Thank you for your reply. My apologies for the slightly delayed response, as I had to step away for a bit.
Let me address your specific questions first, then I will go into my own impressions and things I noticed in the contract.
First, yes, one of the issues I noted in the contract was the 5 year length. I think it's far too long, especially to start out, because neither party knows how the relationship is going to be. And, clause #6 on page 4, "Exclusivity" actually does make the contractor the exclusive provider of services. The way it reads, if you circumvent him, you're still obligated to pay him as if he brought in those sales!
Yes, I would include a separate provision that the contract is not mutually exclusive and that either party is free to work with other companies or solicit other customers in furtherance of their business.
My personal impressions --This contract is horribly one-sided in favor of the contractor. I'm not sure if this is an agreement they provided, but it reads like it is. Some points to consider and things I noticed:
- On page 1 -- Initially the Contractor seems to be referred to as "Distributor", then it switches.
- Page 2- A five year term is too long, especially for just entering into an agreement -consider maybe a one year term with a shorter renewal period
- Page 2 #4 -Termination should not require 90 days notice. If you want to terminate someone who is not benefiting your business, I believe it should be effective immediately. After all, is he giving you 90 days notice if he quits? Furthermore, you cannot give them the power to essentially not be terminated unless they violate some law. What if they under perform? What if you just don't get along with him? What if he is rude to existing clients? What if he just creeps you out? Be sure to also strike the part that says "In the event this agreement is terminated for any reason, contractor shall continue to receive compensation from the company until the Agreement would have expired...." Otherwise, think about what could happen - he is terminated 6 months into a year old contract, and you have to continue paying him? Again, it's a very one-sided term.
- Page 3 #5 - The contractor is free to work with or work for any person, organization.... Doesn't read well. Should perhaps say "The Contractor is free to work with or for any person or organization
- Page 3 #5(a) - It's repetitive and has been previously stated in the agreement, can be stricken
- Page 3 #5(c) - I think you can just say "will not pay an hourly or salaried rate"
- Page 3 #5(d) - I'd remove the non termination clause and anywhere else non-termination is mention. It's entirely unfair to you and completely unbalanced. You essentially can't terminate this Contractor unless they run afoul of the law, and even then, only upon 90 days notice, and you have to pay him as if the agreement was in full force and effect until the agreement would have expired.
- I think there needs to be language included that you will not pay any of the contractor's expenses for the performance of his job duties -e.g., phone, business cards, etc. It's sort of vaguely alluded to, but it should be made clear. Also, I don't know if he needs any licenses or permits to operate, but it can't hurt to add in there that he is responsible for paying those expenses and maintaining any licenses, permits, etc. in good standing.
- Page 4 #6 -Exclusivity - Previously mentioned - I would strike it and insist that both sides be free to do business with whom they choose.
- Page 4 #8 Non-disclosure -Two years and 100 miles is a little overbroad and restrictive. Yes, it restricts him, but to the extent that for two years and within 100 miles from your location you cannot use someone similar could hurt your business. If you're going to do a non-compete, shorten distance and time - maybe 6-12 months and 50 miles, for example.
Page 4 #7 - Arbitration - Typical contract language regarding arbitration is that the decision or the arbitrator is binding on the parties (hence they cannot sue). If you don't want to include that, then there needs to be a provision that in the event of litigation, the losing party will pay the other side's attorney fees and costs.
Page 5 #11 - Modification --Strike the section that says "Either party may assign this agreement..." unless you are comfortable with this contractor assigning the agreement and their responsibilities to anyone of their choosing, without input from you, and without you having a say in how this might impact your business.
I think you would be well advised to see a business lawyer in your area about a better worded and more complete contract, something that is also much more balanced and fair to both sides. If this contractor won't give up the termination clause, I wouldn't do business, personally. If you need assistance finding a lawyer in your area, call the Florida Bar Lawyer Referral Service at 1***-***-****, and they'll put you in touch with a lawyer in your area and give you a 1/2 hour consultation for $25.
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