Vendor Agreement

[10sacer]

Have a new customer that requires the signing of a Vendor Agreement which in essence is a sort of legal guarantee that I won"t go after their accounts and if i do there are repurcussions.

I understand why they think they need this - but do I need this as well. Here's my point - if i sign this thing there is zero GUARANTEE from this company that i will get any work from them regarding these accounts they have but i am effectively barring myself from now calling on that other company if i don't get any jobs from original "marketing company".

If the Company stops sending me work or terminates our client/vendor relationship then I can't call on "their" accounts for 2 years. Here's the kicker -they won't give me a list of these accounts i am not supposed to compete against them in - so how am i to know who is off-limits?

Should i come back with a separate non-disclosure that prevents them from telling people my prices and from bad mouthing me if relationship goes sour and setting payment terms and timing? Like - I will agree to their terms if they will pay in 30 days.

Biggest red flag for me in the document is the section that states that if it weren't for this Company I wouldn't know about or get business from these other clients. Seems kind of arrogant and egotistical.

Has anyone seen something like this and what did you decide to do?

 

[iSign]

I wouldn't be too happy about it, but how I would react would depend on how valuable i thought the relationship is.

Different thoughts that come to mind are to require disclosure of their clients to allow me to identify if they are already my clients... or perhaps to say "my lawyer has approved me for signing this, upon receipt of the deposit on our fist job in excess of $1000"...

...or "my lawyer has advised me that this document will not actually interfere with my continued business with any of my extensive client list", so as long as you understand I have no intention of sacrificing my existing relationships, I will gladly sign for the sake of appearances regarding my business integrity, as I already do observe fair business practices, just like i am giving you the benefit of the doubt on... but sure, lets get it signed & do some business... it's just paper & I never end run around my clients anyway...

 

[Fred Weiss]

I've been doing business locally and nationally for other shops since 1984 and have never been asked for such an agreement. OTOH, it was always an unwritten rule that I would never use any knowledge gained in my dealings with another shop to compete unfairly with them.

That being said, the real question is how much do you want to do business with this new client? If you really want to do it then respond that this is agreeable if each account protected under the agreement produces x amount of revenue for you. If they don't then they are excluded from protection until such time as they do. If you don't receive adequate value then there is no reason for the client to demand he receive value in the form of account protection from you.

But if business is good enough without the new client and you don't like the tone of the agreement or the restrictions you would have to accept, then simply don't enter into it.

 

[heyskull]

That seems rather harsh.
I have never heard or seen this carried out in the sign community.
This would have to be one helluva lot of work even to be half considering this sort of thing. Is this a multinational business?
I would give the agreement to a lawyer to read through Isign and Fred have some good information.
Also I would come back with some sort of agreement that they had to sign assuring their business and for them not to go looking for a better deal!
I think you need to be telling them this is a big risk that you will be taking and also need reassurance they won't be going anywhere.
I have come across businesses with big ideas but have come to nothing so tread carefully.

SC

 

[John L]

I answered no, twice before to the same thing with one client. They still buy from us.

 

[andy]

One sheet material supplier I know of sells their branded material into as many small and medium sized sign shops as they can.....

Meanwhile on the quiet this same supplier has sneakily setup a complete fabrication and graphic marking factory which targets the same end users as their small sign shop customers rely on to earn a living.

If you bought sheets of material from a supplier and then found out the same people were trying to cut your throat by going direct to your customers would you be pleased?

Your customer probably dealt with someone else who wasn't satisfied with a slice of the cake... they wanted it all and went touting for direct work behind your clients back.

I wouldn't have a problem signing a non compete agreement but it would have to list specific clients... otherwise you are writing a blank cheque. It's also worth asking "what's in it for you"?. If you are going to sign this piece of paper there needs to be some tangible benefit, some guaranteed volume of work or some minimum guaranteed spend.

 

[Letterbox Mike]

At this point about 80-90% of our work is "wholesale" for agencies, sign shops, designers, print companies, or other companies that resell our product. So for us, signing these is par for the course, we're presented with them fairly regularly and while they're not overly common, they're also not that uncommon.

If the majority of your work is not for agencies/brokers, and you rely heavily on your ability to continue to service the general public as well, it may not be in your best interest to sign this in the off chance that something goes wrong and they would want to pursue any option to make your life difficult.

The reason for these is, unfortunately, there are a lot of vendors out there that will try to cut them out of the picture and go directly to "their" client. These agreements are intended to be intimidating to you to "scare" you from doing so, they're rightfully trying to protect their business. If you operate the way anyone doing this type of work should be (respect your relationship with YOUR client and their relationship with THEIR client), the agreement shouldn't be a concern. If you intend on eventually cutting them out of the picture, I wouldn't sign it, but I wouldn't expect to get more agency work over the years either.

 

[binki]

Have a new customer that requires the signing of a Vendor Agreement which in essence is a sort of legal guarantee that I won"t go after their accounts and if i do there are repurcussions.

if you are wholesale only then this shouldn't be a problem for you but if you are wholesale and retail dba with the same name then you have a place to be concerned.

I understand why they think they need this - but do I need this as well. Here's my point - if i sign this thing there is zero GUARANTEE from this company that i will get any work from them regarding these accounts they have but i am effectively barring myself from now calling on that other company if i don't get any jobs from original "marketing company".

At this point if you don't get consideration this contract may be invalid. If you sign it and they never buy from you they pretty much have no case. Think about it. You gave away the right to sell for nothing. You can get this thrown out in about a minute in court.

If the Company stops sending me work or terminates our client/vendor relationship then I can't call on "their" accounts for 2 years. Here's the kicker -they won't give me a list of these accounts i am not supposed to compete against them in - so how am i to know who is off-limits?

This is where you need to negotiate. You need a termination fee and a shorter timeframe. You also need a list of clients they have and proof that they sold to them in some period of time before your contract is over. Again, there needs to be some consideration for the contract to be valid but this one is not a slam dunk to get tossed if they purchased from you for 5 years and then stopped.

Should i come back with a separate non-disclosure that prevents them from telling people my prices and from bad mouthing me if relationship goes sour and setting payment terms and timing? Like - I will agree to their terms if they will pay in 30 days.

You definitely want to add a non-disparagement clause as well as protection of your customers, payment terms, if they violate the terms then the other provisions of the contract are canceled and they revoke the right to the 2 year non-compete, etc.

Biggest red flag for me in the document is the section that states that if it weren't for this Company I wouldn't know about or get business from these other clients. Seems kind of arrogant and egotistical.

That one doesn't pass the laugh test. It will get tossed in court.

Has anyone seen something like this and what did you decide to do?

We respond with changes and negotiate as I indicated above. For each clause in a contract that I didn't like but the client wanted came with compensation and they either backed down or I got extra bucks for it.


Remember that this is a legal contract and for it to valid and to be upheld if you go to court there has to be consideration on both sides. You cannot give away your rights for nothing. The contract cannot be one sided. There is nothing wrong with having a contract like this if it benefits your biz.

Finally, just because a clause cannot be upheld in court doesn't mean you let it into the contract. Insist on striking clauses such as the 'you don't know our customers and wouldn't ever get them without us' period. Do NOT accept payment or other consideration to keep this one in. Things like that are a deal breaker for me.

Good luck.

 

[jiarby]

Just say "No thanks... I do not want to do business with someone that doesn't trust me."

 

[iSign]

that one doesn't pass the laugh test. It will get tossed in court.

I love this line!!

 

[wetgravy]

I've seen a couple of these pass through the shops I have worked at, either they were turned down or additional clauses were written in such as having exclusive production for x amount of dollars or years, probationary periods for both parties to determine if they will continue business with each other or cancel the contract, and of course a way to end the non-compete ... sounds like the contract is "sign this or we won't think of doing business with you" ... not a good contract ... I would negotiate it, if they don't want to ... walk.

 

[10sacer]

Non Compete

Just to follow up...

I have come to many of the same conclusons that many of you have and I have also submitted to my business attorney to A) review B) offer negotiable stances on some points and C) come up with a responding document that prevents them from sharing my prices, my methods and from disparaging remarks should everything disintegrate at some point.

While it is true that they are in at least one major national account that I probably would have to work very hard to get into - there is still no guarantee of work from either party at this point and I hate to take a flyer for 2 years with my right to do business.

One negotiation stance I intend to pursue is to offer to sign individual non-competes for single accounts that are worth X amount of dollars. And they better be significant dollars. Makes no sense to sign a blanket document covering all real and potential accounts.

I really appreciate all the input, advice and points of view.

BTW - see actual "contract" attached

 

[visual800]

I wouldn't sign a damn thing and tell them to walk. no one should "own you". Customers are obtained not property. there is no guarantee any company will last these days including them.

This is absolute arrogance

 

[royster13]

They need you more than you need them because I bet every shop they have showed this to before has told them to "hit the road"....

 

[signswi]

Non-competes are rarely enforceable but I don't see any reason why you wouldn't just negotiate terms you can live with and work with it. The "handshake" days are long gone and if you ever deal with big agencies you're going to see more and more of these agreements. They're asking you for the moon and hoping you settle somewhere on earth--or they're not worth dealing with (if they won't negotiate down off the lunar surface). Find out which.