reviewed. A dealer should object to any unfair provision in the agreement that binds the dealer to any changes on the website document whether or not the dealer is aware of or consents to the changes. When possible, it is a good practice to remove references that incorporate documents that are not attached to the vendor agreement, such as agreements on the vendor’s website, and to instead attach those to the vendor agreement so the terms of the entire agreement are clear. Term and Termination. The term of the agreement and termination date are very important provisions. Vendors want to bind the dealer to as long a term as possible. Dealers who don’t pay attention to these provisions will find themselves locked into a term that is far longer than anticipated. A good position for the dealer is to have an initial term that is as short as possible, with a provision that when the term ends, the agreement is terminated, but if the parties continue with the agreement, it goes on a monthto-month basis and can be terminated by either party on 30 days’ notice. A dealer may want to lock in good pricing for a longer period, but when that period ends, the contract goes month-to-month. The dealer should avoid an evergreen clause discussed above because of the risk of failing to give proper notice that would terminate the agreement and prevent the evergreen term from going into effect. Some agreements allow a party to terminate the agreement for convenience at any time without providing a reason. Representations and Warranties. There are usually representations and warranties in vendor agreements whereby each party states that certain matters are true. These create claims against a party if any representations are inaccurate or are breached. The scope and language of the representations are determined by the nature of the agreement, and the dealer should carefully review its representations and warranties to ensure they are true, accurate and reasonable. Compliance With Laws. Every vendor agreement should have a compliance with laws section that provides that the vendor will always comply with all federal, state, local laws, ordinances and regulations applicable to the agreement and the vendor’s business. Indemnification. Vendor agreements should have an indemnity provision which is an agreement to hold the other party to the agreement harmless from certain costs, expenses and damages. It is a risk-shifting tool that can be drafted to cover liability for third-party claims and direct claims of one party against the other. Indemnity clauses should protect both parties to the agreement and should cover all losses of the indemnified party, including attorney and expert witness fees. Vendors typically draft indemnity provisions to be one-sided in the vendor’s favor. Moreover, it is a common practice for vendors to limit their liability under any indemnification they offer as discussed below, so indemnification provisions need to be read in concert with limitation on liability provisions. Limitation on Damages. Vendor agreements presented to dealers will almost always have a provision that severely limits the amount of damages that can be claimed against the vendor if the vendor breaches the agreement. It is not unusual for the limitation clause to state that the vendor will not be liable for any indirect, punitive, incidental, special or consequential damages. In addition, some agreements further provide that any damages suffered by the dealer will not exceed the amount paid to the vendor by the dealer over a defined time period, or some similar unreasonable limitation. In responding to these types of limitations, the dealer should consider what damages would occur if there were a breach and then negotiate a provision that would compensate the dealer for those damages. Damages because of a breach can include lost profits and ideally the limitation clause should not exclude those damages. Most vendor agreements have been carefully drafted by attorneys for the vendor and include favorable language for the vendors. 20
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