The word “hack” and all its variations have two very different meanings. One is associated with breaking into computers or networks and the other refers to a trick or shortcut to increase productivity and efficiency. We can all live without the computer hack, but who doesn’t want to make their life easier and be more productive?
When signing an equipment service contract, there are usually terms and conditions written in not-so-easy-to understand legal language. Because we are all busy, the only thing you want to do is sign the paperwork and move on. However, there could be serious consequences by not knowing what you are signing, especially when dealing with these types of contracts. Below are 5 hacks to reading some of the most important clauses in an equipment service contract.
Coverage start and stop dates should be easily identified within the contract and should be prominently located somewhere near the beginning of the document; you should not have to search for it. The dates can be listed as many things including: contract coverage term, service start date/end date, validity, and contract duration period. This is very important information and you should fully understand when your service contract begins and when it ends. If you cannot locate these dates, it is necessary to contact your sales representative and get both of these dates from the company in writing. It’s also important to know if you are signing a multi-year contract or if the contract will be automatically renewed year after year.
Inclusions & Exclusions
You should be on the look-out for two very important keywords as you read through the service contract: included and excluded. A thorough understanding of what is included under the service contract and what is excluded will eradicate future service issues and unexpected expenses. If you are unclear about any of the services provided under the contract, ask the provider to explain them in detail and get any clarifications in writing. Most equipment requires some form of preventative maintenance; you will need to know if preventative maintenance (PM) is covered under the contract and how many PMs are allowed annually. You will also want to know what services are completed in a PM visit. In addition, what service hours are covered under the contract: 24 x 7 or business hours, 8 hours a day, 5 days a week; and if you will you be charged extra for service after hours, on weekends, and on holidays. Are parts, labor, and travel included and are there any restrictions? Are glassware and consumables covered? Is there a clear definition of what is considered a consumable? Will the provider supply loaner equipment if it will be out of service for an extended period of time and will you be responsible for shipping charges? Are software updates and/or upgrades covered? If the vendor is guaranteeing their service response times, will refunds or credits be applied if they do not meet them? Is telephone support included?
Any additional coverage or supplemental coverage will increase the contract price, but it is important to get this out on the table before the contract is signed in order to eliminate any misunderstandings of what is included and what is not. If you believe that your equipment requires an additional PM visit or if you notice that glassware is excluded under the standard coverage, you can ask to have that added to the contract. Once again it is important to get everything verbally promised to you in writing.
Are replacement parts included? It’s also important to know if the parts used will be new or refurbished. In some cases, replacement parts may be provided on a new or refurbished basis at the sole discretion of the manufacturer, as long as it meets OEM standards as a new part. Are shipping costs included or will you be billed for this? Are the shipping terms standard or overnight?
Never presume that you have the ability to terminate or cancel a service contract before the expiration date without having to pay a fee. Early termination fees can be costly! Manufacturers will penalize the customer anywhere from 25% to 50% of the remaining contract charges due. Oftentimes, long term or multi-year contracts will not provide an “out clause” for the customer but will render the ability of the service organization to terminate the contract for any number of various reasons. You will want to make sure that you completely understand what circumstances would cause the service provider to prematurely terminate the contract.
After understanding these hacks, it should be easier to identify important contract clauses, no matter how they are written. It might also help to make a list of what your facility requires, equipment usage, age of the equipment, your budget, etc. If there’s just not enough time in the day, there are third-party companies available to analyze your equipment service contracts for you and provide an unbiased assessment.
New to equipment service contract language…what legal language has caused you the most confusion? An old pro at deciphering contract language…what other tips would you add for the newbies?
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