Don’t sign business agreements without expiry and termination clauses

It is astonishing how many businesses enter into agreements with clients, partners and suppliers without defining how they can be terminated and when they expire.

In our view it’s like entering into a marriage without having a pre-nuptial agreement, which can be expensive for the partners if anything goes wrong and highly lucrative for the lawyers!

One example is telecoms providers who offer to take over a business number and the business then finds itself still locked into an onerous and expensive arrangement that it can’t get out of several years later.

Another is IT lease and hire agreements that do not expire. We came across a client who was still paying the lease fee after 10 years, 7 years after the equipment had been thrown away and it still needed 3 months notice to terminate the agreement.

Among the worst offenders are printer and copier suppliers.  We have heard of many examples where the machine supplied was not fit for purpose and the rental agreement then tied the business into servicing, maintenance, supply of ink and toners and often also into a defined number of copies made per year.

Even where suppliers do include termination clauses they can be excessive such as a well known employment consultancy that has a 60 month termination clause in its standard contract.

Although a commercial contract does not have to be in writing, it makes sense to have a clear, written agreement wherever possible.

At a minimum, you should agree the main contract conditions in writing to make your respective rights and responsibilities clear.

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