QUESTION:
Hello Ken,
Every year we lose or I should say refuse tens of thousands of dollars worth of contracts from larger building management companies and larger corporations. The reason is that they insist that we sign their contract or PO instead of them signing our contract. Their contracts inevitably have the same contract language and clauses that ours have (supplied by your firm) in ours regarding indemnification, liability etc, etc, etc.
I know that we’re doing the right thing as a company to protect our business but what I can’t understand is that many if not most other companies regularly sign their contracts. I’m not talking about trunk slammers; I’m talking about mid size and national companies.
Why can’t we as an industry drive the contract issue by all agreeing to not sign anyone’s PO or contract but to insist that they sign ours? If we all banded together as an industry customers would have no choice but to sign our contracts that afford us the protection we all deserve.
I’ve been in this industry for over 30 years and I’m yet to find a solution to this problem. No matter how many horror stories that you post there’s always someone willing to risk their business for a high profile customer.
Am I the only one frustrated at losing customers over this? It certainly seems so from where I sit.
I’d love to hear from other companies in similar situations.
Rick S
Triad Security Systems
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ANSWER:
It's tough to pass up a lucrative job, especially when you know one of your competitors is going to pick it up. Governments, institutions and large corporations with fancy house counsel are often going to present contract problems. The problem is invariably that they want you to sign their contract, not yours, or work off their Purchase Order.
Often these contract forms are designed for general construction; sometimes for even more generic business with the customer, like selling equipment. These home made contracts and purchase orders not only don't have the essential protective provisions you have in your security contracts [if you are using mine] but they usually contain provisions that require you to answer for your perceived negligence and to indemnify the customer.
Can you take a chance and work without your contract or sign the customers? To consider taking the job you must have E&O insurance; otherwise you risk too much. Then you need to be sure your E&O policy does not exclude your contractual indemnity, because you don't want to have to provide indemnity if your carrier isn't going to provide it as part of your policy.
Check with your broker or carrier.
The protective provisions of the security contracts are the most important but not only terms you need consider. Keep in mind that once you don't use your contracts you are giving up the recurring revenue under contract, so there is no clear added value to your business on a sale. There would also be no long term contract. The customer's contract or PO might also limit your right to recovery in the event the customer elects to cancel your job at any time, during or after installation.
You don't need counsel to review your contract when you are signing up a subscriber on your contract because it's your contract and you should know its contents. When you work off your customer's contract or PO you should get advice from counsel so you know what you're getting into, unless of course you have decided to take the job and the risk no matter what. Then you may as well put your head back up your butt and do the job without getting any legal advice, continuing on your blissful way.
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