QUESTION
Can legal fees be deducted from the revenue in a revenue share agreement?
Asked on Jan 20th, 2013 on Contracts - Illinois
More details to this question:
Hi. I entered into a revenue share agreement with a company tsoft sells subscriptions of my program to its members. The terms state that I receive 45% of the revenue after all of the other parties cost "related to the development, implementation, and continuation" of the program have been deducted. A couple weeks After the product was launched and selling well, they demanded that I program a customization that would allow them to give it away for free (as an enticement to sell THEIR main product), which I refused (as I would not receive revenue). They tried to bully me with their lawyer, and I stood my ground and they eventually relented. But when they paid my share, they deducted the legal fees they incurred while in a (unreasonable) dispute with me. My question is: Can legal earnings deducted prior to paying my share? My though is that in doing so, they are contending that they can demand ANYTHING they want from me, and use the threat of depleting my income with legal fees
1 ANSWER
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Whether the other party has a lawful right to deduct their attorneys from the payments depends entirely on the language in the particular agreement you signed. You should have an attorney review the contract and get an opinion whether the contract language allows them to do what they did. If they have taken liberties, a letter from an attorney may be enough to dispel of their notion that they are allowed to do it. On the business side of things, you may need to weigh the extent to which your future revenues depend on a good relationship with the other party, though it sounds like the relationship has already begun to go south.
This answer is not intended to establish an attorney/client relationship and is not intended to be relied upon for legal advice in your particular situation. You need more specific, detailed advice from an attorney who has the opportunity to read the contract and gather any additional facts that might affect the opinion.
Answered on Jan 22nd, 2013 at 10:17 PM