Legal Question in Business Law in California

I had a dispute with a company over unpaid invoices. The company delayed payment for 2 years, and then finally agreed to a payment plan and settlement agreement. They made their first payment, but now are over a month late with their second payment. The settlement agreement clearly outlines the penalties and interest that are being accumulated, but does not outline at what point the agreement is broken for non-payment. Is there a standard amount of time that I have to wait before I can legally say that the settlement agreement is breached and sue for non-payment? Or will this just go on forever as long as they say that they will eventually pay the amount owed, interest and penalties?


Asked on 9/14/13, 12:01 am

3 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

First, a well-written contract should include sections dealing with "default" "events of default" "breach" and "remedies" and perhaps other similar topics, which should be reviewed to see what light they may shed upon your right to bring suit and/or to treat the contract as totally breached (vs. a minor breach which permits a limited lawsuit for damages but doesn't result in termination of the agreement.

Also, does the agreement include a "time is of the essence" clause? If so, even a minor delay in performance would be a material breach and you'd have an immediate cause of action on the entire contract.

I'd also look to see if the agreement specifies anything like a "grace period" or gives a defaulting party rights to a notice and an opportunity to cure its default.

If there's nothing helpful in the agreement itself, I'd think that missing one payment is not a material breach, but that by the time the next payment is also late, then the breach is probably material. Or, if there's no second monthly payment (e.g., the payments fall due quarterly), by the time the payment is 45 days or so past due, and the debtor has been given notice and a chance to respond.

There is also a right to sue that arises when the other party repudiates the contract, i.e., either expressly or by strongly implied conduct gives a clear signal that it intends to breach.

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Answered on 9/14/13, 10:32 am
John Laurie Gertz and Laurie

I agree with Mr whipple

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Answered on 9/15/13, 9:42 pm
Keith E. Cooper Keith E. Cooper, Esq.

A settlement agreement is a new agreement and stands on its own. If the party doesn't make the payments as specified, they are in breach of the agreement. Unless the agreement specifies otherwise (usually referred to as "notice and an opportunity to cure"), you may take legal action immediately. You probably recognize that it is not worthwhile to continue making agreements with someone who doesn't honor them, so it would be a waste of paper to make a new settlement agreement.

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Answered on 9/17/13, 12:47 pm


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