NO END TO CONTRACTS?

Water utility operations and services are governed by contracts with suppliers, employees, customers, consultants, engineers, accountants and even lawyers. The importance of crafting carefully such contracts, therefore, cannot be overstated. Sometimes, however, oversight or carelessness in drafting can cause unintended results--often by reason of a court decision.

For example, a recent state appellate court decision involved a contract between a manufacturer and a sales representative for the manufacturer. The termination provision of the contract stated that the contract may be terminated only by the written agreement of both parties. The manufacturer sued, requesting a judicial ruling that it could terminate the contract unilaterally because the termination provision was unenforceable. It also stated that it was not represented by counsel during the negotiation and drafting of the contract.

In its decision, the Appellate Court stated that a contract that is terminable only upon the mutual agreement of the parties is indefinite in duration, and that state public policy prohibits contracts of indefinite duration. Therefore, the Court held that "as a result, a sales representative agreement terminable only upon the mutual agreement of the parties is not sufficiently definite in duration and in terminable at will." *

It bears repeating: contracts can be structured with care and clearly stating the parties' intent--with the assistance of counsel, or contracts may be structured by subsequent court decisions with possible unintended results for the parties. The choice should be obvious.
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*Rico Industries, Inc. v. TLC Group, Inc,
2014 IL.App. (1st)131522