IT and Business Insights for SMB Solution Providers

I Only Do Major Agreements—And You Should Too

Small IT providers who think small contracts are all they need usually end up paying a big price.

I often get inquiries in my inbox that sound something like this: “We are a small MSP operating out of Small Town, USA, looking for a short contract for our services. We don’t need a major agreement—just something that covers our liabilities. Can you help?”

My response is always the same: “No, I only do ‘major agreements’—and that is the only type of agreement that your MSP should be using.”

So, do I like turning away business? No. (Do you?) Am I crazy? Well, the voices in my head tell me I’m not—so, for now, I’ll listen to them. Is there a method to my madness? You’re damn right there is—and it goes to the heart of how every MSP should handle its service agreements.

Let’s dispense with a few misconceptions. First, there really isn’t such a thing as a “major agreement” versus a “minor agreement.” In fact, all MSP agreements are “major” agreements. Think of it this way: If it’s worth putting on paper in the first place, then it’s a “major” agreement that needs to be handled accordingly.

Second, a “short contract” isn’t always a good thing. In fact, it’s usually a very bad thing because short agreements often exclude provisions that would otherwise protect your MSP. I see contractual shortcuts taken all the time for the sake of brevity, and those shortcuts virtually always lead to disastrous results.

For example, one provision that often ends up on the cutting room floor is the so-called “attorneys’ fees” provision, i.e. “If a party is required to sue to enforce this agreement, the prevailing party is entitled to an award of its attorneys’ fees and costs.” If you exclude that provision, you’ll save yourself about two lines of text. Hooray! But you’ll lose far more than you gain, specifically, your ability to recover attorneys’ fees in cases in which your MSP is the clear-cut winner of litigation. You could spend tens of thousands of dollars in lawyers’ fees just to recover a few thousand dollars from your non-paying client. In other words, you lose in the long run. (The attorneys will win, but you will lose).

Third, there is no real warm and fuzzy way to “cover your liabilities.” Either you cover your MSP’s liabilities by specifically describing those liabilities, and then specifically describing how they are being limited, or you do not. There is no middle ground. You can’t be brief when it comes to this stuff, or you’ll end up with short, but unenforceable, limiting language.

For example, if you want to limit your MSP’s liability for negligence then you need to explicitly state that in your service agreement. (Want to save space? Try eliminating references to causes of action such as “negligence” and see what happens. Hint: You’ll save a few lines of text, but your MSP will be responsible for negligence, since you took a shortcut.)

About the Author

Bradley Gross's picture

BRADLEY GROSS is the founder and president of the Law Office of Bradley Gross, P.A. Gross is a world-recognized expert in information technology law, and his law firm specializes in transactions involving MSPs, VARs, OEMs, technology solution resellers, cloud solution providers, IT professionals, and technology and media companies globally. Brad can be reached at [email protected], or at (954) 217-6225.

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