract (otherwise you will be in breach of contract as well), or to get them to amend or rescind the contract, allowing each of you to walk away from the contract (or to make new arrangements). That said, because this is also an employment contract, you may be able to stop working for them (quit) without technically being in breach for that aspect of the contract – it’s impossible to say without knowing both the employment laws of your state, and the terms of the contract. You will need to speak with a lawyer in your state.

In addition, you have a duty to attempt to offset the losses you have experienced as a result of their breach of contract. For example, even though they did not make the payments on your truck, if you were financially able to, you should have done so, and if you did not, then any late fees or other charges (not to mention the damage to your credit) may be seen by the court as at least partly your own responsibility. As an aside, legally you are the only one responsible for the truck loan if it is in your name alone. Your responsibility is to the loan holder, the janitorial service’s responsibility is to you.

If you cannot get the company to talk to you and work things out (even if only to formally agree that you will both walk away from the contract), then you will need to have an attorney take the matter up with them. The threat of a lawsuit for breach of contract may be enough to get them to the table.

Recommended reading:

Working For Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants