View Full Version : Contract Questions
01-30-2001, 10:44 PM
This is the week I begin work on the quarterly commercial contract I talked about a couple weeks back maintaining a local water distict's sites. I scheduled them to start on Thursday (the 1st of Feb). Tomorrow, the Building Manager would like to meet with me to go over some final points about insurance (which I have, no prob). All is well in Green Land, except...
The contract was written with a 10% provision for prepayment. The contract is signed, by both parties. The General Manager of the district told me after signing I would get a check around the 24th to take advantage of that provision. On the 25th I stopped by to drop off a couple more proposals for more work and the check 'wasn't ready'. No problem.
Talking to the GM tonight he said the check still 'wasn't ready' and might not be for the meeting tomorrow. In fact, he said it should be ready in 'two weeks', but could be ready tomorrow. Now, the contract I submitted stated clearly that the 10% provision was only in effect if the entire contract is paid by January 31st (tomorrow). They may very well have it ready but I'm getting the feeling of a runaround here.
I'm the sort of fellow who stands by principle and plan to explain to them the delay (if present) is fine, but that the 10% provision will no longer be in effect. If they refuse to honor the signed document and want to pay only the reduced contract, even if late, I expect I'll walk since the contract would be in default. The money's still good, but I only submitted a 10% provision to avoid billing and collecting hassles, which this would clearly be.
I guess my question is, am I being too hardline and shooting myself in the foot? Should I allow an extension on my 10% provision for 'reasonable delay', or should I stick with my principle?
Being my first real commercial contract, I'd hate to let it go under these circumstances, before I even begin. However, I don't like the idea of continuing under tainted circumstances, either.
What would you do, or suggest that I do, in this circumstance?
01-30-2001, 11:45 PM
TG, do I understand you right when you say they were going to pay you the full amount of the contract before you ever started the work minus 10%.
If you were trying to avoid billing hassles then I guess this would be the way to go but I sure wouldn't expect this from very many commercial accounts. Billing and waiting is part of being in business and throwing away your first contract because of this sounds a little extreme. Just look at it like you'll receive the full amount now, just over the length of the contract. To bail now would almost certainly guarantee no more work from these people, but to hang in there and bill monthly would show that your willing to work with them and might get you more work in the years to come.
01-31-2001, 12:04 AM
The 10% prepayment for entire year is a practice used by alot of companies. In the long run it is more profitable to do this. Now with the contract signed by both parties it is the duty of both parties to fulfill their end of the agreement. Otherwise that is breech of contract. Alot of contracts, including ours has penalties for breech of contract. I take it this one doesn't. The prepayment was perfect for this situation since they seem that they would have pulled the "it will be ready in two weeks" every month. I would explain to them that they have not lived up to there end of the bargain and A: you will need the money by the 1st or B: you will have to be paid full amount for the services (since they did not meet the deadline) or C: void contract due to other parties "breech of contract".
01-31-2001, 12:13 AM
I don't disagree at all Lonestar! I guess it would depend on how bad he needs the work, and from what I gather this is his first real commercial property. A contract is a contract no doubt. I would sure get a definite date before throwing in the towel------------if you intend to hold them to it.
01-31-2001, 12:24 AM
Let me clear that up, Homer. I definitely don't plan to throw the contract out if they miss their deadline and are willing to therefore be billed and pay the full amount at the end of each month, but I'm getting the feeling they're going to want to be late on the deadline by a couple weeks and still get the 10% discount. If they hardline me that way, I feel I should walk on breech of contract. Out of principle.
Yes, this is my first commercial contract, but I still have my residentials, some handshake commercial work, and a lot of hope and promise.
The flip side of me is saying give them a break if they come up with a good excuse and try to make it up on the extra work they promise. However, if this is a sign of things to come, is it even worth it?
Would you stand by principle in this case, regardless of whether you needed the work or not, or does integrity have to take a back seat when 'getting your foot in the door'?
I'm truthfully torn...
Lonestar: I suppose the penalty for 'breech of contract' in this case is having to pay the full amount monthly instead of receiving the 10% discount. What additional penalties could be applied?
01-31-2001, 12:28 AM
I guess it would depend on how hungry your foot is!
01-31-2001, 12:34 AM
Let's just say my foot would survive either way. ;)
01-31-2001, 12:40 AM
I just don't want you to do something you would regret later is all I'm saying. If down the road they still breech the contract then you will still be within your rights to drop them. I would give it time and see how it plays out before getting too "legalistic" about the whole thing. As long as it isn't you that "breeches" then you always have the option of moving on so you can't lose.
P.S. That was pretty good about the foot huh? :D
01-31-2001, 12:52 AM
I agree with that. However, if they give a check for -10% of the full contract in two weeks and I take it then I'm obligated to complete the terms of the contract. At some point I will either have to stand firm or back down. I'm leaning toward standing firm, but also don't want to do anything I regret later.
I suppose, push comes to shove, I might let them slide a bit if they promise to have the check to me by a certain date, and have a damn good reason for not having it ready now. If, however, it is not available by that time I'll have to really stand firm on my principle, and expect full contract payment every month by the due date. If they get the feeling they can push me around, I may have to wait eternally for payments (which lends credence to my standing firm on the orginal contract terms again... oboy...).
Even my wife (who, for the record, says walk if they breech!) got a smirk outta the foot comment, Homer. ;)
01-31-2001, 12:58 AM
Tell her hello for me and I just want you two lovebirds to be happy.
Tryin' to be helpful
Lookin' out fer ya
Have a good nite
Don't let them thar bed bugs bite cha
I deal with mostly commercial customers, & they are for the most part savvy about these types of matters. If you give in this time I'd be willing to bet they will delay that check many times down the road. They may realize you're new to commercial work & feel they can take advantage of the situation. Its not personal, its business. For every day that money is in their hands instead of yours, its making them money with the interest. They will delay as long as possible once they see they can get away with it. I would do what I can to keep the contract but I would charge them the full price as stated in the contract so as to not start any bad habits. Maybe they'd like you to delay whatever services you are doing for a couple of weeks, with no penalty. Good luck either way.
Mueller Landscape Inc
01-31-2001, 02:20 AM
If it were me, I would hold firm to the contract. If it says that they need to pay by the 31st then that's when it needs to be paid. Otherwise they lose the discount. I would tell the GM that you are looking forward to providing a great service for them, however, the payment arrangements have already been agreed upon and you will not change them.
Tell him that you are a professional and that is why everything is in writing. Be confident and do not let him see you sweat. Of course, if you have already implied to him that it would be "OK" for them to pay late and still receive the discount, then you can't change your mind again.
I know that discounts are popular in some areas, but I really don't understand why. To me, it is giving your service away. Ten percent is a lot of discount.
01-31-2001, 06:10 AM
i always put a payment clause on my commerical account invoices that states "if not paid in full in thirty days a 15% service charge is added to your account" this always gets the ball rolling...i even like it if thier late.
my two cents worth.
Offering such a discount is basically a gimmick. You build it in to your price to begin with. Also, I agree 10% is a bit extreme. I've seen companies use discounts in the 2-5% range. The idea is that if you get all of the money up front, you should be able to wisely invest that money to obtain a better return than the original discount you would lose, by the time that money is really due.
Don't you just love being put in these positions? It make you out to look like the bad guy. An unfortunate part of being in business. A lot of good advise is being given here. I personally, when in that position,will wait it out,especially if it's a comm. property because they are much harder to get. I don't claim to be an expert on this subject but, like the others on this board, I feel for you and others in uncomfortable situations. That is what is great about lawnsite. People comming together to help. Hope this does not sound too corney.
01-31-2001, 08:14 AM
It's obvious that they know what they're doing. It's probably part of their standard operating procedure. Years ago, while working as a sales rep calling on a large home building company, I learned that the company actually had hired someone to go over all their statements and sort out the ones that had minor errors (t's not crossed, i's not dotted, etc.). These statements were then rejected and returned to the vendor for correction, effectively extending their 30 day terms into 60 day terms. Pretty shrewd huh? If they want YOUR services they'll abide by the contract. Your apparent willingness to walk proves you don't need them so I'd let them know and then follow through and never look back.
01-31-2001, 09:07 AM
When I meet with the 'Building Manager' today (conveniently a separate person from the 'General Manager' with whom I did the walk-through and to whom I delivered the proposal), I'll make it clear the provisions of the contract once more. They'll have the option to deliver said check today or lose the 10% provision. I just can't see myself backing down on that.
I believe I have the GM and the Board in my corner already, so that should help. They were all impressed with my professionalism and contract, and have already signed the document. One of the Board has even solicited further services of me for his own personal property (which I declined because it was two hours away from home base), so that shows signs they want me. I'll just have to stick to my guns and let the chips fall where they may. Plenty of fish in my district still untapped.
Thanks again for all your input, my friends, and I'll be sure to update you when this Day of Anxiety comes to an end...
01-31-2001, 09:40 AM
TGC, look at your contract. The 10% cutoff is not breached until tomorrow - payment not made by 1/31. So tomorrow, if no check received, take the alternative monthly bill to them. If questioned, simply state that you didn't get the lump sum as stated in contract, so you assumed they wish to go monthly.
This will do do one of two things: (1) get them on the stick about cutting the big check tomorrow, which you could graciously accept, or (2) just make the regular contracted monthly payments.
I would even wait to Feb 15, if they offer full payment then. But don't extend that recourse tomorrow. If they have not paid up front in the past, they may be having trouble transferring funds in different accounts to make the payment. Govt has to flow with budgeted amounts, and they want to do it, but need to shift funds from other accounts. Once you are set up with them, budgeting can be set up differently in future. For you to be hardnosed now, if they've been busting tail trying to get set up, you are shooting yourself in foot.
01-31-2001, 09:55 AM
Here's what I would do in this situation. I would make sure that they know if they don't pay by the 31st then the 10% does not apply and they will be billed monthly. If they refuse and are going to go somewhere else if they don't get the 10% then I would let them go and recover the cost on the other jobs that I'm doing for them. That way they will be happy and you will get your money. It sounds like they can push a lot of business your way so don't take yourself out of the running.....
01-31-2001, 11:28 PM
I've learned that if you "give in" just once, a commercial customer will continue to dog you into the ground from that day forward. I had one client that was a couple days late on paying me. (had become a habit) When I called to remind the maintenance mgr that my check was late, he said it was "in the mail". When I didn't get it in 5 more days, I called again and said that there would be a late charge. He said laughing, "We don't pay late charges". I laughed and said, I don't service properties when invoices become overdue. Another 2 weeks went by before I got paid. And since the grass didn't get cut for almost 3 weeks, when I did go and cut it, there was an extra charge for the bagging that I had to do. Needless to say, that taught me a lesson, and I walked. It hurt to lose a 600.00 a month property, but sometimes you just have to stand up and say, ENOUGH!
02-05-2001, 09:16 AM
Sorry to keep y'all waiting (at the edge of your seats ;) ), but it got real busy around here with starting those new sites and the wife being hit hard with that flu.
I went in Wednesday, as anticipated, and they asked if I could wait until Friday for said check, since they still needed two Board signatures. The check was ready, shown to me, and included prepayment on another job that wasn't due to be prepaid until the 16th of February. They were extremely apologetic about the delay and sincere.
On Thursday, I began the work on getting the sites into 'Cummings' shape. The task was arduous, to say the least, but they're starting to look real good after being badly cared for previously.
The check was hand-delivered on my office visit on Friday.
All is well in Green Land once more. ;)
Thanks again for all your input and advice!
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