Contracts are a Pain

August 1, 2019

With the availability of the new i-SIGMA Contract Template, it’s time for a conversation.

Contracts are a pain. Why make a big deal out of something about which most customers are clueless.  Try telling someone looking for next-day service about your 6-page regulatory contract. You might as well give them your competitor’s phone number.

So, with that in mind, consider the following:

1) Inadequate contracts can be leveraged by competitors. As stated, appropriately worded contracts are legally required when any B2B customer hires a third-party service provider to protect data. And, while it is the customer’s responsibility to make sure they have the right contract in place, that customer may not be happy when they find out from your competitor you didn’t care enough about their welfare to bring it to their attention. Customers may not know the particulars about contract requirements now, but with laws changing daily, and headlines about new regulations appearing with the same frequency, they’re likely to believe contracts need changing too.

2) Silence is not golden. A good contract specifies and limits service provider liability (and indemnification requirements). Not having a contract leaves the liability limitation wide open. Additionally, in some jurisdictions, regulatory compliance responsibilities are not specified in law. In such jurisdictions, the contract is the only way of placing those liabilities.

3) It increases the value of a business: In a real sense, the quality of customer contracts effects the value of a business. The only sound way for a customer to permit a contract to be reassigned from a regulatory perspective, is if the succeeding service provider accepts the same contractual requirements (including liability limitations). When using a state-of-the-art contract, it is far less likely assignability will be questioned, and therefore, the company is worth more for having used an appropriately worded contract.

State-of-the-Art Terms and Conditions: Returning to my earlier example: Someone calls looking for next day service. You know they should have an agreement in place with certain regulatory provisions and mutual protections. You know it, they don’t. Rather than scare them away, it is perfectly appropriate for work orders to reference the terms and conditions posted on your website. Should something happen, terms and conditions are more susceptible to challenge, but the degree to which they reasonably identify customers regulatory requirements, the better meet the customer contractual compliance and service providers’ exposures.

Written By: Bob Johnson, i-SIGMA CEO