For most small business’s entering into contracts with vendors and clients is a very regular and necessary practice. Although, with so many contracts that are signed are you aware of what every term in every contract you signed means? To make your contract review easier, it is important to be aware of some of the common dangerous contract terms. Today, we will discussing one of the most insidious and disturbing contract clauses I have ever seen in a contract. This contract was between a restaurant and a major nationwide vendor. The clause states, “To be grounds for termination: (i) the conduct constituting the breach must have been under VENDOR’s control, and not due in whole or part to a third party’s conduct.”
While this clause does not seem to be overly unfair on its face, but when paired with the underlying facts its danger is clear. The vendor used a third party company to act as a liaison between the vendor and their clients. The vendor put systems in place that made it impossible to get a hold of them via phone, Email, or standard mail. We spent weeks trying to get a hold of an individual to help with an issue that our client was having, and we were met with barriers at every turn. Emails, phone calls, and certified mail all went unanswered. Ultimately, the only way we were able to communicate to the Vendor was through the third party liaison.
Since a third party had significant control of the vendor’s client’s accounts, and was the exclusive medium for communicating to the vendor, it is likely impossible for the vendor to breach. The reason for this is that if ever the Vendor violates the contract they can say it was partially the fault of the third party. Although, this clauses directly conflict with Florida Contract Law because numerous cases show there must be mutuality of obligation for a contract to be valid. In other words, both sides to a contract must have “something” required of them. Since the vendor, cannot be held liable for breaching they are not obligated to do anything under the contract. If they breach you can attempt to file for breach of contract, but under the terms of the contract they will likely defeat this claim.
Here at The Weil Law Group, PA our small business subscription comes with a half hour of free contract review or legal advice a month. We also do individual contract reviews for an affordable price. If you have any questions or need any help call 954-603-7603.