You have worked hard to setup your business for a profitable quarter: once you receive the materials from your suppliers, you can deliver to your customers and turn a profit!
But what happens when your key supplier doesn’t deliver? That’s when you need to ensure that your contract enables you to claim Consequential Damages. Many suppliers seek to insert a Limitation of Liability section into their agreements that eliminates claims for Consequential Damages. If you want to hold your supplier responsible for lost profits that could result from your supplier’s failure to deliver, you should make sure that claims for Consequential Damages are not waived or prohibited.
Your would have made a certain profit if your supplier honored the contract and delivered. Thus, your lost profit was a consequence of your supplier’s failure to deliver as promised. Thus, your lost profits may be deemed Consequential Damages.
Did you know that if a certain type of term of your contract is found to be illegal or void, it might wipe out the entire contract? Fortunately, you may be able to save the agreement by adding a severability clause. A severability clause typically states that the rest of your agreement still remains in full force and effect even though some of the terms are unenforceable.
Severability clauses can come in handy in contracts for any sort of business operation. For example, a severability clause was used to strike a provision that might have invalidated an agreement between a customer and the operator of a zip-line course. The customer sued the company for negligence after suffering severe injuries on a zipline course at a ski area in Vermont. While on a self-guided aerial course, the customer mistook a guy wire (which is used to stabilize the course platforms) as a zipline and slid directly into a tree. Prior to ziplining, participants were required to sign a liability waiver agreement that included an arbitration clause, which required those with claims of over $75,000 to submit to a panel of 3 arbitrators: one chosen by each party and a “neutral arbitrator” from the ziplining industry.
We were delighted to present to a wonderful SAP Partner delegation in San Francisco about the future of the distributed enterprise and the contracting challenges it presents.
Thank you to SAP.io for the hosting and Twitter shoutout here.
Do all contracts need to be in writing? No. Often parties can have an oral agreement or show their assent to an agreement by taking certain actions; however that is not a safe strategy in the business world. An automotive parts distributor in New York learned this lesson the hard way.
Auto parts manufacturer Cummings Power Systems had been selling parts to distributor National Gear & Piston on a wholesale basis for more than a decade. The manufacturer sent its standard form of agreement to the distributor for signature nine years into the relationship, but it was never signed and the parties continued to do business.
A couple years later, the manufacturer declared the distribution relationship terminated when the distributor sought to bid on certain types of contracts the manufacturer wanted to pursue directly. The distributor sued, claiming that the unsigned agreement prohibited the termination.
The court sided with the manufacturer and determined that a lack of a signature meant that no contract existed between the parties. Because the unsigned agreement specified that it would become effective “upon the date fully executed” by both parties and neither party had actually signed the agreement, the contract was never valid.
How do you protect your business? It's time to audit all those contracts to make sure they are signed by both parties ASAP. Or it's time to load the contracts into Contract Wrangler, and we'll check all those signatures for you and alert you to which agreements are missing a signature.
How can you keep track of the key data that is in all the contracts you've signed?
#SalesforceAccelarate @mikekreaden talks with @ContractWranglr CEO to find out:
Who knew that a key source of agility is knowing the contents of your business agreements?! Here's a note we just received from Chris, an executive in the Pacific Northwest:
Did I ever tell you about the time we discovered our POS was a POS?
At our family micro-brewery (which grosses over $1M/year), it was important to have the most streamlined processes, both on the production and service side. We received many complaints about our Point-of-Sale system (POS) from our service staff, so we went looking for better options. We discovered that switching to a newer point-of-sale system would serve customers faster, enable customer loyalty programs, save us money on fees, etc.: it was a no-brainer. When we contacted our current vendor, however, they notified us that their contract had an auto-renewal clause and it just auto-renewed for three more years! We didn't know the auto-renewal was impending or we would have acted sooner. The vendor gave us two options: 1.) keep using their service, which was bad for our business or 2.) pay an exorbitant fee to cancel their service. It was a lose-lose offer!
If we had Contract Wrangler during that time, we would have avoided extreme penalty charges from our vendor. I've realized now that Contract Wrangler is not only important for avoiding unnecessary charges, but also as a reminder to ensure our business is using the best vendors possible. As a producer, retailer, and distributor, we have countless vendors to manage and it is crucial to ensure our vendor agreements are sound. Ultimately, we would have saved thousands if we had implemented Contract Wrangler's system sooner and, most importantly, would have maintained an organized and intelligent system of analyzing our vendor agreements to prevent future issues.
Contract Wrangler and our CEO Neil Peretz are proud to support #FOUNDERSFORCHANGE.
We believe in a more diverse and inclusive tech industry!
"While recent news stories have debated whether an unsigned contract is still valid (see here), corporate executives know that unsigned contracts are unlikely to pass muster with auditors, investors, and regulators. That's because these outside experts are worried about a common state law typically known only to attorneys, called the Statute of Frauds.
In California, for example, the state Civil Code incorporates a version of the Statute of Frauds that requires a written agreement for contracts cannot be performed within 1 year, promises to pay the debt of another, leases of real property for more than 1 year, and contracts for the sale of real property. If Ms. Daniels' (aka Peggy Peterson's) contract required her to perform a task that takes longer than a year, such as maintaining indefinite secrecy, then such an agreement would need to be in writing in California.
If those in the news had used Contract Wrangler, this all could have been avoided! At Contract Wrangler, we automatically detect which contracts are missing a signature and trigger alerts. The result is that our clients are always ready for due diligence and defending the rights they bargained so hard for.
We appreciate the fantastic guidance and advice from the leaders of one of the most illustrious enterprise software companies in the world. And we now have the opportunity to help SAP customers bridge the Intention-Action Gap between what their contracts promise and what their company and business partners actually do.
Here's a link to the big announcement by SAP.
So many lessons learned from the leader in business relationship management! We're incredibly proud to be selected for their Accelerate Program and work together to bring new revenue-generating insights to Salesforce users.
I first started tinkering with computers in the age of the Commodore PET, TRS-80, and Apple. The task of developing software meant rolling up one’s sleeves and typing away for months or years.
Thanks to the rise of the Internet, object-oriented programming, and the Open Source movement, the process of software development has been transformed. New software now utilizes a complex web of third party components, frameworks, and SaaS infrastructure. It’s not uncommon for even the most basic software offerings to sit on top of dozens of other SaaS systems: Twilio for communications, Intercom for customer service, Mongo for database, Mixpanel for analytics, Stripe for payments, SendGrid for email, JIRA for trouble-tickets, Tableau for reporting, etc. The result is faster development and richer software because developers can take advantage of specialization and powerful feature sets that would take years to develop on their own.
The pernicious side effect of this great bounty- an incredible proliferation of contracts. Each component and SaaS system that we use comes with its own terms, conditions, restrictions, rights, and promises. What is the escalation procedure when your Single Sign On provider is down? What warranty comes with your cloud storage service? How many seats of that customer service tool are allowed to use?
The important details about each of these critical software systems is buried in their contracts. When a problem arises, most companies need to scramble to find the agreement - and distinguish between the draft version vs. the final signed agreement - and then hunt for a lawyer or paralegal to decipher the hundreds of SLAs, warranties, and license provisions.
We invented Contract Wrangler to enable you to benefit from all these great third party systems without getting tripped up by forgotten contract terms and conditions. Simply drag and drop your SaaS agreements into Contract Wrangler and have your SLA and warranty details, along with expirations and auto-renewals at your fingertips faster than you can say “404 Error.”
Most people think that the key element of a Non-Disclosure Agreement (NDA) is the right to prevent others from using and disclosing their confidential information. However they often pay insufficient attention to another key clause: the right to have your confidential information returned to you or destroyed. The majority of NDAs have a time limit, after which your confidential information is no longer deemed “confidential”.
Imagine you have cutting edge technology that is five years ahead of the market. You sign an NDA with a one year term with a potential business partner. A year passes and you forget to request that your confidential information be returned or destroyed. The result: you may still be ahead of the market but your information is no longer confidential - and it is in someone else’s possession! In some states, you can even lose trade secret protection if you have disclosed the trade secret and let the NDA lapse when the trade secret remains in someone else’s possession?
Fortunately, this pitfall is easily overcome. Make sure any NDA you sign gives you the right to demand the return or destruction of your confidential information. And then set a calendar appointment before the NDA expires to request your material back.
Make sure your accounting department know what's in your contracts.
Many businesses sell their product to clients based on volume - ranging from volumes of bandwidth to volumes of spaghetti sauce to volumes of heating oil. Both suppliers and customers benefit from making certain volume commitments in advance. Customers have a chance to lock-in a certain amount of supply, often at a set price. On the other hand, minimum volume commitments permit suppliers to appropriate resources accordingly.
Volume commitments often tie discounts to per-unit pricing with higher advance volume commitments leading to lower per-unit prices. Salespeople sometimes urge customers to make big volume commitments to get cheaper per-unit pricing with a sotto voce message: “Hey, don’t worry, if you don’t hit a volume commitment, no one will ever find out.”
Shockingly, experience often proves these salespeople correct! Companies that sell by volume typically calculate the total due by multiplying the actual volume by the discounted price to calculate the amount due. Company accounting departments often fail to catch minimum volume commitments buried in customer contracts and statements of work. As a result, companies under bill clients when clients fail to meet their minimum volume commitment.
Tracking Auto-Renewal provisions can save you millions.
Modern businesses specialize in the core products or services they want to sell. To do so, each must depend on the specialization of partners, suppliers, vendors, and contractors to supply necessary products and services for its business to operate. For example, you are probably reading this website using software from one company and Internet access from another.
Specialization creates efficiencies but if we don’t know the secret trick of managing it, costs skyrocket. Increasingly, modern supply contracts last for a defined length of time and then auto-renew. These auto-renewal provisions lock in price increases and eliminate the ability to negotiate a better deal when circumstances change.
When purchasing a particular service, we often spend the time and effort to shop around and identify the ideal pricing plan. Odds are high, however, that the same pricing plan won’t be right for your company’s circumstances forever. Your company may grow or it may shrink; market prices may change; a vendor’s quality may suffer; or you may simply decide to change directions. Buying outsourced services gives you more flexibility but only if you stay on top of Auto-Renewals in your contractual relationships. Many Auto-Renewal provisions require you to notify the supplier by a certain date (the Notice Date) if you want to terminate the agreement before it auto-renews. If you miss that Notice Date, your company will be stuck for another term - which could be a year or a half a decade depending on the contract.
A verbose lawyer is dangerous.
Some attorneys seem to believe they are paid by the word and that job security stems from developing texts indecipherable to the layman. The reality is that long sentences in contracts can bite you.
Take a “simple” agreement between a telecom operator and a company that owned utility poles. Within the 14-page contract, they agreed that “This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party. ” Sure, it was longer than a sentence that a normal person would write but because lawyers were involved, people assumed that longer sentences must be more
After signing the agreement, the telecom company thought the utility pole owner was bound by the agreement for a minimum of five years. Thus, the telecom company expended large amounts to augment its phone and cable services across 91,000 of the company’s utility poles. Unfortunately for the telecom company, the utility pole company interpreted the run-on sentence differently. The utility pole owner believed that the right to “terminate by one-year prior notice” applied at all times -- even before the renewal period.
The resulting court battle cost more than $1 million. It would have been so much simpler to break that long sentence into two separate shorter sentences. And perhaps include a simple illustrative table showing the possible options.
If you cannot understand what your lawyers wrote, then the other side might not understand either. Avoid major legal expenses by aiming for clarity upfront.
Contract Wrangler is honored to be selected for the prestigious LexisNexis LegalTech Accelerator. LexisNexis is an amazing role model in the legal information industry and we are excited to work with them on leveraging legal-related documents for business insights. Read LexisNexis announcement about Contract Wrangler and the LegalTech Accelerator here
Contract Wrangler was selected as one of the "most dynamic international startups offering real estate and urban management solutions" by a panel of top real estate executives and investors and asked to present at the flagship event of NYC Real Estate Tech Week. Read the news here
Contract Wrangler was one of the handpicked early stage startups to present at the prestigious, invitation-only Legal-RegTech Workshop at Bonny Doon, which assembles legaltech thought leaders, investors, and major law firm partners. In selecting presenters, Organizer and distinguished attorney Howard Chao, the principal of top legaltech fund Doon Capital, handpicked companies that "will reduce risk, make compliance easier to achieve, improve access to regulatory and policy information, all in ways that were not previously possible."
We are excited to be chosen for the highly selective FFL Accelerator Program, which is exclusively for founders who already have deep tech industry experience. FFL is led by a team of early Google alums and startup founders from Stanford and MIT. Founders in the FFL Accelerator Program include veterans from Google, Apple, Facebook, and Microsoft, a Co-Founder of Excite, and a Partner from Sequoia Capital. They are experts in AI, Machine Learning, Marketing, Productivity, Marketplaces, Deep Learning, IoT, NLP, VR, Financial Planning, Insurance, and more. Graduates of the FFL Accelerator include Digital Staircase (acquired by Facebook), Amiato (acquired by Amazon), Pixelapse (acquired by Dropbox), Aviate (acquired by Yahoo), Wello (acquired by Weight Watchers), Carta, Osmo, Rentlytics, and Qventus.
Contract Wrangler CEO Neil Peretz is Invited Speaker at Disruption in the Delivery of Legal Services Conference in New York
Today at the HSBC Conference Center in New York City, our CEO was an invited speaker and panel faculty member on the topic of Technology Solutions Using AI that are disrupting the delivery of legal services. Bringing an in-house counsel perspective to the discussion, Neil helped participants decipher which legal-related tasks are more amenable to the application of artificial intelligence (such as contracts) and why we still need licensed, experienced attorneys to train these AI systems. Fellow speakers included partners from Goodwin LLP, Bryan Cave, White & Case, Mayer Brown, Ropes & Gray, Littler Mendelson, and Seyfarth Shaw, and senior legal executives from Bank of America, GE, S&P, and AXA.