Contracts are NOT One Size Fits All

Contracts are NOT One Size Fits All

When I first started my career the contracting process was a huge issue and challenge – from the fine tuning of commercial terms to the small print (but big implications) relating to liability and indemnity.  In addition, renewal openers, price changes and little things like force majeure absorbed an incredible amount of energy.   It still does!

Is that a good thing or bad thing?  Well, yes and no.  It depends.

An agreement is defined as an arrangement between parties, usually resulting from a discussion regarding roles and responsibilities, scope of work, contingency “planning” (or blaming!) for extraordinary events and a set of deliverables.

When we think about our personal lives, we have agreements in place with our spouses, children, family, friends, etc. that we manage daily.

Is it any different in business?

When COVID-19 hit, roles shifted as everyone (PEO, employer, employee, insurance providers, etc.) did what they had to do…and the industry’s level of response was awesome!   Did this change the basic parameters of the original agreement or scope of work?  That is an individual question that each PEO and client will have to answer, but the point is that quality organizations put quality agreements in place, maintain them with modern tools and adjust the delivery of services as the business environment demands – agreements in business, much like in our personal lives, are fluid and should be continually assessed to gauge relevance and impact.

Here is the kicker.  Not matter your preparedness, you may find that your particular client agreement does not serve your interests perfectly.  Here are some examples.  Caution:  some of these are anti intuitive…which is why I chose them!

  • Long term commitments are a good thing correct?

In an M&A transaction, the buyer may desire to repaper all of the clients and this can cause issues in that process, depending on the opener constraints. 

  • We continually update our basic agreement and it has evolved over the past X years.

In a perfect world you would have one agreement with the same terms and conditions and fully executed by all clients.  This is often not practical, so a process of updating to include that all clients sign the updated version is a good goal.  From and M&A perspective, a multitude of versions and variations is generally less attractive.

  • Price increase openers help increase new client attainment.

We often see these as a way to appease client desires to limit financial impact and provide budgeting surety, etc.   However, this can have serious consequences when things change on our side or the client’s side…and they often do. 

The bottom line is that all we can do is make the best decisions every day relative to our client agreements and maintain them with persistence, considerable consideration and appropriate legal guidance.  In addition, a regular and thorough review can identify areas of opportunity to prepare for the future – within whatever your goals and objectives are.

McHenry Consulting has resources, process and experience that may be valuable to you in your contract preparedness.  Please contact us if you would like to discuss your particular situation – we are here to serve you!

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