Protection in contracts with web companies

[jordan]

With so many web companies going out of business, I was wondering if people could share their tips on how we can make better contracts with Internet companies. We are basically a service company and play the role of vendor/licensor more than the other way around. We only rely on web companies for bandwidth and a couple of net related services that don''t necessarily play a crucial role in our business. Thanks!

Jordan

 

[mike]

Originally posted by jordan
With so many web companies going out of business, I was wondering if people could share their tips on how we can make better contracts with Internet companies. We are basically a service company and play the role of vendor/licensor more than the other way around.

We almost never agree to non-refundable setup fees. If we do agree to a setup fee, it is refundable if the service isn't operational and they get only a smaller percentage as a setup fee, i.e. 10-15% maximum of the yearly contract.

 

[Michael Wechsler]

A couple more:

• include a termination provision in the event the purchaser goes bankrupt of ceases to exist as a going concern. There are some typical ones that usually have a 30 day provision.
• include a provision stating that you may discontinue services immediately/within 48/72 hours notice if there is non-payment after a certain period. This way you can discontinue services the moment they start to stall you... and that will happen.
• make sure that you have a choice of forum (the place where all lawsuits can be brought) in the state and county which you do business. You don't want to forced to find adequate counsel in some remote territory if you need to enforce.

 

[brian]

Ours says that if the company defaults they are liable for the basic payment throughout the agreement. So if you have a $1200 contract with $100 per month and they breach in month 6, they are liable for the next $600. It doesn't get you everything but it does allow you to collect more of a share in the bankruptcy proceedings (which might be 10-20 cents on the dollar!! )