Contracts - Getting out

[Prizam]

Hi all,

Made a woopsie. Want to get out of a contract for hosted rack space. I needed to give 90 days notice on the anniversary of the contract renewal. And missed this date by 2 weeks.

Vendor is now saying i need to pay 25k to exit the contract. The original renewal date still has not passed and i think they are stalling on some of the negotiations with me.


Can i get out of this?

[lostmotel]

Unfortunately the answer is "it depends". If you can post up a redacted copy of the contract that would be helpful.

Fundamentally, the key question is what is the total value of the contract? £25k to get out could be deemed extravagant and unconscionable if the cost of the services over a year were £25k, but maybe not if the cost was £25million.

In terms of loss to them, you could quantify it by saying that by not giving them notice, they have put some work in to ensure continuity of service for you, and have not been able to sell that rack space to another buyer. A reasonable amount to get out of the contract would probably therefore be 90 day's worth. What does that work out as? If £25k is the cost for a year then that is about £6k. You say there are negotiations, have you made them an offer yet?

Breadvan72 would be your man for a more definitive answer on the internet, but if this has the potential to cost you £25k or even £6k I would be getting professional legal advice from a solicitor familiar with IT contracts.

[Prizam]

Year cost of the services is 29k.

Other than the loss of our business, they will have no other losses.

I have an email from the from last year saying renewal is on the 03/04/16. They didn't mention the 90 day notice.

If i could renew for a reduced period (3 - 6 months) then it could work. Bust suspect they will play hard ball.


The company them selves have had some huge failings in the last year and are loosing a lot of customers.

[johnfm]

All boils down to what the terms & conditions provide.

Currently looking at some Rackspace terms, and there is a rolling 90 day renewal with termination for convenience on 90 days notice.

Does your provider have online T&Cs?

[lostmotel]

If the contract really does say that failure to give 90 days notice and then wishing to discontinue service results in £25k being payable then I would say on the face of it you have a good case for having that provision being deemed unenforceable. But as with everything the devil will be in the detail of the contract.

If you have not done so already I would offer them a maximum of a very generous £7,150 in full and final settlement (£29k x 90 / 365) just to get the problem off my desk. But I would invest in going and seeing a solicitor first with a copy of the contract and get some proper help.

[Prizam]

Thanks. Their is no in house legal team so would need external support on this one.

I cant find any proper contracts, only SOF order forms signed by my predecessor, years ago.

On those forms it states.. "Termination notice period (90) Days." Thats it.

[johnfm]

Prizam said:

Thanks. Their is no in house legal team so would need external support on this one.

I cant find any proper contracts, only SOF order forms signed by my predecessor, years ago.

On those forms it states.. "Termination notice period (90) Days." Thats it.

Depending on the supplier, their T&Cs may be found on their website. Rackspace, for example, have all their up to date T&Cs on their website.

If you cannot find them, ask the supplier to provide a copy and also to set out the basis upon which they claim the break cost would be £25k.

[akirk]

it may depend on their terms in buying in that allocation for you...
our hosting charges are payable 1 year in advance and non-refundable - we have to plan hosting needs ahead of time...
however our charges are c. 0.5% of yours!
we could therefore show that cost to us in pre-buying / committing to server space...

if you have no contract stating 12 months in advance / etc. then send notice to terminate service in 90 days time and pay that...
see what happens!

[Prizam]

T&Cs found and it just says the same as the SOF, pretty much.

Hosting is billed monthly in advance.

We have other products with the same company and spend over 100k a year, I would hope they would sacrifice this small contract in liu of the bigger picture and their recent cock-ups.

Legal bod now contacted.

[johnfm]

Prizam said:

T&Cs found and it just says the same as the SOF, pretty much.

Hosting is billed monthly in advance.

We have other products with the same company and spend over 100k a year, I would hope they would sacrifice this small contract in liu of the bigger picture and their recent cock-ups.

Legal bod now contacted.

If the SOF only says 90 day notice of termination and is silent on 'anniversay of contract start date' and is silent on termination fees, you need to ask them to provide T&Cs that were entered into at the time (or subsequently varied in accordance with the t&cs) that support their position.

Failing that, you give them 90 days notice of termination.

[Bertrum]

Legal team is exploiting your lack of Knowledge of the original contract...Cheeky.

Difficult to say for sure without seeing the contract but I would give them their notice of 90 days stating the term of the contract you are complying with and see what happens.

[akirk]

personally I wouldn't be generating legal costs - based on what you have said...
write / state that you are terminating contract on 90 days notice based on contract's terms and conditions / pay for the 90 days up front if you want - or at least one month and request invoices for the other two months on appropriate dates...
sit back and carry on

[JamieBeeston]

Prizam said:

T&Cs found and it just says the same as the SOF, pretty much.

Hosting is billed monthly in advance.

We have other products with the same company and spend over 100k a year, I would hope they would sacrifice this small contract in liu of the bigger picture and their recent cock-ups.

Legal bod now contacted.

Could you not leverage a total exit of all contracts if they don't come to an amicable solution on this one?

Hosting migration is much much easier than it once was.

Feel free to drop me an email if you want some off-board advice from someone who used to be in the industry.

[Prizam]

JamieBeeston said:

Could you not leverage a total exit of all contracts if they don't come to an amicable solution on this one?

This is my position. Have ditched the lawyers, not worth the expense. After looking at the contracts, the other deal is worth 200k a year to them. I would hope they will swallow the 20k to keep us sweet.

[Europa1]

£25k to exit a £29k contract? Suggest to them it sounds like a penalty clause, which is unenforceable.

[jonamv8]

I've had this situation and found a letter sent by a colleague terminating it within the correct period that I was unaware of. Whilst I do not condone lying is it possible that someone else may have terminated without your knowledge and a copy of such correspondence could be provided? Or leverage your other positions with them as it would be foolish of them to let go of 200k for 25k

Good luck

[johnfm]

jonamv8 said:

I've had this situation and found a letter sent by a colleague terminating it within the correct period that I was unaware of. Whilst I do not condone lying is it possible that someone else may have terminated without your knowledge and a copy of such correspondence could be provided? Or leverage your other positions with them as it would be foolish of them to let go of 200k for 25k

Good luck

Your suggestion is fraud? Excellent PH business advice.

If that fails, you could find out where the MD of the hosting company lives and abduct his wife and children, sending him severed fingers until he waives the termination charges.

[johnfm]

Prizam said:

JamieBeeston said:

Could you not leverage a total exit of all contracts if they don't come to an amicable solution on this one?

This is my position. Have ditched the lawyers, not worth the expense. After looking at the contracts, the other deal is worth 200k a year to them. I would hope they will swallow the 20k to keep us sweet.

How do you propose playing that?

What are the termination terms of the £200k contract? It might cost you similar termination charges to get out of that one too.

Before playing the 'keep us sweet' card, why not put them to proof on the termination provisions?

[JamieBeeston]

johnfm said:

Prizam said:

JamieBeeston said:

Could you not leverage a total exit of all contracts if they don't come to an amicable solution on this one?

This is my position. Have ditched the lawyers, not worth the expense. After looking at the contracts, the other deal is worth 200k a year to them. I would hope they will swallow the 20k to keep us sweet.

How do you propose playing that?

What are the termination terms of the £200k contract? It might cost you similar termination charges to get out of that one too.

Before playing the 'keep us sweet' card, why not put them to proof on the termination provisions?

Simple, you dont get out of it, you tell them they either take a pragmatic view on it, or we will serve notice on the big contract and seek to move away to an alternate provider as soon as contract terms allow!

[johnfm]

JamieBeeston said:

johnfm said:

Prizam said:

JamieBeeston said:

Could you not leverage a total exit of all contracts if they don't come to an amicable solution on this one?

This is my position. Have ditched the lawyers, not worth the expense. After looking at the contracts, the other deal is worth 200k a year to them. I would hope they will swallow the 20k to keep us sweet.

How do you propose playing that?

What are the termination terms of the £200k contract? It might cost you similar termination charges to get out of that one too.

Before playing the 'keep us sweet' card, why not put them to proof on the termination provisions?

Simple, you don't get out of it, you tell them they either take a pragmatic view on it, or we will serve notice on the big contract and seek to move away to an alternate provider as soon as contract terms allow!

My point is that if the £200k contract has similar (seemingly penal) termination charges, then serving notice may not be much of a threat.

Might be - depends on a lot of things.