“We have a fantastic relationship with the LSL team. They keep our interests top of mind and maintain a positive reputation in the industry.” —Craig Whetter, President | David Wilson Automotive Group (relationship since 1983) Donald Slater, CPA, Partner Assurance & Advisory donald.slater@lslcpas.com Adam Odom, CPA, Partner Assurance & Advisory adam.odom@lslcpas.com David Myers, MST, CPA, Partner Tax & Advisory dave.myers@lslcpas.com LSL | CPAs & Advisors | Brea, Laguna Hills, Sacramento & Santa Ana, CA | The Woodlands, TX | lslcpas.com/automotive | 714.672.0022 Negligence, Gross Negligence and Willful Misconduct. Vendor agreements will sometimes state that the vendor is not liable for any negligence of the vendor, but rather that the vendor is only liable for conduct described as gross negligence or willful misconduct. This language might be found in the sections of the agreement regarding indemnification, the representations or in some other place. Ordinary negligence is a violation of a reasonable standard of care. Gross negligence is a departure from the reasonable standard and requires conduct which is blatant and reckless. Vendors should be liable for their ordinary negligence, not just liability for gross negligence or willful misconduct. Liquidated Damages. Some agreements have a liquidated damages clause. Liquidated damages are a fixed dollar amount a party breaching the agreement owes to the other party. Parties sometimes negotiate an amount of liquidated damages where it is difficult to estimate what damages a party would suffer if there were a breach. In some instances, liquidated damages can work if the parties make a reasonable attempt to determine the amount that would compensate a party for a breach of the agreement. Force Majeure. Force Majeure is a French term that literally means “greater force.” It relieves parties to the agreement from liability under the agreement due to events beyond their control, sometimes called “acts of God” such as natural disasters, war, pandemics and the like. A force majeure clause is a standard contract provision and should clearly define the events that are considered force majeure. Insurance. If the agreement provides for vendor services which could cause some type of injury or damage, there should be a provision requiring the vendor to provide proof of insurance to cover any liabilities the vendor may have to the dealership and naming the dealership as an additional insured. Audit Rights. There may be a need for a section in some agreements allowing the dealer to audit the vendor’s services. These rights can include access to books, records and other items to verify the vendor’s compliance with the agreement. Confidentiality and Privacy. If confidential matters must be disclosed in certain vendor agreements, it is important to have a confidentiality clause. The clause should describe what is confidential, specify the obligations of the vendor regarding the confidential information, and how the information will be returned to the dealer when the agreement terminates. Many vendors give themselves the right to use customer data for their own purposes. Dealers should resist provisions that allow this. The agreement should ensure that the vendor will comply with all customer data privacy requirements. Notices. There should be a notice section in the agreement stating to whom and where notices are to be sent and the way they are to be sent. Governing Law and Jurisdiction. Many vendor agreements require that if there are any legal disputes over the agreement, the law of the state chosen 21
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