Introduction Fees

Several years ago we signed a contract with ‘XY Co’ a company that agreed to supply work to us and we agreed to pay them an introduction fee. They have never really sent any work, perhaps 1 or 2 jobs which we completed and paid their fees. It all went quiet and we thought the contract had come to an end several years ago.

We receive work from another work provider which we have undertaken a lot of work for over a number of years. Recently we have started receiving letters of instruction from ‘XY Co’ to undertake the same work introduced to us from our current work provider.

We have accepted the work from our current work provider and have invoiced them according to their instructions. Unfortunately ‘XY Co.’ requires payment for the work they allege they introduced to us, the invoices are mounting up but I don’t think I should pay twice what do you think?
The starting point is to read the contract that you have signed to establish what is says and whether you are required under its terms to pay the introduction fee. It is good practice to record the contracts that you have signed so at a glance you can see what the company has legally committed to undertake.

If you create a list of contracts the business has signed you can review them regularly. If one contract is no longer operating as expected, review it, contact the company and ask why the contract is no longer operating. You may have just slipped off their system with a change off process or employee.

If the contract does not recommence then terminate it in accordance with the clauses within the contract. If you are a member of RML then contact the legal helpline to obtain advice upon the content of the contract. RML will draft a suggested termination letter which you can use to end the contract.

With contracts which ‘introduce work’ they should be terminated rather than left, because the purpose of the contract i.e. ‘introducing work’ can be difficult to precisely define. The company may introduce a customer initially but then the customer may return several times. Does the initial introduction by ‘XY Co’ enable them to claim their fee for each occasion the customer returned to your garage?

Whether you should pay the requested introduction fee depends upon the content of the contract you have signed, so initially you must read the terms. XY Co. may have a valid argument to request a fee, however without reading the contract it is impossible to determine the strength of their argument in law.

You could write to ‘XY Co’ and explain that the work was introduced to you by another work provider and therefore it is not appropriate to pay their fee because they did not 'introduce' the work. 'XY Co' cannot introduce something you have already been ‘introduced’to.

If ‘XY Co’ starts to threaten litigation then you should contact RML and provide copies of the information to allow RML to advise and assist.