Unlimited liability clauses are becoming an increasingly common feature of supplier contracts. FIDI Secretary General Jesse van Sas explains why movers should be wary of this growing trend – and what they can do about it
We all know the feeling when a corporate customer or RMC decides to work with you for an upcoming move, or perhaps a whole series of moves. Excitement, the sweet smell of success, and even a feeling of relief, because you’ve secured revenue for your business. The daily pressure to perform and get moves booked is high and getting a booking can take a huge weight off your shoulders.
However, we also know that under these sometimes emotional conditions none of us make the best of decisions. In psychology, it is common knowledge that people’s decision-making and thinking isn’t always rational and linear when taking place under situations of excitement and/or stress. This becomes more pronounced when – counter-intuitively – people are given lots of information related to a topic they don’t have the ability to understand fully, either because it is complex and confusing, or because it concerns an area in which they have little experience.
Take the small print. One of the items usually printed in the long list of contract elements is the one of liability, and more particular liability that is ‘unlimited’. This is becoming increasingly popular in relocation contracts nowadays, and it should be a major concern for movers.
When stated on a contract, ‘unlimited liability’ can refer to all manner of things, from damage to goods or residence to even personal data breaches. While it makes sense for customers to hold their supplier liable for infractions, the term ‘unlimited’ has potentially huge ramifications, and could cripple or even finish your business if it were ever to be applied for serious matters.
The ‘unlimited’ element of the liability is often in stark contrast to the value of the contract you have secured. Even for a move contract of €20,000, you are potentially signing your life away by accepting an unlimited liability clause. You are, in short, accepting an enormous risk for a very modest contract.
So why do we do this? Pressure, as already stated, but also our lack of understanding. The average mover does not have a legal department, nor the means to consult with legal advisers to go over the contract with a fine tooth comb.
Moreover, not accepting or bickering over the conditions could mean your competitor will get the business. The authors of these conditions are often procurement professionals, very good at writing one-sides clauses, and imposing these on the supply chain. It borders on bullying behaviour.
An unlimited liability, enforced unilaterally by a much bigger party on a smaller supplier is deemed as unreasonable, and will in many legislations not hold up in court. Liabilities can be shared between two contracting parties, but it needs to be proportionate to the actual business given and also, likely, the size of the supplier’s business.
If not, the corporate customer may ‘think’ it is protected by cleverly diverting its liability to the supply chain, when in fact it will be found to be 100 per cent liable because of the imbalance of liabilities in the contract. The contract will be considered unreasonable or unfair – and can therefore not be enforced in practice.
I realise it is easy to say you must tell your customer that you don’t agree with the ‘unlimited liability’ clause. But, if you can tell them that such a clause is an empty box, unenforceable and factually counter-productive to their purpose of diverting liability, maybe you can start a conversation and bring this back to a negotiated and fair agreement between the contracting parties.