Restrictive contract clauses: not for my business


These days, you have to contract for virtually everything. From waste removal to water heaters, and everything in between. Contracts can be tricky. Clauses in contracts can be tricky too. Sometimes clauses are right up front… and sometimes they’re hidden in the fine print. When you sign a contract as a business owner, clauses that could be lurking in the fine print could take you by surprise… limit your options… and cost you money. Some clauses can prevent you from changing suppliers by locking you in long-term contracts. Others may automatically renew without notice, unless you cancel within a limited window, and… Some have high fees for early termination of the contract. Here’s what to watch for: Price escalation clauses. These allow suppliers to increase the price at any time and for many reasons; Exclusivity clauses. These require you to buy all of the product or service from the one supplier; Or, “right of first refusal” clauses. These force you to inform your current supplier about any offers from other suppliers and stay with your current supplier if they match the best offer. This obligation can even extend beyond the term of your contract. You may not want these because they can limit your options and raise your costs. At the Competition Bureau, we pay a lot of attention to these, and other restrictive clauses because we know that under certain circumstances they can hurt consumers and harm competition. Sometimes, the use of restrictive clauses like these may contravene the Competition Act, and warrant Bureau intervention. Before you sign on the dotted line, here’s the bottom line. You have options-and the best options include looking carefully and asking questions. Remember, knowledge is power. So here’s our advice: Shop around, get multiple quotes. Read the terms, conditions and fine print carefully Remember that you can amend contract clauses when negotiating the terms of your contract. Ask for a copy of the contract so you can review the terms and conditions, and monitor any changes. You can also use quotes from other suppliers to negotiate more favourable terms and conditions with your current service supplier even if you’re under contract. Contracts are all about the clauses-get to know them!

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