In other words: two wrongs don't make a right ;)
Seriously, these kinds of "Ask HN" make me angry with the kinds of comments people reply with. You cannot possibly know the legal situation the OP finds themselves in based on the (lack of) details they've written. What you are telling them could see them in court losing the case, and maybe even having to pay damages for cutting ties. You are giving advice that could potentially destroy their business, or even result in personal financial ruin.
Read that again: your comment could ruin a person's life. Think twice before you pretend to be in a position to help someone by spewing advice without having a clue what the situation calls for.
Frankly, I'm astounded that HN allows "Ask HN" posts seeking advice with legal ramifications. These should be moderated and removed. The ONLY valid answer to these posts is "consult a lawyer". Nothing else is helpful, whatsoever. Even real lawyers who might respond cannot determine the correct course of action without hours of research into the specific case at hand.
And if lack of payment is not breach of contract, it's a bizarre contract. That would mean he already agreed to work for free, and that seems very hard to believe. If it does, he's a much bigger idiot for that than for relying on anonymous internet legal advice.
Then again, some laws, jurisdictions and judges are absolutely surreal. And that's also why anonymous legal advice on an international forum is meaningless: what matters is your local jurisdiction. But that doesn't mean we can't have an opinion on it.
Now I don't give a damn how rude I am being: never give advice to someone regarding a legal matter other than "you should talk to your lawyer", unless you are offering your legal services - and surprise, legal discussions would never happen on a public forum. You could destroy a life if you offer ill-advised information, and the recipient believes you instead of seeking legal counsel. Unless you know every facet of their case, even if you're a lawyer, you cannot guarantee that your advice is not ill-advised for their situation.
Proving you are right is expensive at times.
According to what you say, this means that I can hire anyone and not pay them, but according to the contract we came up with: Regardless of whether I pay or not, they have to do the work for me. No one in their right mind would ever sign this or abide. Most contracts come with this assumption that payment shall be received and work shall be done in order to receive the payment. If no payment is received, than it makes no sense to continue doing the work. This sounds highly illegal. They breached the contract therefore eliminating the other party's responsibilities to hold up their bargain on the contract as well.
As for lawyers.. there are a bunch of them who actually specialize in this specific type of law, and may be known as contract lawyers, small business lawyers, or even lawyers who specialize in freelance work, who help individuals or small companies from getting screwed. There is a lawyer for everything. And yeah, you have to find an affordable one, and possibly negotiate with that lawyer too, but I'm pretty sure most of them have a fee range and it all depends on how much paperwork you do and how much paperwork they have to do.
If we're talking thousands of dollars owed to a company or individual, than it is well worth it to pay that lawyer a few hundred dollars to try and retrieve that money, at least, in part to what is owed. In some cases, you can probably get the lawyer to ask for extra money to cover the court and attorney fees. For work that remains undone, no one can force the client to pay that. But to do work for a client and then take them to court? He's in a situation where the client has already stopped paying before the work was ever complete.
As for his client running out of money? I don't care. He doesn't care. Why should he? I can't walk into a Walmart store and take something and walk out because I don't have the money. No one cares about my money problems. The only thing they care about is that I purchased that product legally with money. That store had to pay for that item and then they resold it to me for whatever price they charged. This is the social contract of society. This is no different from freelancing, contract or not. You don't pay, you don't get. This guy has to pay his rent. He has to pay his bills. Does the company care? Yet they still want work done? Yeah, screw that. They breached the contract which revokes all his responsibilities to them.
Absolutely not. He may be in breach of contract by withholding.
>> Get yourself an attorney
This. He should have already had a lawyer on consult. If not, he needs one now. There is no way to resolve this risk-free without a lawyer.