As a business owner, at some point you are likely to come across a client (or perhaps multiple clients) that want to negotiate the terms of your standard agreement. You are open to negotiating, but you do not want to give them everything, so how do you decide where to draw the line?
While each business (and, really, each transaction) calls for its own unique analysis, here are some preliminary considerations for negotiating the terms of a client or customer contract:
Negotiating Your Client or Customer Agreement: Considerations on Key Provisions
1. Delivery Schedule
Your client wants to shorten the deadlines for submitting deliverables. Can you realistically meet the client's expectations? Even if you can, it may be worthwhile (and it should be understandable for your client) to include certain protections. For example, if you miss a deadline because you were waiting on information from the client, this should excuse your delay in contractual performance.
2. Service Level Agreements
Many business clients like to include service level agreements (or "SLAs") in their vendor contracts. If a client is requesting the addition of SLAs (or revisions to your standard SLAs), you need to focus on the details, and you need to think carefully before agreeing that missing an SLA will constitute a default under the agreement.
3. Intellectual Property (IP) Rights
If you will be supplying custom deliverables, you may or may not be willing to give up the intellectual property rights in your work product (ownership of IP rights and ownership of a physical deliverable are two very different things). At a minimum, you will likely want to reserve the right to display your work for portfolio purposes.
4. Remedies for Breach
What does your client expect if you happen to come up short? What are your rights if the client is noncooperative or refuses to pay? Clients often like to try to negotiate these provisions, but their requests will often be unreasonable in the context of the substantive contractual relationship.
5. Representations and Warranties
If a client is asking for additional representations or warranties, it is important to critically assess the request with a focus on the proposed language and its potential interpretations and implications. Representations and warranties can have significant legal ramifications, and you do not want to make a representation or warranty without first carefully thinking it through.
Although business owners will often overlook indemnification clauses as "boilerplate," these are actually critical legal provisions that can have significant implications for a company's liability exposure. Before considering any changes to your company's standard indemnification clause, you should be sure to discuss the implications with an experienced contract lawyer.
7. Dispute Resolution
Finally, if your client is located outside of South Florida, it may be requesting changes to your agreement's dispute resolution provisions. While you may think you are willing to accept the risk of litigating out of state or to change your agreement's choice of governing law, once again, these are important decisions that should be made with the advice of legal counsel.
Contact the Fort Lauderdale Contract Lawyers at Michael L. Feinstein, P.A.
If you need legal advice for negotiating a contract in South Florida, we encourage you to get in touch. Our lawyers have extensive experience in contract negotiations, and we can help you make informed decisions about protecting your company. To speak with one of our contract lawyers in confidence, please call (954) 767-9662 or request a consultation online today.