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A fair deal for service providers

by Heather M Eichenbaum Esq
27 June, 2007

With amusement venues throughout the world, it is inevitable that service providers, including inspectors, consultants, attorneys and computer programmers, will travel. It is wise that service providers protect themselves, to ensure they are paid fully and promptly.

Although those service providers highest in demand could require advance payment before providing their services, this would be rejected by many venues as it leaves them with few options if the services are then not provided, and of course it hardly suits the industry’s seasonal cash flows.

Contracts between the parties can provide some protection for both sides and are the optimum means by which both service providers and venues can set forth their expectations and requirements. However, a contract leaves open the question – if the contract is breached, how does the service provider (or venue) enforce it or recover damages?

If the service provider completes their obligations under the terms of the contract but then isn’t paid, what can they do? Say they reside in the United States but the services were provided in China, can they file a lawsuit in the United States, or must they try to navigate the unfamiliar Chinese legal system? The contract should set forth the venue and what laws will apply to claims for breach by either party to the contract.

To ensure payment to service providers once work is complete, many contractually require periodic payments toward the total contract price. This does not provide complete protection, but it does ensure some payment. Further, once travel arrangements are made and travel has begun, if that first payment is not made, the service provider is left with no recourse but, again, a lawsuit. This leads back to the issue of where the lawsuit can be filed and how to collect on any judgment.

The best option for ensuring full payment, or the ease of recovering the funds if they are not paid, is for service providers to require, contractually, the escrow of the funds due under the service contract. Thus, if the total contract price is $20,000, those funds are placed in an escrow account and then the service provider would be paid an initial $5,000 deposit by the venue, before travel begins. Once the project is begun, another $5,000 can be released to the provider. Once half complete, another $5,000 can be released, and so on. The escrow account should be held in the locale of the service provider. This will allow the service provider to initiate a lawsuit, in a familiar forum, to recover the funds if they are not properly released. The terms of the escrow account must be spelled out clearly within the service contract, as must all others terms of the project.

With the funds escrowed, the amusement venue also has control over the release of the funds and can hold back monies if the service provider fails to meet their contractual obligations. Moreover, where the service provider performs fully under the contract, they can be assured that the contract price is sitting in an accessible account from which they can recover on any judgment if the venue fails to pay under the contract. This solution is one which the parties should be able to live with as a fair compromise in most, if not all, situations.

Heather Eichenbaum is an attorney with Spector Gadon & Rosen PC, located in Philadelphia, New Jersey and Florida. As well as defending amusement venues, she also provides training and corporate assistance. Clients include Six Flags, Atlantic Pier, Gillian’s Wonderland, Holiday World and Reithoffer Shows. Heather can be reached at +1 215-241-8856 or: heichenbaum@lawsgr.com