Whatever the size of your company, eventually you will be dealing with a contract with a 500-pound gorilla for the first time – a very large multinational, or just a company that is much larger than your previous clients/ customers. This is a good thing, as it means your business has grown.
The problem comes when the gorilla insists that you sign its sales or service document rather than your own. The problems that may result include:
- The document doesn’t fit your business because it is a one size (or one type of vendor) fits all;
- There are sections you could live with, if only they could be tweaked.
- Some provisions are toxic and cannot possibly be agreed to.
Generalizations are risky here, as no two contracts will be alike. However, there is some advice I can share regarding the different issues, based on my experience.
- The document doesn’t fit your business. I see this all the time with a client who prepares high-quality videos for companies to post on their websites. Very large companies send them their standard agreement for software providers, not creatives. Almost nothing fits. My favorite is when the document is rife with onerous confidentiality restrictions on the customer’s information. As the whole purpose is to make that information very public, those sections must be deleted. To address this:
- Try getting the salespeople to have a frank discussion with the people they are dealing with at the company and explain the problem. Often, they will find that major changes are expected.
- There are times that a section has absolutely no applicability to your business and it is safe (after taking great care to confirm your understanding with counsel) to leave it in. Sometimes in my example above, there are large sections protecting Personally Identifiable Information (PII), a requirement of the utmost importance for some companies. As there is no possible way for my client to get to PII, having no access to the company’s systems or facilities, the COO sometimes chooses to leave the requirements in.
- The Sections You Could Live With if they Were Tweaked. If the client or customer is serious about wanting to enter into an equitable arrangement, they will expect to negotiate some points. Work with someone who can help you with corrective wording. Sometimes you will be told that modifications to some sections require lengthy legal review. Then you must consider accepting the risk versus losing the deal, which is what they are really saying – they are not going to wait.
- The toxic provision you cannot sign. One of my clients received an NDA from a prospective strategic partner that made everything discussed between them – ever – the sole intellectual property of the prospective partner. My client, rightly, walked when the prospective partner would not give. There are several elements to this issue:
- If there is a section that is that onerous (and ridiculous) you have to delete it. You may well find out the other side just puts it in knowing it will be deleted.
- Their legal department may put in such provisions in the hope that someone will miss them and sign the agreement with them still in there.
- The other party may really be insisting on onerous, one-sided terms.
If any of the three reasons immediately above is true, ask yourself “is this a company I really want to do business with?” If the legal department just wastes your time, as in the first sub-bullet, or acts like a bully and is a bit unscrupulous, as in the other two, they are not acting in a vacuum. The management team is likely to show the same behavior. Such companies do not make good customers, suppliers or allies.
Just because you are dealing with your first 500-pound gorilla does not mean you cannot negotiate a reasonable contract. If you need help, get it. But don’t just blindly accept terms that you will regret later because you don’t know what is and is not acceptable and how to negotiate for what you need.