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Relaying denied

Exchange 2003..  Outside vendor created an application for us that does order entries and sends out Email confirmations using SMTP.  Many Emails are getting bounced back with this message:    You do not have permission to send to this recipient.  For assistance, contact your system administrator.
 <  (OUR EMAIL SERVER.OUR DOMAIN) #5.7.1 smtp;550 5.7.1 < (EMAILADDRESS)>... Relaying denied>

App vendor thinks the relay restrictions are to blame.  I have allowed the workstation range of IP addresses, the web server IP, and checked the box that allows anybody who successfully authenticates....to relay.  They did mention one odd thing....Emails that go to addresses already in our global list of contacts don't seem to get bounced back, but ones that aren't do.  Is there some kind of relay restriction based on membership in an address list?  

My suspicion is that his app just isn't authenticating properly, if at all, but he insists that the exchange server settings need fixing.  Not sure where to look next.  Any ideas?


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2 Solutions
If the app can authenticate, then that is what I would concentrate on.
To prove whether it is authenticating correctly, setup a second SMTP virtual server on the server, disable anonymous access and then get the application pointing at that. Turn up logging and see what happens.

A cheats route which I have used in the past is to use the ISPs SMTP server. This may mean that some emails come straight back in, but at least you don't have to worry about relaying settings.

re: Is there some kind of relay restriction based on membership in an address list?  
I'm not aware of a exchange SMTP VS setting for that.  Are you running an antispam solution on the exchange server?  I suspect the majority of them use all the resoruces they can find including user and global contacts to do thier jobs.

Are you using a front end/back end/dmz or single box?

The thing that I'm concerned with is how is this bounce message being sent if you are blocking relaying from this application.  The typical application with basic SMTP email sending built in, would just refuse to make the connection, if they were intelligent enough to log it they would spew:
550 5.7.1 Unable to relay for joe@joe.com

how robust are the APP's settings for smtp server?
kburmasterAuthor Commented:
Author of app tells me since I included all workstations that use this app in the range of authorized IPs, his app doesn't need to authenticate.  We use GFI Mailessentials for antispam running on the server, and it's just a single box behind a PIX firewall.  Having a hard time getting answers out of this guy.  All he says is "It's using smtp.  Must be your server settings.."

Thanks for input so far!
go to the machine with the APP (I assume it is run under windows)
initiate a manual SMTP connection
this guide misses one point that the syntax of each command can;t have weird extra spaces in it.
mail from:joe@joe.com is the syntax

use this cheat sheet to send email to your real email address from your (same) real email address
then do it with madeup sending email address, then with the address the APP is programed to send 'from'
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