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I'm entering into a new, non-cancellable agreement with an…

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Hello! I'm entering into...

Hello! I'm entering into a new, non-cancellable agreement with an existing client for 2018. In revising the 2017 MSA/SOW, the client has asked to include a mutual right to renegotiate should the scope and/or duties listed meaningfully change. I've been told by them (we have a great relationship) that this is primarily to protect my firm in case a new executive comes in who might have their own resources and want to cut ours down. I'm looking for the proper language to add to either the MSA or SOW to reflect their ask. Thanks!

Lawyer's Assistant: Since laws vary from place to place, what state is this in?

My firm is in IL; client is in OH.

Lawyer's Assistant: Has anything been filed or reported?

No

Submitted: 8 months ago.Category: Business Law
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11/17/2017
Business Lawyer: KLAW, Attorney replied 8 months ago
KLAW
KLAW, Attorney
Category: Business Law
Satisfied Customers: 2,369
Experience: I have over 20 years of experience in commercial real estate law, finance, consumer credit, landlord tenant, and business law.
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G​ood morning. I am a legal expert attorney who will assist you today.

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Customer reply replied 8 months ago
Great.
Business Lawyer: KLAW, Attorney replied 8 months ago

You are in Illinois correct.

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Customer reply replied 8 months ago
Correct
Business Lawyer: KLAW, Attorney replied 8 months ago

Ok. I will work on your answer.

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Business Lawyer: KLAW, Attorney replied 8 months ago

Hello and welcome to Just Answer. No attorney-client relationship or privilege is formed by speaking to an expert on this site, the answers are for general information. By continuing, you confirm that you understand and agree to these terms.

Any such provision would be included in the Master agreement. The SOW is outlining specific services or to perform under the contract. A SOW s usually incorporated in a contract, indirectly by reference or directly as an exhibit.

Since the client would like to have a cancellation clause in the contract and it is in your interest to carry the contract through o term, the full 1 year, then you should include a clause that states language as follows.

12.4 Termination. A party may terminate this Agreement for cause if the other party (a) materially breaches this Agreement and fails to cure the breach within 30 days after written notice by the non-breaching party detailing the breach, or (b) becomes the subject of a petition in bankruptcy or other proceeding relating to insolvency, receivership, liquidation or assignment for the benefit of creditors, and such petition or proceeding is not dismissed within 60 days.

12.5 Refund or Payment upon Termination. If you terminate this Agreement in accordance with Section 12.4 (Termination) for cause, then we will refund You any prepaid fees covering the remainder of the term of all after the effective date of termination. If this Agreement is terminated by us in accordance with Section 12.4 (Termination), You will pay any unpaid fees covering the remainder of the term. ****insert fees**** . In no event will termination relieve You of Your obligation to pay any fees payable to us for the period prior to the effective date of termination.

Remember any contract is cancellable, the legal issue is always, t what will happen to the breaching or cancelling party when they do cancel or breach. Generally, a contract that states no specific duration is considered "at will" and either party can terminate it with proper notice, as per the contract, at any time. A contract for a set “term” is binding for the term and either party can enforce their rights in the event of a breach.

So you should negotiate your position and insist on a clause like above that guarantees you compensation even if there is a breach.

However, with such complex contractual clauses, which could amount to a loss of substantial revenue, you should always consult a local business attorney before finally signing any contract.

I hope this clarifies.

It was a pleasure assisting you today, and I would appreciate if you would rate my service, so I will receive credit and payment for my work. After you rate the question you can ask follow up questions, and you will not be charged any additional money for the follow-up questions.

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Customer reply replied 8 months ago
The client isn't asking for a cancellation clause. They're asking for a mutual right to renegotiate if the scope or duties change. Here's how the Termination language currently reads:The Parties agree and acknowledge that this Agreement and the
2018-2019 SOW are and shall be non-cancellable. If Client terminates or suspends Services under
the 2018-2019 SOW, either (i) for any reason other than Company’s material breach; or (ii) for
no reason; then all Fees payable under the 2018-2019 SOW shall be immediately due and payable,
whether or not Company has competed performance of Services under the 2018-2019 SOW.
This Agreement and the 2018-2019 SOW shall commence on January 1, 2018, and shall continue in
full force and effect until December 31, 2019.
Business Lawyer: KLAW, Attorney replied 8 months ago

That is very standard. To be clear do you want a clause regarding negotiating?

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Customer reply replied 8 months ago
as stated in the original request. Thank you.
Business Lawyer: KLAW, Attorney replied 8 months ago

O​K.

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Business Lawyer: KLAW, Attorney replied 8 months ago

You would need to negotiate language that states that the agreement may be terminated by either party on thirty (30) days advance written notice effective as of the expiration of the notice period.

This provision allows either party to terminate the contract for any reason and no reason once the party desiring to end the contract sends a notice to the other party and then allows 30 days to expire. This type of provision provides the maximum flexibility to both you and the client , with the corresponding risk that if your company does not want to terminate and the other party elects to, your company will have lost the benefit of its bargain. However, you may negotiate a minimal amount of fees payable, a minimum payment guarantee, in case of a breach and have it based upon months. If the contract is terminated by a certain date then company agrees to pay $$ representing work through the date. Many contracts use quarters of the year as a mark.

I hope this clarifies.

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