1. Locked in price.
2. Locked in turnaround.
3. Locked in amount of minutes, lines, etc.
4. Defining responsibilities on both sides.
5. Defined penalties, what amount and for what.
6. HIPAA language, privacy/security.
7. How to terminate.

I would like to toss out the question on the termination part for discussion. When a contract says: termination policy is 30 days, and less than 30 days notice is given, what then?

Legal action is usually too expensive, even if the contract would hold up in a court.

If the contract says, if 30 days is not given, then a penalty will be paid constituting so many lines, or a portion of the average, is that being used by anyone?

My contracts do not stipulate a penalty for under 30 days notice, and I'd like to plug that loophole, so I'd like to hear how others handle it, and if they had to use it, has it been enforceable.

When a relationship is good, then contract language is easy to enter into. It is when a relationship is not going good, then ending a contract can be sticky, especially in regard to penalties, and collecting penalty fees. But a contract should not have anything in it that you do not intend to enforce.

Thanks for your thoughts Carole/gmts

It's a sticky wicket you matter how you look at it. If your clients are small clinics and doctors in private practice, they can be easily scared off by the sight of any penalty fees in your contract (at least those penalties that are directed at THEM).

If your client is a hospital or large clinic, they may already have sufficient legal staff at their disposal to make your life miserable if you try to collect on the way out the door.

I would suggest two possible solutions. (1) Put a clause in there that says any dispute will be settled by arbitration.
(2) Instead of a specific fee per line, put a percentage, like X% of the past quarter's billing. That sounds less scary.

George

The "loophole" that I can find in your favor here would be "right to cure" (a breach). If a client notices you later than the 30 days, that 30-day period could be extended for just those days that it would be deficient. That would actually be what you are entitled to according to your contract. Those days may be the only thing you are entitled to at court. It would be far better for you if they just breached and ran away without notice! In that event, I have not personally heard of an MTSO being able to hold a client fully to these contracts sucessfully, even with minimum work guaranteed by the contract. The law looks at future losses with a jaundiced eye in that they are nearly impossible to predict. I mean, if you believe you can hold the breaching party to the balance of the contract, I think that would be unlikely. I believe most clients know this. They may FEAR it, but it's an unrealistic fear. In the end damages will be minimal. In fact, since you are the contract originator, this will work against you in court.

Either way-- flat breach or deficient notice, if you're looking to bag some extra work on a breach, I would whip out a letter asking for damages in the amount equal to the previous six months and be willing to settle for the previous quarter-- if I were lucky. Chances are I'd take away nothing.

My contracts have a 90-notice. I did that so I could presumably get 90 days' damages in case of breach. I believe that's all the damages I could realistically get anyway no matter what. I would recommend that you make that change in your new contracts.

George

George, yes, I agree that a percentage of an average monthly bill would be less scary.

Would I be able to enforce it? Who knows.

Do I think it is necessary to include a 30-day (or 60, or 90) notice for termination of services even without a penalty? Absolutely.

I expected you all to have a termination clause, but I wasn't sure about the penalty part.

Now, what successes or failures have you had with trying to enforce them?

Carole/gmts

With another, we GOT BACK a client who decided to try another service without ever telling us. But we were up against a formidable challenge -- his wife is an attorney. So I laid an extra heavy dose of Jewish guilt on him and that seemed to cow him a bit into admitting that he had screwed up.

With others -- the best thing to do is remember the old saying that you should never try to teach a pig to sing. Why? (a) It won't work, and (b) it only angers the pig.

George

I point out to them that there's an early termination clause on their cell phone contract, for heaven's sake, and they don't seem to have a problem with THAT.

The other contracts mentioned generally do not contain a noticing period and therefore CAN contain an "early termination" penalty, which would hold up if litigated.

The paramount issue that I consider in my 90-day out clause is my company; that is, if WE want out. Many times we have. I do NOT want to be on the breaching end with a client who has deep pockets if they are a problem account. Several thousand in damages would put a dent in us, and sometimes I find that an account just isn't worth my efforts and I want out.

However, my suggestion to you is that you scrap the noticing period and insert an "early cancellation" clause in your contract equal to the highest quarter of revenue during the term the contract ran.

My contracts also automatically renew on the anniversary date for another term absent the notice.

Yes, I've had a couple of clients mess with me, trying another service, etc., and that is a breach based on our exclusivity clause. In one case, I noticed them that the contract had been breached and was effectively terminated and raised their rates immediately. They "cured", but I knew it was only a matter of time and I noticed them of my intention to terminate. They had gone "rogue" and I felt we'd have QC "problems" delivery "problems", etc., as they tried to wiggle out. They did, in the end, beg us to stay, but trust was gone, and we terminated. Lucrative but very bad and vicious account. Another front office disliked us so much and wanted another service to do the work that they trumped up a "breach of confidentiality" lie; and even though we could easily disprove the charge, we didn't want to go through the whole litigation process to hold them. Our attorney told us it would be more expensive to litigate as opposed to what our damages would be. They did cancel without notice, and since there was nothing for us to "cure", it was an outright breach.

What we COULD have done, though, was charge the other service with tortious interference in our contract. We should all keep that legal recourse in mind when someone tries to grab our contracted accounts. If you hear through the grapevine that someone's soliciting your account, put them on notice with a well-crafted letter that you will go after them.

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What we COULD have done, though, was charge the other service with tortious interference in our contract. We should all keep that legal recourse in mind when someone tries to grab our contracted accounts. If you hear through the grapevine that someone's soliciting your account, put them on notice with a well-crafted letter that you will go after them.

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So, I have to find out FIRST if the clients I am marketing to have a service already and then, stay away from them if they do? And if they are near the end of their contract, I could be "interfering" with their contract by doing direct marketing? Or would this tortious interference involve more than sending a brochure and/or making a follow-up call?

We have a contracted service with Brinks. I get advertisements from ADP all the time. Is the advertising by ADP considered interference?

I can't comment on ADT/Brinks.

We can certainly solicit clients who are otherwise contracted. I guess what I didn't make clear is that we should not engage in collusion with the client target to encourage them to breach a contract that is going well. If they have problems with their service that they relate, our f/u questions should be in finding out whether these problems effectively put the existing contract at risk, i.e., uncured breaches of terms. If we've got a lower price, better turnaround, even better Q/C, these should only be considered by the target client at time of contract renewal. But, if the current service has gone long on their prices, blown TAT and QC, etc., the client could terminate the contract for cause, and a claim of tortious interference COULD BE made, but would be hard to support.

My point, as always, is that anyone can sue, and everyone can threaten to sue. Sometimes it works, sometimes it doesn't.