Parties to a Vending Machine Contract
A vending machine contract, also known as a vending machine agreement, is a legal contract between a vending machine owner (or operator) and a location provider (such as a business or property manager). The purpose of a vending machine contract is to authorize the vending machine operator to place and maintain a vending machine at the location provided by the property owner or manager. While vending machine contracts are much less complicated than most other types of contracts, they serve a very important function for both the property owner and the machine operator.
The business implications of a vending machine contract are significant . Such contracts enable a vending machine operator to grow its business by allowing the operator to expand into new markets and territories. Meanwhile, property owners benefit from having another source of revenue from potentially no labor costs.
The legal implications of a vending machine contract are equally important. In an ideal business relationship, a vending machine contract protects the interests of both parties by, among other things, addressing issues such as the duration of agreement, rental / leasing fees, physical location of the machine on the premises, service and maintenance obligations, compensation for cost of products or repairs, and more.
Essential Clauses of a Vending Machine Contract
To ensure mutual understanding and smooth operation, the vending machine contract must cover all aspects of the business relationship. Every agreement will vary, but experienced vending machine attorneys note that the following key elements should always be included in the deal:
- Terms of Service: The availability of the vending machine, including 24/7 service or periodic restocking.
- Payment Agreement: Price to use the machine, how payments will be made, and whether a deposit and/or rental fee is required.
- Responsibilities: Who takes care of the vending machine itself (cleaning, breakdowns and repairs)?
- Maintenance Obligations: Scheduling of regular maintenance or service, emergency contact numbers.
- Termination: How long is the contract in effect and the process for ending the contract.
Vending Machine Contracts: Crucial Legal Aspects
In crafting a vending machine contract, there are several legal factors to consider. One of the first predicted concerns is whether the contract is an employment contract under applicable labour and employment laws. These are laws that vary by location so you need to consider what laws apply to the contract in question and how they dictate the terms with suppliers, operators and staff. It can have nasty consequences if you enter a contract with a supplier and the terms violate local law, and you get slapped with legal penalties.
The next legal consideration is in regards to basic contract law. If the contract is not specific enough it can be ruled void because of vagueness or lack of lawful subject matter. You don’t want your business to be affected by mistakes in the language of your contracts so you should consult a lawyer before signing them.
The last legal consideration for vending machine contracts is compliance with consumer protection laws. These laws vary from location to location. When constructing the vending machine business model it’s crucial that these laws are taken into account in order to avoid legal penalties.
Example Vending Machine Contract Clauses
With the elements of a vending machine contract identified, it is best to look at some examples where these clauses are applied. The first example comes from the only commercial vending machine operator in the territory. The vending contract might have the following clause as applied: Terms of Service (a) The term of this contract shall commence upon signing and continue for a period of three (3) months. Thereafter, the term shall automatically renew for an additional period of three (3) months unless either party gives the other party at least thirty (30) days’ prior notice that the term shall not renew. (b) This Agreement may be terminated by either party ("Terminating Party") if, at any time during the term, the "other party" ("Terminated Party") shall fail to make a payment within fifteen (15) days after the date upon which the Terminated Party received written notice signed by the Terminating Party demanding payment hereunder, and stating the amount thereof, or should either party seek protection under the bankruptcy laws, the bankruptcy laws shall control. The above clause automatically adds significant value for the vending machine operator. Providing for an automatic 3 month renewal prevents early terminations by the other side or 15-day notice provision insures that the minimum 6-month is met. In this context, the vending machine company will have already placed a machine, paid for its transportation and setup, and thus, the 6-month is too short. The machine is most likely earning a profit by that 6-month mark and the longer the relationship goes, the more valuable it becomes. The 15-day decision period provides adequate time for the vending machine company to find a way to make payments, negotiate with the property owner, or remove the machine. While the contract clause does not mention the property owner and is thus directed to the other party, having the property owner listed separately as a guarantor insures that if the property owner is the party that terminates, a third party can be liable for damages. The next example contract clause can be useful in many other relationships with this type of clause: Vending Machine Operation and Maintenance Guarantee (a) Operator shall install, maintain, and operate all Vending Machines in a safe, sanitary, and commercially reasonable manner at its sole cost and expense. (b) If within thirty (30) days of receiving written notice from Owner that any of the Vending Machines is defective in any manner, Operator has failed to notify Owner of the existence of such a defect and immediately commence to diligently remedy the defect, or if within sixty (60) days after receipt of such notice, such defect has not been remedied, then Owner shall be entitled to install, at Operator’s sole cost and expense, a substitution vending machine and charge Operator for the use and occupancy of the premises until the defective vending machine is replaced by Operator or the Vending Machine Agreement is terminated. Many of my vending machine customers have complained of other parties not properly maintaining the vending machines. If the contract permits a they or their agents to do it, the vending machine company loses its ability to claim damages for improper maintenance. Including a clause like this will not eliminate maintenance problems, but it will force the other side to take maintenance and repairs seriously.
Negotiating the Terms of a Vending Machine Contract
The first step in negotiating a contract is to determine what you want. The next step is to determine what you can do without. For example, if you are signing a product placement agreement for your own vending machine, you may not be able to live without your snack and drink choices. However, you may be flexible when it comes to repair work or warranty terms.
Knowing what is non-negotiable for your vending machine business will help you negotiate a contract that not only works for you, but will not be a burden if you do eventually walk away from the vending machine contract.
Determine what you want from the vending machine contract and what you can do without. One way to negotiate a decent vending machine contract is to use a contract from a previous vending machine placement. However, if possible, you should have a lawyer write up a new contract with the changes you’ve discussed with the potential vending machine company.
While you negotiate changes with the vending company , you should write them down and keep everything organized. Either e-mail or send the notes back and forth. If something is said verbally that is not included in the contract, it is not binding. The best way to make sure that all oral agreements are considered a part of the contract is to include them in writing.
You should also have a lawyer review every vending machine contract that you sign and have a lawyer review your vending machine contract if you plan to leave the vending company. You will want to make sure that you follow protocol and leave the contract in a legal way. Consulting with a lawyer makes sure that you will not be breaking the contract due to a misunderstanding of what the vending company wants.
While using a vending machine placement contract from a previous placement may be an ideal start, it is also important to have a lawyer review any contracts with the vending machine company you want to use. That way the lawyer can catch anything that you missed while you were reading over the contract.
Common Mistakes in Vending Machine Contracts
Vending machine contracts might seem straightforward, but there are plenty of places where franchisors may trip. You might be tempted to cut corners on these agreements, thinking most of the provisions do not even apply to your situation. You could be playing with fire. For example, some franchisors offer an indemnification agreement in which the franchisee agrees to hold the franchisor harmless for any losses that might arise in the future, whether through normal operations or misconduct. However, some courts have found that as a matter of public policy, indemnifying a franchisor for its own wrongdoing is unconscionable and unenforceable. The unfavorable publicity that franchisor exposes itself to with such provisions is often more trouble than it is worth. Much the same can be said for waivers of punitive damages or jury trials. Most courts will not enforce a disclaimer of liability for punitive damages because of a defect in the mutuality of promises. (The party being held liable for punitive damages is not subject to similar remedies for its own wrongdoing.) In some cases, the courts will not enforce a waiver of punitive damages against one party but will nonetheless enforce it against the other. A franchisor should also be aware of covenants not to compete. When enforcing such an agreement to prevent a former franchisee from entering into a competing business, the courts are reluctant to do so, especially if it ties up a primary means of making a living. A reasonable nonbinding restraint on competition is generally enforceable, but there is no hard and fast rule as to what constitutes "reasonable." In any case, a franchisor needs a sound strategy for enforcement. One of the most common pitfalls when a third-party service provider sells the franchisor’s product instead of the franchisor itself. It is easy to draw too bright a line either way. Either the franchisor claims to be the sole supplier but then has no control over pricing or availability, or the franchisor agrees to a contract with a vendor but then has few legal options if it ever becomes unhappy with the terms of that vendor’s pricing or products. A good example of how this plays out is Coca-Cola, the world’s largest soft drink company. Coca-Cola has never sold sodas directly. It licenses bottlers around the world to manufacture and sell its products, allowing for a very low-cost operation. On the other hand, it has centralized control over pricing and actively enforces its rights to require any bottling agent that hopes to sell Coke products to comply with its requirements.
Advantages of a Custom Vending Machine Contract
Utilizing a generic vending machine contract template might seem like an easy way to cut costs on legal services. However, the benefits of working with a lawyer to develop a customized vending machine contract far outweigh any initial savings. The advantages of having a tailor-made vending machine contract are relatively simple: the contract can be drafted to suit both parties, meet all state and federal regulations, and be easily referenced if any issues arise.
Legal Help When You Need It: No franchise or business association governs how vending machine contracts should be written. Likewise, states don’t always have regulations specifically addressing vending machine contracts. This means that while a template may cover some of the requirements for your state, there may be many additional regulations specified by the vending machine bill of sale laws in your state , and those don’t have any "one size fits all" solution. A lawyer experienced in the ins and outs of vending machine business entities has the expertise to ensure that all state and federal distinctions are duly covered.
Tailor-Made for All Parties: Not all vending machine businesses operate the same way. Some rely on local commissions, while others oversee a large national footprint of clients. Does your vending machine contract need to account for major holidays? If so, what are your client’s major holidays? While some states have laws governing when a landlord can ask a vending machine business to remove their products, they don’t have any guidelines on whether the removal is note-worthy or on when it will have to happen. For these reasons (along with multiple others), it’s important to work with an experienced legal professional who can address the needs that are specific to your vending machine business. A general contract template is not able to do that.