My lawyer's advice to me about contracts

Discussion in 'Business Operations' started by Big C, Jan 30, 2011.

  1. Big C

    Big C LawnSite Bronze Member
    Posts: 1,641

    I went to see my lawyer to let him review my Service Agreement for the upcoming year. He questioned why I added a 30 day notice for service cancellation, he advised to me was to go to a hardcore contract, that states if the commercial customer bails out they will payout the remainding amount of the contract....which didn't sound smart to me....but hey he's the lawyer. I still think that I will go with my Service Agreement with the 30 day out because I am a small operation and will be doing only small commercials.

    Now on to my second question if I were to do a Service Agreement that has a 30 cancellation clause, Can I still do flat rate monthly billing and what stops a customer from paying lower in the summer and try to bail out in the winter...causing me to loose money. I know the subject of contracts/ service agreements have been beaten to death here but your opinions are appreciated.
     
  2. New Leaf Maint

    New Leaf Maint LawnSite Member
    Posts: 35

    I would do the thirty day clause. Most clients who read the contract don't like to feel trapped into a contract. For bigger clients you want a full year contract especially if you need to buy more equipment and you don't want to buy it then have them cancel their contract.

    As far as billing a flat monthly rate I wouldn't do it unless you have a full year contract.
     
  3. Roger

    Roger LawnSite Fanatic
    Posts: 5,917

    He is telling you why you have a contract in the first place. If you don't expect the payout, then your document leaves you in the lurch. His advice is right on for commercial customers.

    I've posted often previously about residential customers, those requiring menial services such as grass cutting, trimming, and mulching. I read over and over again about the importance of 30 day cancel clause. I ask "why?" If a home owner finds somebody else, and you show up and find the work done, and you are told you are "out," what good is your piece of paper? Also, if you find your pricing is wrong, find the customer to be somebody you don't want to work with, or want to end the relationship on the spot, why do you want to be locked in for 30 days? Why wouldn't you just want to leave? All the talk about "being protected" for these menial tasks, for low money relationships is delusional. The money involved in trying to get a monetary resolution is far beyond the outstanding balance.
     
  4. Green Feet Lawn

    Green Feet Lawn LawnSite Member
    Posts: 226

    I agree with Roger on residential work. I don't even use a service agreement unless they ask for one. You ask me to do the work, we do it, you pay us. Its simple. I have not been burned.
     
  5. Big C

    Big C LawnSite Bronze Member
    Posts: 1,641

    I understand about residentials, I don't plan on using any type of paperwork for residentials. My question was more about the small commercials( day cares, gas stations,doctor offices) and how to handle those customers...Do you guys treat small commercials like residentials when it comes to contract/service agreements or would you go with the hardcore contract and flat rate monthely billing?
     
  6. Roger

    Roger LawnSite Fanatic
    Posts: 5,917

    You have not answered the key question your attorney was trying to answer: Do you want protection, or not?

    I read many postings by LCOs writing about contracts (makes no difference if you call them service agreements -- legally it makes no difference, and the other party is undoubtedly more skilled in managing contracts than the grass cutter). The posts say they use a contract because "it protects me." I've often asked the question, "protection from what?" Of course, the question never gets answered.

    If you are going to have a contract put in place, you want it to have teeth in it to protect your business. The language your attorney wants in the contract is for your monetary protection -- they choose to cancel, they buy out the remaining time on the contract. Isn't this the kind of protection you want?

    Asking for a 2 week, or 30 day, cancellation notice is no protection. It is even worse than no protection, it is obligating you to service an account you may not wish to service.

    I'm not sure very many people are understanding what they want protection from. In the words of your attorney, he wants you to be protected from loosing your income. That seems like an appropriate protection to me. Do you think it is appropriate? If you don't want your source of income protected, why bother with a contract?
     
  7. Jason Rose

    Jason Rose LawnSite Fanatic
    Posts: 5,858

    Roger I think you hit it on the head.

    I don't mess with contracts, service agreements, whatever, for most customers. I only have a couple HOA's and commercial customers that request them. I agree the "contract" really doesn't protect you from loss of income unless that's how you have it worded. I think that some would be less likely to give you the contract if they knew that no matter what they had to pay you. And lets say that you aren't maintaining the property to their standards, or what was specified in the contract? Then YOU are in breech of contract and IMO they owe you nothing more after they have replaced you with someone else.

    For my customers all the contract is for them is an agreement that I will be there each week, fertilize or treat the lawns the specified number of times and what PRICE I will be charging for these services. Mostly that's all they want to see is that the price you have quoted isn't going to be changed (raised) mid season. If they end up being dissatified with my service and I'm doing what I feel is the best job that can be done, then they are probably going to find another service and I'm out. I think I also have a 14 or 30 day notification of cancellation in my contract but I'm probably not going to fight it if something like that came up.

    I don't think any court is going to rule in your favor anyway if you do try to take them to small claims. If they say they weren't satisfied with the service or you weren't doing what was in the contract you aren't going to get anything more from them. Now, if they have cancelled you because of simply finding someone cheaper mid season, then you would probably have a leg to stand on, but what are the odds they are going to tell the judge that?
     
  8. smcclumpha

    smcclumpha LawnSite Member
    Posts: 3

    Jason,

    Could you email me a copy of your contract, our contracts need to be redone and I would like to see what others are doing.

    smcclumpha@upei.ca

    Thanks
     
  9. mslawn

    mslawn LawnSite Senior Member
    from LA
    Posts: 483

    One other thing to note, while you will still need a contract for some properties, some commercial properties require to use their own contracts, yours may not even get used. Your service details and pricing just gets wrote in.
     
  10. Swampy

    Swampy LawnSite Bronze Member
    Posts: 1,435

    I would never agree to the terms from another company unless its subcontracting work such as signing on my truck to plow with another company.

    I have to agree with Roger for the most part,
    When signing a contract we have a semi fixed price, have to account for changing fuel prices along with extra's (such as emergency tree work, pulling shrubs, trash pick up, etc) and as well as a yearly percentage increase. It helps having seasonal contracts, one for lawn maintianence and one for plowing, though some customers like having just one contract.

    I should put this out there, our contracts are multiple year contracts, those contracts are multiple sites with high acerage. Most start out as a 1 season contract or 2 season contract, but are negotable and can expand to a 3 season or more. Contracts don't protect us, if fact the customers want them so that we are legally obligated to service them. Contracts help us plan for the future, with equipment purchases, fuel costs, route scheduling, and down the latter of things.

    Service Agreements or Contracts for residental or home owners. Don't use them unless it is a construction project with a mininum of $2,000.
     

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