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khrystil

Splitting off from business

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I'm a developer.  I was in the early stages of planning a business and wire framing the product. During this time I found out that an old acquaintance was launching a company that would end up being a competitor, and so I contacted him and asked if he was interested in partnering.  We met and it became clear that he was not interested in it being a partnership, so we agreed upon a (very low) hourly rate, plus a fee that would be paid to me per item sold.  The fee was a substantial amount of the gross profit, and I was happy.  We drafted up a very simple initial contract, just written on a sheet of paper, and both signed it.

 

He already had a website through which they were selling their products and I worked on this site and developed an invoicing system for them.  I was paid for the time and the items sold.  I continued to work, and at some point, he asked me to sign an non-compete agreement, which is set to last 7 years.  I was hesitant, but I ended up signing it.  A few weeks later, when I was set to be paid again, I had put in a lot of work, nearly double the number of hours that I had told him I would be able to put towards development on a regular basis.  He was upset that I had gone over the estimated hours, despite the extremely low rate.  I told him it would be okay if we met somewhere in the middle between hours worked and hours estimated.  He had to go and said that we would continue the discussion the next day.  The next day he sent me a message telling me that he had decided not to work together.  I called him up and met with him where I convinced him to keep working together and came up with a draft of a new agreement, which he said he was going to have looked at.  The new agreement was similar, the per item fee was still there in the same amount.  When he came back to me he began to question the per item fee that we had agreed to.

 

That was about 5 months ago and I have not been paid since.  I have continued working on the project and have automated much of the company, to the point where the company pretty much is the software that I have developed.  Everything that I was paid for at the beginning were temporary solutions and are not longer in place.  We have continued to negotiate and I thought we had reached a verbal agreement about a month ago, but we we sat down to write things out, we were not on the same page.  Still, I made some concessions, and we got a document written out, but again he has said he wants someone to look at it, and has not signed.  

 

I maintain control of just about everything, including cash flow, since it all flows through the software.  All digital assets, including logos, have been designed by me.  I'm not sure what course of action I would like to take yet, but I'm curious how the non-compete clause would hold up in a circumstance like this.  I've heard of instances where non-competes don't hold up in employee-employer situations where the employee has not been properly compensated - which I feel is the case here.  I'm wondering if taking the software I have developed, which would leave them with nothing, and operating my own business using it would even be a legally viable option.

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I am sorry to hear about your issue. As a California attorney, whenever I encounter this situation with a client, I always like to have them provide me with any documentation that has been signed as well as emails. It's only then that I can properly triage their issue and provide competent counsel.

 

You obviously have some options as you are aware, but since you have not mentioned where you live and other important details, it is very difficult to answer your question. This is a very specific issue and it is not appropriate for an attorney to try to advise you in a public forum. Try to find an attorney in your area who specializes in business transaction or contracts.

 

Good luck.

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