What rights does a customer have when its
vendor, with whom it has a valid contract for services, abruptly shuts down its
business and, because of that shut down, immediately discontinues providing the
services required by the contract? Add
to that, the customer did not receive any advance notice from the vendor of the
impending shut down, nor did the customer receive any notice from the vendor within a reasonable time period subsequent
to the shut down.
If, after
the shut down, there isn’t a “subsequent vendor” (a subsequent vendor who
exerts its rights to contracts acquired from the previous vendor (or who exerts
its rights to contracts acquired from a lender who took control of those
contracts by exercising its rights to collateral), then there’s no reason for
any debate, at all, since there isn’t a subsequent vendor who’s going to be
exerting its rights to contracts.
But, what if there is a “subsequent vendor”,
one who, two weeks or so after the previous vendor shut down and stopped
performing services, acquires the rights to the previous vendor’s
contracts?
FULL DISCLOSURE: I
AM NOT A LAWYER! Nor am I a Judge! The opinions expressed
in this blog post are only that, opinions!
They are, however, opinions that are, I think, based on common-sense
reasoning. And, my opinions are based on
my 40+ years in business, during which time I had to, at times, make decisions
about legal issues, especially those that were not always pure black &
white.
Contracts are considered assets. But, not all contracts have continuing value
after a vendor has shut down and gone out of business.
Contracts can be assigned to, or acquired by,
a subsequent vendor. But, the
validity/enforceability of an assigned contract depends on the terms and
conditions in the contract. Where a contract provides for a vendor to
provide services in return for customer’s payment for those services, both
parties have an obligation to each other.
But, in order for such contract to be assignable to a subsequent vendor (regardless of how that
subsequent vendor obtains rights to the contract), the contract must contain an
assignment clause, one that specifically states that the contract is
assignable. And, generally speaking, the
assignment clause will state the conditions, if any, that must be met for
assignment to be effective. In other
words, if there isn’t an assignment clause, the contract isn’t assignable. Or, if there is an assignment clause, but
assignment requires consent of the customer, then the contract isn’t assignable
unless the customer consents to the assignment.
The timing of a discontinuance of services is
a major issue, especially when a vendor abruptly shuts down, gives no advance
notice of the impending shut down, and gives no notice subsequent to the shut
down.
This is an especially important point if services are performed on an
everyday basis, hour by hour, minute by minute.
Does the customer have the right to consider the contract immediately
terminated? Or, does the customer have
to wait and see what happens later on?
My opinion on this particular issue is that a customer can consider its
contract terminated at the time the shut
down occurred. And, at that very
point, the customer has the right to enter into a new contract with any vendor
of its choice.
What obligation does a customer have to
continue possession of equipment (at the customer’s office) that was
effectively abandoned by the vendor who shut down? In my
opinion, the customer has the obligation to safeguard that equipment until such
time that customer receives notice that a party, with valid legal right, claims
ownership of the equipment. But, this
does not mean that the customer has an obligation to keep the equipment at its
office. The customer can have the
equipment removed and stored off-site, and, if that’s done, the customer has
the right to be reimbursed for expenses involved in the temporary relocation,
and storage, of the equipment. If the
customer owes money to the vendor who shut down (or to a subsequent party who
has the valid right to collect monies owed to the vendor who shut down), it
would be, to me, valid for the customer to claim the removal/storage expense as
an “offset” to the monies owed.
What obligation does a customer have for
services purchased before the shut down took place? The
customer has an obligation to pay for those services, provided that those
previously performed services are accurately and timely invoiced. If I were a customer, I’d attempt to
negotiate a discount before I paid a dime, especially considering the disruption
to my business that the abrupt shut down caused.
While I’m
not a lawyer or a judge, I’m totally convinced that I know more, much more,
about the reprographics business than do lawyers or judges who aren’t in the reprographics
business. If I was asked to be an
“expert witness” in a lawsuit involving issues related to the reprographics
business, I do believe I’d be considered “highly qualified” to be an expert
witness.
Those who’ve
been involved in the reprographics business and industry for more than just
couple of years have, I’m sure, come to the same conclusions I have as to the
unique nature of the relationships that are developed between A/E/C Industry
customers and Reprographers.
As I put it to one of the writers at the
Boston Business Journal…..
There is an industry – a very large industry (even
though it is shrinking, year by year) – known as the “Printing &
Graphics” Industry. There are several “sub-industries”,
one of those being the “Reprographics” industry.
In spite of the fact that “Reprographers”
come under the larger, overall P&G Industry, the “reprographics”
business is quite different from the “printing” business – – in terms
of “frequency” of contact with customers and in terms of “how
reprographers serve customers”. Customers of reprographers are
architects, engineers, builders, real estate developers, construction companies
and sub-contractors (who work for general contractors.) (The latter
collectively referred to as the A/E/C Industry.)
Typically, a “printing company” gets orders
(print orders) from its customers once a week, twice a week, maybe once a month
or once a quarter. But, reprographers typically get orders from their
customers (A/E/C customers), individual customers, every day and sometimes several times during each day. Because
of this, “reprographers”
have a much, much closer relationship to their customers than is the case with
“printers.” This sort of close-relationship thing has a
lot to with the word you used, “reverentially.” Reprographers
who do a good job – or I should say a great job – for their customers have
those customers for years, and years, and, in many cases, for decades.
A/E/C industry firms are very loyal to reprographers who do a great job,
and, typically, an A/E/C firm does not use multiple reprographics firms, just
one.
And, there’s a second part to this,
“reverentially speaking”. Years ago, some reprographics firms, _______
was one, began offering FM (also referred to as OnSite) services to their A/E/C
customers. An “OnSite” service is where a reprographer
“staffs, equips and operates” a reprographics “center” at
the customer’s office location(s.) Consider, also, that we put into place
systems that “capture cost by project” and that “assist the
customer in recovering costs that are reimbursable by its clients.). When
an Architecture firm has an “OnSite” services program, that develops
into an incredibly close
“customer-vendor” relationship, for, in those cases, customers can
entirely focus on their “core business” (architecture, engineering –
planning and design) and not worry, at all, about document production, document
management or document distribution. Reprographers who do a great job at
this – OnSite services – are
considered part of the customer’s team, they are not looked at as
“just” a vendor.
0
0
1
1255
7157
Proactive Management
59
16
8396
14.0
Normal
0
false
false
false
EN-US
JA
X-NONE
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:10.0pt;
font-family:Cambria;
mso-ascii-font-family:Cambria;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Cambria;
mso-hansi-theme-font:minor-latin;
mso-fareast-language:JA;}
What I said to the guy at the Boston Business
Journal adds fuel to the reasoning that any A/E firm, whose OnSite (FM)
Service was abruptly and without any advance notice shut down, had the right to
consider that shut down an immediate and complete termination of the vendor’s
contract. And, given that, the right to
enter into a new contract with any vendor of its choosing!
Reprographics 101 