Legal blackmail - how to go about it.

[Ceiling Cat]

This story has a basis in reality - The Names Have Been Changed To Protect The Innocent.

Mr. Abel has contracted to buy supplies regularly and exclusively from Company Baker. Company Baker will supply free of charge the dispensing and application equipment to Mr. Abel on the condition that no other supplies from a competitor be dispensed or applied with this equipment. Should Mr. Abel break this agreement, it is stipulated in the contract that Mr. Abel will pay a penalty of $100,000.

A year goes by and Mr. Abel finds out that he can buy a similar product for 1/3 the price from Company Charlie. He also finds a supplier that can supply him with dispensing and application devices at a very reasonable cost. Mr. Abel starts to buy his supplies from Company Charlie.
Company Baker finds out that products from another company is used in their dispensing and application devices and sues Mr. Abel.

How would Mr. Abel go about making this problem go away? There are 75 other businesses in the city that is selling Company Bakers product, and another 100 vendors in the general region. Can Mr. Abel make a deal with Company Baker to keep the information confidential of where to purchase the competitors product as well as where reasonably priced dispensing and application equipment can be purchased in exchange for making the $100,000 penalty go away? Should the information become known to the other vendors, Company Baker would loose a lot of sales.

Is there a line where this bargaining becomes criminal blackmail?

 

[TeasePlease]

Blackmail is such a dirty word.

I would simply have my lawyer contact Baker and offer to sign a NDA in exchange for a full and final release from from the penalty and contract. They should be able to to read between the lines. Pun intended.

otherwise, suck it up and pay the break fee. Your legals would far exceed $100k in commercial litigation

 

[afterhours]

there is no such thing as penalty in Canadian contract law i.e. this clause is likely not enforceable. See a lawyer and pay for a 1 hour consult to figure out where you stand.

 

[TeasePlease]

there is no such thing as penalty in Canadian contract law i.e. this clause is likely not enforceable. See a lawyer and pay for a 1 hour consult to figure out where you stand.

Break fees and liquidated damages clauses are quite common. Plus, anything can be contracted unless it is illegal.

 

[simon482]

could always just go out of business, change your address to 1 digit higher than what it was, change your company name to something that looks and sounds almost exactly the same. can't sue a company that doesn't exist.

 

[Ceiling Cat]

This happened a few years ago, Mr. Abel paid the penalty and then was still on the hook for the balance of the contract. I would have taken the blackmail route. If 175 vendors found out where to buy lower priced product and low priced dispensing and application equipment, Company Baker would have gone bankrupt. I am sure they would have gladly let the $100,000 penalty slide knowing the consequences would be loosing $100,000 plus per vendor per year that goes over to the lower priced supplier.

 

[afterhours]

Break fees and liquidated damages clauses are quite common. Plus, anything can be contracted unless it is illegal.

liquidated damages and penalty are not the same thing; you can contract for a penalty but it will not be enforceable

 

[simon482]

would it not be better as a supplier to lower your prices to compete with others and give a good customer a break on some things instead of losing the customer altogether ?

 

[afterhours]

This happened a few years ago, Mr. Abel paid the penalty and then was still on the hook for the balance of the contract. I would have taken the blackmail route. If 175 vendors found out where to buy lower priced product and low priced dispensing and application equipment, Company Baker would have gone bankrupt. I am sure they would have gladly let the $100,000 penalty slide knowing the consequences would be loosing $100,000 plus per vendor per year that goes over to the lower priced supplier.

sounds like Mr. Abel saved himself a couple of hundred bucks on consulting a lawyer

 

[Ceiling Cat]

The supplier ( Company Baker ) has a recognized name brand and does advertising, that is the reason for the higher prices. The other supplier does no advertising and just supplies the product.

I think Mr. Abel was afraid of Company Baker's lawyers.

 

[simon482]

The supplier ( Company Baker ) has a recognized name brand and does advertising, that is the reason for the higher prices. The other supplier does no advertising and just supplies the product.

I think Mr. Abel was afraid of Company Baker's lawyers.

that makes me ask my question again. instead of losing a good customer and that stream of income wouldn't it make more sense to lower prices to compete and odds are the customer would appreciate that and stay loyal to "you" and "your" business.

 

[TeasePlease]

liquidated damages and penalty are not the same thing; you can contract for a penalty but it will not be enforceable

I didn't say that they were.

Not enforceable? That's simply absurd.

 

[Aardvark154]

The lessons of this story are:

Consulting a lawyer in a business situation such as this is generally well worth the fee.

Don't try to get yourself involved in criminal activity merely because you are p.o.'d about a contract or terminating a contract.

If you can really save much more than you would loose by breaking the contract - go ahead and break the contract.

There is no such thing as "legal blackmail."

 

[afterhours]

I didn't say that they were.

Not enforceable? That's simply absurd.

look it up