Entering into a contractual relationship with a new vendor is a significant decision, often fraught with anxiety and risk. What if it doesn’t work out? What if something better comes along? Will I be stuck?
There’s something about signing a contract that makes us nervous – sometimes nervous enough to walk away from an otherwise great opportunity.
Long-Term Contracts Can Save You Money
The seeming perils of a multi-year contract are often balanced by the benefits generally granted by vendors who can then count on your business for three, five or ten years. Those savings can be significant, according to Mira CEO John Berglund. “A three-year contract can mean a 10 percent savings to an association.”
Each Conference Gets Easier
The benefits don’t end with cost savings, said Berglund. The process becomes more beneficial to the vendor after the first year, which is usually the most challenging because it’s a new program and a lot of details must be managed. It makes sense for the vendor to incentivise a long-term relationship.
“There is a great deal of time and effort that goes into the first year, for both the association and the vendor. After year one, that hard work really starts to pay off.”
After the first year, it’s a matter of refining the process – adjusting the abstract management workflow and incorporate the insights each subsequent conference reveals. “Project managers will know your process after the first year. Also, website users – authors, chairs, reviewers and attendees – will be more responsive to a familiar website. Admin staff will be comfortable with the configuration tools after the first year, too.”
The Best Of Both Worlds
What if there were a way to realize the freedom of a year-to-year obligation while still capturing the benefits of a long-term contract? It’s important to understand the contract you’re being asked to sign.
Early Termination Clauses
Every contract should address early termination. Those clauses are the first words savvy negotiators seek before signing on the dotted line.
Most contracts allow early termination for obvious issues such as:
- Material Breach, when the product or service simply does not perform its intended function.
- Force Majeure, when the promised product or service fails as a result of acts beyond the control of the provider (fire, flood, war…)
Discretionary Termination
The type of termination you should be concerned about is “discretionary termination.” Suppose you just don’t like the service anymore. Maybe a better solution has come along and you want to jump ship. Discretionary termination requires no explanation at all.
A good abstract management platform contract will, of course, allow early termination for material breach and force majeure, but what about your option to walk away without penalty?
Nobody should be forced to work against their will with a service provider. Think of discretionary termination language as a sign of vendor confidence. A secure business relationship is “at will,” with the contract defining exactly what is being delivered, the terms and the price. It’s reasonable for a provider to require at least 30 days notice prior to cancellation of an agreement. It’s also reasonable that the provider require that any fees charged prior to termination be paid.
Demanding discretionary early termination language is reasonable. Make sure that language is in your contract before signing. And don’t let that clause prevent you from negotiating pricing based on a multi-year contract.
Discretionary termination language is standard in all Mira multi-year contracts. The clause reads:
“CUSTOMER shall have the option to Terminate this Agreement after each Event without penalty or cause provided CUSTOMER gives MIRA written notice after thirty (30) days after the conclusion of the Event. Should CUSTOMER terminate this Agreement, CUSTOMER shall pay the entire balance owed for the current Event, pursuant to the Pricing set forth in Exhibit B. In the event CUSTOMER terminates this Agreement after an Event, any discounts as applied to future Events shall be forfeited by CUSTOMER.”
Image courtesy of Jeroen van Oostrom at FreeDigitalPhotos.net
