Businesses that interact with many clients and customers often implement master agreements that apply to the majority of their relationships. This is especially common with businesses conducting transactions online. Master agreements are a great tool for reducing the burden of creating unique contracts for each customer and they greatly reduce the likelihood of inadvertent errors in drafting. It provides for certainty and efficiency.
Drafting for Flexibility in the Original Agreement
Some form of a master agreement, typically called a user agreement, often governs online customer accounts. If your business wants to make use of permanent customer accounts for future transactions, you should note that a user agreement that meets your needs today may not be sufficient in the future, whether due to changes in law, new technologies, or other circumstances. You should regularly review any master agreements in use by your business to ensure that you and your company are adequately protected and that all material terms have been defined. In order to put these reviews to use by implementing changes, the original agreements must have flexibility built in to allow the company to update the master agreement. As an example, the iTunes Terms & Conditions contains the following clause:
CHANGES
Apple reserves the right at any time to modify this Agreement and to impose new or additional terms or conditions on your use of the iTunes Service. Such modifications and additional terms and conditions will be effective immediately and incorporated into this Agreement. Your continued use of the iTunes Service will be deemed acceptance thereof.
It is important to note that while this clause does not require Apple to notify customers of changes, they typically do so. PayPal recently sent out a notification that their terms were changing, providing a summary of those changes, and a link to view the updated agreement in its entirety. Sending this type of notification to customers is always a best practice.
Implementing Changes
Clients and customers should always be notified of any changes in a master user agreement that governs their relationship with your business. Not only is this important for enforceability, but also for maintaining a trusting relationship between your business and the other parties. Additionally, the client or customer must be given an opportunity to terminate the relationship if they do not agree to the new terms. At no point should a master agreement be changed without notifying the customer and giving them the opportunity to terminate the contract.
Enforceability
For a preliminary assessment of enforceability, ask yourself three questions: did the original contract allow updated terms? Were those terms updated in compliance with the procedures set forth in the original contract? And lastly, was the other party given sufficient notice and opportunity to discontinue the agreement under the new terms? If the answer to these three questions is “yes” then you may be able to enforce the contract with the updated terms. Conversely, if the answer is “no” to any of these questions, the updated terms may not be enforceable.
If you are drafting a master agreement or have a question involving such an agreement, you should work with an attorney discuss your next steps. This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.