5 Reasons Why You Must Not Forget Key Contract Dates
Key Contract Dates
A couple of years ago, I wrote a blog article about Evergreen Clauses and how they should be avoided for most small business leaders.
However the situation regarding evergreen clauses is somewhat complex. Depending on which side of the coin you’re on, key contract dates can be a blessing or a curse. For example, if you’re paying a web vendor on an annual basis, they are a curse to you but a blessing to the web vendor. On the other hand, if you have an evergreen clause in a lease, it can be a blessing if you like your premises.
Most business leads have issues with important trigger dates in a contract. These can include deadlines associated with notice requirements or deadlines for a particular duty. We put this list of 5 reasons why you must not forget key contract dates, to help you avoid making a very costly mistake to your business. Don’t get trapped simply because you failed to keep track of an important date.
5. Reduce Costs With Key Vendors
Think about your Top 5 key vendors or suppliers. How long have you been doing business with them? How important is your business to them? It’s time to dust off your contracts with them. If there are any evergreen clauses, make sure you disable them and set a firm deadline to end the contract. Then, contact those vendors and negotiate with them. Work to get better pricing or terms. Be smart about this! Don’t attempt to renegotiate terms that are in your favor! (For example; a long-term lease with very favorable rates in an area where the market has gone up considerably). As a general rule, do not renegotiate where it doesn’t make sense. But, you’d be surprised how vendors may negotiate to keep your business.
4. Avoid Conflicts or Penalties
Many deadlines are not purposely ignored, but rather fall to the wayside of other stresses in growing and running a business. These can include: completion of construction, inspection requirements, approvals, certifications or sales metrics. But make no mistake, the other party hasn’t forgotten. Worse, any sort of verbal acknowledgement or understanding that such a deadline isn’t important is completely irrelevant. Contract law generally doesn’t permit you to introduce “extrinsic evidence” to disprove the otherwise plain meaning in a contract. The only way to disable a key condition or requirement in a contract is with another writing signed with the other contracting party. Without that, you must meet your obligations in the contract or face a “breach of contract” situation with the other party. Be sure to look for a “liquidated damages” clause in the contract, which means “automatic penalty” regardless of actual damages.
3. Hold Others Accountable
Maybe a key date doesn’t have to do with a requirement on your part, but it is a requirement for the other party. Make sure you’re aware of key dates and contractual requirements, and make sure you remind the other party — well in advance of a deadline — to keep them honest and hold them accountable. If you don’t, you jeopardize the relationship, the value of the deal and your business itself.
2. Prevent Others from Taking Advantage of You
If you let them, vendors will reduce the level of service but continue to charge you the big bucks. Examples of this include online advertisers, such as yp.com, yelp.com, citysearch.com and others. When is the last time you looked at your online ads? Do they look and do they appear as you’ve last indicated? Did you lose categories, key information, your phone number, hours of operations, pictures, address or website link? Oftentimes, these vendors change the interface and simply migrate all their customers over to the new service! Sadly key information is lost and the value of the service can be greatly reduced over time if you’re not on top of it. Add to the fact that some vendors, like yp.com, try to lock their customers in yearly contracts with annoying evergreen clauses and you have instances where you could be taken advantage of. Double-check the dates of your contracts, and make sure the other party is meeting your expectations.
1. Avoid a Costly Relocation
Many leases contain an option to renew the lease at same or similar terms and/or rates. The problem with such options to renew, is they usually have a long notice requirement (i.e. a year). In other words if you don’t notify your landlord in time of your wish to renew the lease, you will either have to relocate or renegotiate the lease (and usually with very unfavorable terms). This is especially important for ground leases where you have leased the land and built something, such as a building, retail outlet or shopping mall. If you do not exercise your option to renew in time, you could lose absolutely everything.
Use a Calendaring System and an “Important Dates” File
If you have neither a calendar system nor an “Important Dates” file for key contract dates, then you’re really asking for trouble. I recommend that you do both in case one breaks. The reason is, I find that when I put a calendar item into the distant future (let’s say 2 to 3 years out or more), it’s possible the calendar item might get deleted or removed inadvertently, usually because I’ve upgraded my iPhone or upgraded my version of Outlook or Windows. The “Important Dates” file helps make sure I don’t lose really distant calendar items, but it’s also a bit inconvenient because I don’t reference the file very frequently. Therefore, I put it on “my Desktop” and I make a point to scan it once a month, and to update it when I sign a new contract.
One of the benefits of working with a law firm, is you can ask the law firm to keep track of the key contract dates for you. As a law firm, we have specialized software that keeps track of important dates for our clients, and we can alert you to upcoming issues. The only problem with law firms and lawyers, is that we also suffer the causes of death, incapacity and hacking, just like everyone else — so don’t put all your eggs in one basket.
Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later.