Negotiating contracts isn’t my idea of fun, but it’s necessary for clarity, peace of mind, and legal protection for both parties. That’s because contract proposals from vendors are always written by the vendor’s legal department and designed to include legal and revenue protection.
The nature of services differs widely among providers, with some being subject to tariffs, and some carriers relentlessly stubborn, it’s nearly impossible to have a standard telecom agreement. Instead, I recommend working from the telecom provider's form to negotiate an agreement that is acceptable to both parties. In today’s world, telecom bleeds into software-as-a-service (SaaS), software, support, maintenance, and many vendors besides carriers, so I find these general rules to be handy.
Vendor proposals are always initially delivered in PDF format. Immediately push back, ask for an editable copy in Microsoft Word, and the vendor will comply. This alerts them that you intend to negotiate. Don’t apologize. It’s business, and they are likely familiar with this process.
Some managers prefer to forward vendor contract proposals to the legal department, but to save some time, I prefer to review them first. I was fortunate to receive some coaching from my legal department and developed a bit of a guideline for the process. This isn’t legal advice; it’s simply my rudimentary checklist when reviewing a telecommunications services agreement that saves us time in reviewing and marking up documents. I hope you find it helpful.
I have initial responsibility for reviewing agreements and making adjustments, if necessary, to reflect the business discussions and to incorporate changes as you will see below. I markup the document with Track Changes enabled in Microsoft Word. Once the initial review of the agreement is complete, I send the draft to my legal department for further examination.
1. Company Name. All telecommunications agreements should spell the company name correctly. This point seems basic, but I’ve seen it spelled incorrectly many times. Your legal company doesn’t want to waste time correcting something like spelling errors. These should be corrected before reaching the legal team. Check the preamble, notices section, signature block, and schedules, to confirm the correct spelling is reflected.
2. Confidentiality Clause. If the agreement includes a confidentiality section, it should protect both Company A and the provider. Also, the obligation of confidentiality should be of limited duration.
For example, if the clause reads:
“Customer shall not disclose to any of provider's confidential information to a third party or use provider's confidential information, except for the purposes of this agreement,” Modify it to read as follows:
“For two years from the date of disclosure, the recipient of any confidential information received from the other party customer shall not disclose such confidential information to a third party or use the other party's confidential information, except for the purposes of this agreement.”
3. Invoicing. All agreements should provide room for prompt invoicing. Invoices issued long after services are provided are difficult and time-consuming to research. A clause similar to the following should be added to vendor-supplied agreements:
The vendor waives its right to receive payment if an invoice has not been submitted within one year after delivery of the products or completion of the services covered by the invoice. The vendor's submission of an invoice gives rise to a presumption that the charges are the full amount due vendor for the products or services covered by the invoice. The vendor may submit supplemental invoices only if accompanied by a photocopy of the original invoice and documentation acceptable to Company A that establishes the validity of the vendor's claim for underpayment. The vendor waives any claim for underpayment if a supplemental invoice and supporting documentation have not been furnished within the earlier of one year after delivery of products or performance of the services covered by the supplemental invoice or three months after the date of submission of the original invoice.
4. Terms of Payment. If your company has a standard term, make sure that’s included. If your company’s terms of payment are net 45 days, with no interest payable on overdue amounts, then make the change. If the agreement has a shorter payment period, modify it to net 45. If it provides for interest or penalties on payments that are overdue, the sentence(s) should be deleted.
5. Limitation of Liability. A limitation of liability clause typically states that one or both parties won't be liable for specific damages, such as lost profits or lost business. Sometimes these clauses will cap liability at the level of fees paid for the services involved. Telecom agreements should include one, and it should be bilateral (i.e., provide the same limitations for both your company and the vendor). Below is our standard limitation of liability clause:
Neither party shall be liable to the other in contract, tort, or otherwise, for any loss of profits or business, or any special, incidental, indirect, exemplary, punitive, or consequential damages arising from or as a result of this agreement or any other agreement between the parties relating to the services, even if advised of the possibility of such damages.
6. Automatic Renewals. My preference is for agreements that do not automatically renew after the end of any specified initial term. Language stating that the agreement will roll over for a renewal term (typically a year) should be stricken. This is not critical, however, if I retain the right to terminate for convenience at any time (see item 7 below).
7. Termination for Convenience. All agreements should give my company the right to terminate the services on a reasonable amount of notice (typically 30 days). If the prices we receive from the telecom vendor depend on subscribing to the service for a minimum period, the contract should either be terminated at the end of the minimum period or give my company the right to terminate it for convenience at any time after the minimum period. Below is our standard termination for convenience clause:
Company A may terminate this agreement for convenience at any time by giving not less than thirty (30) days written notice of termination.
The Director of Voice Services must approve any agreement that does not include a termination for convenience clause.
8. Business Downturn. In some agreements, we commit to certain volume levels to secure favorable rates. Agreements that contain minimum volume commitments should also include provisions for adjusting the minimums, should Company A experience a material downturn in its business. Below is a sample clause:
If Company A certifies to the vendor in writing, with supporting documentation, that Company A is unable to meet the minimum volume commitment due to a business downturn beyond Company A's control, which materially and permanently reduces the size or scope of Company A's operations and the volume of services required by Company A hereunder, then Company A may request in writing that Vendor and Company A attempt to negotiate a mutually agreeable amendment to this agreement to decrease the minimum volume commitment hereunder to reflect the change in scope and size and provide pricing commensurate with such decreased commitment. The revised minimum volume commitment shall replace the then-current commitment through the remaining term of this agreement.
Assume that everything is negotiable because generally, everything is negotiable. You may not feel comfortable negotiating contracts, but it’s a skill that, like anything else, requires practice. The fact is, if you don’t ask, you will never receive. It may require tact one day and tenacity another day, but with enough practice, you will develop your own style and skill set to help you and your company be successful.