Everyone who signs a contract thinks about contract termination. When you want to get out, you ask, “Are long term contracts legal, and what happens if I try to terminate a contract early, or just stop paying?” Argent Place Law, a contract lawyer in Virginia, is here to provide some clarity on contract law.
Customer or Provider?
If you are about to sign a service contract given to you, the first item to look for is the length of the contract term, and the second is how can you terminate the contract. Those are going to be the sections you will come back to when you want to end that business relationship, so you’d best know going in what those provisions look like and see if you can negotiate them to your liking before signing.
Typically, if you are the buyer of services, you want the term to be short, renewable, and immediately terminable. It’s a fact of life that things go wrong, circumstances change, quality drops, you find a better service provider, whatever. You want out!
I have a personal rule: I never want to sign a contract that locks me in for a year or more. In my opinion, companies who don’t have short renewal cycles are unsure you will like their service. They want to get the most they can out of you before you bolt to a competitor. Many of my clients wish they had followed that rule when they want to get out of some long term contact (and almost every time I violate my own rule I come to regret it).
As a contracts lawyer, I press my clients who are selling their own services to have short, renewable contracts. I want to represent them in the bast way possible, and I think fairness is the best approach to take with their customers. But some of those same clients who feel burned by a longer-than-necessary contract where they are the customer also want to have their own long contracts for their customers to sign.
But back to the question: Are long term contracts legal, and what happens if I try to terminate a service contract early, or just stop paying?
The answer is that if you signed the long term contract as a consumer you will likely be treated differently than a business signer would be.
Consumer protection laws (and courts) try to mitigate contracts that seem unfair to consumers. To overcome the stigma of unfairness, service providers to consumers often give a discount for long term contracts, and if you terminate early you have to pay the difference between the un-discounted shorter term and the discounted longer term deals. That’s fair.
Business-to-business service providers should use the same kind of switch provisions, but the truth is that business-to-business agreements are treated differently from business-to-consumer agreements. Business customers are presumed to have used their lawyer to review the agreement before they signed. So you can probably get away with merely enforcing the long term agreement on your business customers. I’ll even help you draft long term contracts…just don’t expect me to sign one of those contracts I draft for you.
If you want out of a contract, do not just stop paying. If you have good reasons to get out, do not spoil your honorable position by doing something that makes you into an equal villain. It’s better to open negotiations with the service provider and try to reason with them and agree mutually on a termination timetable.
Entrepreneurs are going to save the world, and Argent Place® Law, an experienced contract lawyer, wants to help. Whether you are ready to start your own company now, or you are expanding your business, or you’re getting ready to sell your business, Argent Place Law can help you succeed. Think how great it will be to have a lawyer with entrepreneurial experience on your speed dial whom you can call up and say, “I want to draft a contract for my customers, where do I begin?” Schedule an appointment, or just call Argent Place Law to find out: 703-539-2518.