#TellAllTuesdays: The Devil in the Details

Welcome to another Tell All Tuesday! Today, we’re tackling a critical topic for BIPOC business owners and women managers/executives in clean energy: navigating contract terms and conditions. Contracts are the foundation of business/service agreements, and understanding the details can protect you from potential pitfalls and ensure successful partnerships. Clearly defined terms and conditions can help you deliver services and avoid misunderstandings.

When reviewing terms, I always tell my management staff that if you ever find yourself assuming a process or something that may be scope creep, ask! Developing contract terms and conditions is the perfect time to define expectations explicitly to avoid hiccups and disputes. Here are some things I hyper-focus on when someone gives me their terms and conditions:

Indemnification (Compensation for damages or losses)

• Ensure the indemnification clauses clearly state who is responsible for damages and under what circumstances. This will protect your business from undue liabilities. Ideally, advocate for mutual indemnification. I often find it absurd when publicly traded companies want smaller firms to indemnify them only, leaving the entire burden on one org rather than vice versa.

Arbitration & Conflict

• Outline dispute resolution procedures, such as mediation or arbitration, to avoid lengthy and costly litigation.
• Larger firms tend to have this located in their hometown. As a small biz, make sure the location where you’re conducting work is where this is happening.

Payment Process, Terms & Timeline

• Paid When Paid: Be cautious of clauses that delay payment until the payer receives funds. You have no control over the main contractor's actions as a subcontractor. We’ve been in situations where the main contractor failed to submit invoices to the client, and we’re left with the financial burden of their irresponsibility.
• Significant Wait Times: Clarify any potential delays in the payment process and set clear timeframes within the scope to anticipate expenditures and payments.
• No Clarity on Approval Process: Ensure the payment approval process is well-defined.
• Setoff: Be aware of any setoff provisions affecting your payment. Some firms will have unilateral decision-making language to pull funding without your approval.
• Interest Rates on Late Payments: Specify interest rates for late payments to encourage timely transactions. NYC has a prompt payment law that requires small business vendors to be paid within 30 days; if they are not paid, they are entitled to interest payments.

Client Engagement

• Contact with the Client: Define how and when you can communicate with the client.

Termination

• Understand the conditions under which the contract can be terminated. Include notice periods and consequences for early termination.

Other Topics?

• Other topics such as intellectual property, insurance requirements, scope of work (and scope creep), and, most importantly, the success of the partnership are all other items that should be reviewed and evaluated during term and condition negotiations.

It’s essential to understand who you’re partnering with. Read the entire contract, including the fine print, to ensure you understand all provisions. Don’t assume that standard clauses are non-negotiable. Customize terms to fit your specific needs and circumstances. Discuss and negotiate terms openly with your partners. Ensure that all parties clearly understand the contract and agree on all points. I would highly recommend seeking legal advice to confirm that contracts are fair. Legal advice has helped us know when something is out of the ordinary or illegal. Navigating contract terms and conditions requires careful attention to detail and a clear understanding of your rights and obligations. By being thorough and proactive, you can build solid, enforceable contracts supporting your business goals and fostering successful partnerships.

I’d love to hear your experiences and tips on navigating contract terms. Please share your stories, and let’s support each other in building solid and successful collaborations. I look forward to seeing you at our next #TellAllTuesday! If you want to join us for a quarterly lunch session, fill out this form, and we'll invite ya: https://pb39uv34732.typeform.com/to/O27bo1rM