Situation:

You’re a busy practice; you’re presented with a vendor’s standard contract with standard terms and conditions to sign for services to your practice software that submits your insurance claims.  Who has time to read all of that information, especially the small, 8-font type?!  You sign the vendor’s contract.  As part of standard licensing practices, the state audits your practice.  The state identifies errors in submitted claims in which the state reimbursed your practice over two hundred thousand dollars.  You are required to return the payments or have the money taken from future claim submissions.  You learn that the claim submissions were wrong because of errors wholly made by your software vendor.  Now you read the vendor’s standard contract terms…  You learn that you agreed to warrant that all claim submissions would be reviewed by you in advance of any submissions and that you would indemnify the vendor for any claims related to claim submissions.  You are left with options of paying the money and/or appealing the state’s audit – both costly. Even if you could pursue reimbursement from the vendor, the contract includes a limitation of liability, limiting any recovery by you in a claim against the vendor to the amount of fees you paid on the contract in the last 12 months.

Issues:

Significant financial impact

Solution:

Read contracts in advance of signing them and/or have your attorney review the contracts in advance.  Your attorney can also help to negotiate terms that are more favorable to you. Standard vendor contracts are often written in favor of the vendor.  If you do not read them or negotiate other terms, you may have no recourse like the situation above.  Remember, you have negotiating power.  Again, your attorney can help with that process; it does not need to take up your time.  While contracting seems like a mundane task, the terms can become very important. Some important contract provisions include indemnification, warranties and representations, contract termination, and limitations of liability. You  need to address these types of issues before any vendor relation issues arise.