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Writing Better Contracts with Service Providers

In an Emerging Issues Analysis, Associate Professor James L. Carey suggests that by regularly taking the extra steps to understand the needs of your clients, including those needs documented in the boilerplate, you can better protect your clients customer base, human resources, trade secrets and improvements. According to Associate Professor Carey, the value you add by updating the boilerplate can build your practice by better protecting your clients businesses. The author writes: 
     Contracts with service providers come in many different shapes and sizes. Businesses you represent regularly will enter into many different agreements with many different persons supplying many different services. These include supply contracts, service contracts, purchase orders and employment relationships -- just to name a few. When considering these contracts, we should approach the concept of service providers very broadly. We should include in the definition contracts with employees, independent contractors, consultants, raw material vendors, third-party service providers, and anyone else who provides a service for payment -- regardless of whether the counter-party is a company or a natural person.
Because this commentary does not address at-will ~ versus contract ~ employment, you should carefully consider how you deal with employees or employee-like persons. In protecting a clients assets in one specific instance you do not want to accidentally alter an existing relationship that otherwise is favorable to your client.
While there are no one-size fits all forms or provisions that must be in every agreement, significant parts of written contracts with service providers will likely contain language that is best described as boilerplate. This is the routine language regarding non-key provisions of the contract that is often used repeatedly. Some sources claim that the term boilerplate originated as a written comparison to a type of steel manufacturing. The claim is that the often-used language is as time-tested and strong as the standard steel plates that would be rolled to make boilers. In contrast, some sources find the origin of boilerplate in the stamped plates of newspaper text sent to various newspaper printers throughout the early 1900s. Large news supply houses would send type-set text plates with ready-to-use press releases -- ready-to-use provided that you did not need to change any of the text. Because the text could not be changed, many came to consider these pre-formed slabs as filler boilerplate simply unworthy of thoughtful consideration. Whether the boilerplate appears as strong as steel or it is simply what you have been handed, these often-overlooked parts of standard agreements warrant your attention. In particular, whenever your client is contracting with a service provider, the boilerplate can provide valuable protections to key assets.
First, of course, a service contract must cover the basics -- the services to be performed, payment terms, termination language, and dispute provisions to name a few. Once these more pressing, business priorities are addressed, you should spend some time reviewing the boilerplate to make certain it makes sense in the current context. It is amazing how often inconsistent language can creep into a contract through the boilerplate. These inconsistencies then sit, like a land mine, waiting to detonate when exposed. Next, consider how your client can be better protected through thoughtful provisions addressing the service-provider relationship.
There are many excellent sources for forms and guidance so that you can better spend your time customizing rather than creating. The Lexis Transactional Advisor feature can quickly give you examples of the basic structure for various agreements. The precedent and overviews available from this and other services can help you quickly get up-to-speed, but the final work product will still demand your concentrated attention. Additionally, form agreements with commentary, such as the American Bar Associations Model Asset Purchase Agreement with Commentary and the Model Stock Purchase Agreement with commentary present thoughtful remarks on much boilerplate language. Further, the Matthew Bender Key Forms and Agreements database can be a rich source of forms and commentary for many different types of business transactions.

Below are four areas where a company seeking to engage a service provider can better protect itself and its assets through the use of well-drafted boilerplate....

Subscribers can access the complete commentary on lexis.com: LexisNexis® 2009 Emerging Issues 3480. Additional fees may be incurred.

ABOUT THE AUTHOR(S):

James L. Carey is an Associate Professor teaching business, securities, will, trust and estate law at the Auburn Hills Campus of the Thomas M. Cooley Law School. Prior to joining the faculty of Cooley Law School, Professor Carey was an attorney representing domestic and international companies in all aspects of their business life, and before that he was a stockbroker with a Wall Street firm. Professor Carey received his bachelors of arts (1991) and juris doctorate (1998) degrees from the University of Michigan. He may be reached at [email protected]