Quote:
Originally Posted by BrianL
Tony,
Very sage advice, but let me add some stuff from someone has been in hosting for a long time as well. Back in the day when hosting was really growing we (BBN/Genuity) changed out terms often for numerous reasons. . First off , when the contract reads 12 months , with only a month to month auto renewal the company is only allowed to project revenue for 13 Months, when the contract is 1 year auto renew you can actually project that as much as 2 yrs revenue to the street. (Back when such things mattered) I know that we , because of our competitive environment , did not do an auto renew mainly because our goal was to reach out to our customers one quarter prior to try to get them to commit to a higher level or more services. The risk with any contract especially during the Internet explosion was that the companies we were dealing with were all about getting sites up fast and then once they were up if they did not gte results they would try to cancel only a few months in , this is after we negotiated lease terms on equipment , which was not cheap at the time, and already committed man hours to expedite delivery of the site for them. In these cases we would commonly pursue relief for the entire terms of the contract , if only to recover our HW investment.
Now since you have no leverage here , since you fully intend not to move forward with this provider, collecting as much as possible is their only recourse. Once they add as much "fees" as they can, the next step is to tack on Legal fees once it gets coded as a 7 or 14 (collection codes) for Legal action , In this case the attorney now gets 1/3 of whatever is recovered and the company has written off the debt. In these cases the Attorney will usually approach with a settlement .50 on the dollar or something. If you can cut a good deal you may want to consider it, because in court it really looks like they got you, and the terms will absolutely hold up in court even if it was a week, or a day, does not matter, a deadline is a deadline.
I couldn't advise Tony's recommendations more ,just thought you'd want another view.
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Brian....
While most of your points are valid I think they are not on target in this case. First, projecting revenues "to the street" is not grounds for damages so no court is going to honor that as a legitimate proof of damages.
In the first term of a contract the company has many expenses that it plans to recoup during the course of the contract and hope to make a little money too. Like you said above, if the customer just ups and cancels for no reason then it stands to cause "damage" to the company for all of the money that was invested in the contract and the company has a right to sue for "damages". The official term is "liquidated damages". The contract term that we are discussing in this thread was fulfilled not once, not twice, but three times through the auto-renewal phase and, according to the customer, no more money was invested in hardware on this account prior to the original contract execution. Any judge with half common sense is going to look at this and call the damages that the company is suing for "punitive" and not "liquidated". Punitive damages in most states are not allowed in contract disputes...I know Georgia is one....not sure about California.
Again, let me reiterate....it is fun pretending to be a lawyer but Boneprone (the OP) should absolutely not take my advice and should speak directly to an attorney to decide what is best for his specific case.
--T