In the State of Georgia what actions can an outsourced IT firm take
legally regarding non-payment of services, hardware, and software? ie:
Can the IT firm prohibit access to the servers that work was performed
on until collection has been made? Are their any limitations to
rescind software that was installed but not yet paid for?

Our service contract reads as follows:

2.	PAYMENT FOR SERVICES.  In exchange for the Services  will pay
compensation to ITK for the Services in monthly installment payment(s)
of $120.  With a base subscription of 2 hours per month. Hours
exceeding 2 hours will be billed at $129.00 per hour.

3.	TERM.  This Contract may be terminated by either party upon 30 days
prior written notice to the other party.

4.	CONFIDENTIALITY.  ITK, and its employees, agents, or
representatives will not at any time or in any manner, either directly
or indirectly, use for the personal benefit of ITK, or divulge,
disclose, or communicate in any manner, any information that is
proprietary to ........, ITK and its employees, agents, and
representatives will protect such information and treat it as strictly
confidential.  This provision will continue to be effective after the
termination of this Contract.

5.	WARRANTY.   ITK shall provide its services and meet its obligations
under this Contract in a timely and workmanlike manner, using
knowledge and recommendations for performing the services which meet
generally acceptable standards in ITK's community and region, and will
provide a standard of care equal to, or superior to, care used by
service providers similar to ITK on similar projects.

6.	REMEDIES.  In addition to any and all other rights a party may have
available according to law, if a party defaults by failing to
substantially perform any provision, term or condition of this
Contract (including without limitation the failure to make a monetary
payment when due), the other party may terminate the Contract by
providing written notice to the defaulting party.  This notice shall
describe with sufficient detail the nature of the default.  The party
receiving such notice shall have 5 days from the effective date of
such notice to cure the default(s).  Unless waived by a party
providing notice, the failure to cure the default(s) within such time
period shall result in the automatic termination of this Contract.

8.	INDEMNIFICATION.  ......... agrees to indemnify and hold harmless
ITK from all claims, losses, expenses, fees including attorney fees,
costs, and judgments that may be asserted against ITK that result from
the acts or omissions of work performed by  ITK's employees, if any,
and ITK's agents.

14.	NEW PROJECT APPROVAL.  ITK and..............    recognize that
ITK's Services will include working on various projects for ..........
  .  ITK shall obtain the approval of .............  prior to the
commencement of a new project

Software and hardware would have been prepurchased by ITK and
delivered to client.  The client hasn't paid for the hardware or
software.

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Request for Question Clarification by pafalafa-ga on 21 Oct 2004 07:14 PDT

Ah, where's the old software "backdoor" when you need one.

I don't who wrote the contract, but it seems a pretty weenie "Remedy"
section to me.  Nonentheless, has the requisite written notice been
sent regarding non-payment?

You didn't mention the amount that is due, but have you considered
small claims court?  It's relatively easy and quick, and often enough,
the mere act of filing (or threatening to file) a claim is enough to
get the situation resolved before it comes before a judge.

Let us know if you need information about this possibility as a means
of answering your question (and if so, what cities in Georgia do you
and your client work in?).

Thanks...and good luck.

pafalafa-ga

I very much doubt there is any Georgia-specific law on this matter as
your questions are fairly general and the contract is fairly standard.
 As a general rule, unless the contract specifically permits it, you
cannot engage in "self-help" when the other party breaches a contract
and impose a non-contractual remedy (like denying access to the
servers or software), even though they haven?t paid.  I know that
sounds unfair, but the very real possibility is that if you do engage
in self-help, you may find yourself liable for breach as well as
looking at a cross-complaint or counterclaim should you try to sue to
recover the money.  It is much preferred to send a demand letter, and
then when the time allotted in the demand letter expires, you
institute a lawsuit if they have not paid (small claims court is fine,
as paf suggests, as long as you are within the jurisdictional dollar
limit).

Here's another idea:  did you write any wholly new code as part of the
engagement or was it just all third-party OTS stuff you bought and
then installed for the client?  If you did write any new code, you own
the copyright to it unless the contract specifically states that you
assign the copyright to the client.  I know this is outside of your
stated facts, but just trying to think creatively.  If you did write
new code as part of the engagement and if there is no assignment
language, you could arguably deny access to that new code since you
still own it.

One other thought: does the contract permit you to retain a security
interest in any hardware or software that you installed?  The part of
the contract you recited is silent on that issue.

Also, I gotta ask: is that really what section 8 of the contract says?
 And the client signed that?  As written, it says that the client will
indemnify ITK against ITK's own acts!  Gotta be a typo . . .