Offering a great product with fantastic support is one way to keep customers, but there are other ways. While we at Usherpa have chosen the “great product with fantastic support” option, others have found that contract law can keep a customer when they would rather choose another partner.
The federal government through the Federal Trade Commission has been taking a closer look at the contracts businesses use to limit the actions of others. Most recently, the FTC has focused on non-compete clauses in HR contracts.
Is it time for the government to take a closer look at other business contracts?
It may already be happening. In June 2024, the FTC took action against Adobe and its executives for making it difficult for consumers to cancel subscriptions. We’re seeing some similar activity in our own industry.
Is Your Vendor Tying Your Hands
In today’s competitive business environment, it’s essential to be vigilant about the contracts your company signs. If your vendor makes it difficult to cancel a service or requires you to give A LONG advanced notice, they may be trying to tie your hands and prevent you from leaving.
Given that business executives generally make changes that they feel will be beneficial for their businesses, it seems obvious that if such a clause exists in your current contract with a vendor, they don’t have your best interests at heart.
When a notification period of six months is hiding in your contract, you’re doing business with the wrong people.
Restrictive contract clauses that lock in customers who no longer want to continue their business relationship should serve as a warning: if your partners don’t expect you to want to stay, it’s time to reconsider the terms you agree to.
Here’s how companies can be more careful about the contracts they sign and what clauses they should avoid.
Where to Look for Restrictive Contract Clauses
Restrictive contract clauses can severely limit your business’s flexibility and options. These clauses are often designed to lock you into a long-term commitment, making it difficult or costly to exit the agreement. Some common restrictive clauses include:
Advance Notification Requirements
Some companies will require you to notify them far in advance of your original contract date or they will renew the contract automatically at the new higher rate. We’ve seen this as far out as six months!
Exclusive Agreements
These clauses restrict your ability to work with other suppliers or partners, limiting your business options.
Minimum Purchase Requirements
These require you to buy a certain amount of goods or services, which can be burdensome if your needs decrease.
To avoid falling into the trap of restrictive contract clauses, it’s crucial to take a proactive approach when reviewing and negotiating contracts. Never sign a contract without thoroughly reviewing all terms and conditions. Pay close attention to clauses related to renewal, termination, exclusivity, and any penalties or fees. Consider having a legal professional review the contract to ensure you understand all potential implications.
The best defense against manipulation by a vendor is choosing the right partners. Find someone who understands your business and makes your success their business. And watch out for that fine print.
For more information about working with a partner with the best client loyalty scores in the industry, give us a call today.
