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Georgia lawyer threatened to sue and spread bad publicity

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  • Georgia lawyer threatened to sue and spread bad publicity

    I own an e-commerce start up incorporated in Georgia. We sell excursions for travelers. A customer, purchased several tours paying a deposit. On the first tour he was not able to meet with the guide in Istanbul. The customer did not call our emergency number, which is a requirement stated on their travel vouchers and in our terms and conditions. The travel voucher and the Terms and Conditions state: "Company will not be held responsible for any problem that may arise if you do not follow the instructions on your Vouchers, or if you do not call the appointed telephone numbers in case of difficulties. He called the local area manager number which was unavailable at the moment, but admittedly did not call our Emergency Number. On the same day he emailed us to cancel all tours. We offered a free tour for the next day, but he did not respond. So we canceled and refunded all booking deposits paid. When he got back home he mailed us a notice indicating he is a Georgia lawyer and!
    threatened to sue and spread bad publicity unless we would settle for $3000. Does he have a case? Suggested course of action?

  • #2
    You have many possible defenses but probably he should be refunded his payments for services to avoid any further issues. You likely do NOT need to pay him extra damages beyond that.
    It's a bit unprofessional of him to threaten a smear campaign.

    To elaborate a bit...The facts here indicate that the tourist your (“client”) and your company (“company”) are engaged in a dispute over fees associated with services offered to the client by the company. The client apparently purchased several tours from the company but failed to meet with the tour guide of the first tour. Additionally, the client did not comply with the terms and conditions of the parties’ agreement that he presumably signed. The client then canceled the remaining tours, and the company refunded the client’s booking deposits.

    It is not clear from the question whether the company retained some other portion of the client’s original non-deposit payment. If so, the client has sought a refund of that payment. Alternatively, it is also possible that the client is requesting that the company compensate him $3,000, perhaps for his time and trouble. The client’s precise reasoning for his claim and threats is essential to accurately assessing the parties’ rights and responsibilities. In other words, the answer may differ depending on the basis for the client’s demand. His prospects are greater if he is seeking the return of his payment than if he is demanding compensation beyond the return of his original payment.

    In any event, when two parties enter into a contract, the terms and conditions of that contract will generally govern their dispute. While contracts are constrained by statutory and common law, they are ordinarily enforceable. Here, the client is requesting that the company compensate him for his failure to use the services for which he bargained. It appears that the client is either demanding a complete refund or even money beyond what he original paid. The client’s right to that money depends on the precise terms and conditions in the contract. The facts here suggest that the company included language authorizing the company to withhold some portion of a client’s payment if the client cancels and/or fails to use the company’s emergency cancelation procedure.

    A part of the agreement’s terms state: “Company will not be held responsible for any problem that may arise if you do not follow the instructions on your Vouchers, or if you do not call the appointed telephone numbers in case of difficulties.” That passage is important in that is may serve to limit the company’s liability. If the client’s losses or difficulties in fact constitute a problem that arose from the client’s failure to follow the instructions on his vouchers, the company may be immune to liability from that failure. Likewise, if the client’s losses or difficulties were a consequence of the client’s failure to call the telephone numbers, the company may be immune to liability from that failure. However, that passage does not necessarily speak to the company’s right to retain the client’s entire original payment (minus the deposits, apparently). While the company could certainly argue that the passage was designed to allow the company to withhold the client’s entire original payment, it is not clear whether the company would prevail on that argument. Without directly reviewing the entire contract, it is impossible to forecast how a court would evaluate that dispute.

    It is worth noting that non-refundable advance payment clauses are enforceable in certain circumstances. In other words, courts are willing to allow non-refundable advance payments provided that certain conditions are satisfied. First, the contractual language authorizing the withholding of the advance payment must be clear and identifiable. Second, the party retaining the advance payment must not be holding it to punish the other party; courts have refused to enforce non-refundable payments on the grounds that one party would be unjustly enriched. In other words, a party should never be penalized in excess of the actual that damage it caused.

    In this situation, it is impossible to ascertain whether the contract featured a clear and identifiable clause allowing the company to withhold the client’s advance payment. If the contract did not feature that type of clause, the money that the company withheld must be related to the damage that it actually sustained. Here, for instance, the client is demanding that the company return $3,000. If the company sustained $3,000 in losses as a result of the client’s breach, the company is likely within its right to retain the $3,000. If the company experienced a loss that is considerably less than $3,000, the client’s chances of success are greater than if the company did sustain a loss of than $3,000. Again, however, the complete language in the contract is essential to answering that question.

    As an alternative to a non-refundable advance payment, courts are also willing to enforce clauses explicitly permitting reasonable liquidated damages. The damages must be reasonable in the sense that they are proportionate the damage and do not simply serve as a penalty. Liquidated damages are designated in the terms of the contract itself. Liquidated damages are appropriate where it would be difficult to ascertain the potential damage value at the time the parties enter into the contract. It is possible that the contract in this case contains a liquidated damages provision. Again, however, the complete language in the contract is essential to answering that question. Some courts (notably California) treat advance payments are unreasonable liquidated damages. Others enforce advance payments on the theory that the advance payment itself is evidence that the amount is reasonable and proportionate. In short, a liquidated damages clause is probably a safer choice than an inflexible non-refundable advance payment.

    Indeed, the choice of state law is important in a more general sense. If the contract itself selects a particular state’s law to govern the dispute, that selection of state law will apply unless that state bears no relationship to the dispute. Likewise, the contract itself may select a forum in which all disputes must be litigated. That forum may or may not be the same state whose law governs the actual subject matter of the dispute. If the client ultimately finds it worthwhile to litigate the matter, choice of law and forum selection clauses will be extremely important to the resolution.

    In short, the parties’ rights and responsibilities depend not only upon the passage provided in the question, but also on any terms and conditions that pertain to the company’s right to retain advance payments. In addition to those issues, the remainder of the contract is critical to evaluating the parties’ prospects. But a refund of monies paid will most likely end the issue.


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