Right Of First Refusal

[abchelp]

I'm in a service business in California where we typically have customers enter a 1+ year service agreement. I want to add a clause which would require that at the end of the contract term - if the customers wants to switch to a competitor (for non-service related issues) they have to give us an opportunity to beat the competitors bid, and thus retain their business. My intention is to prohibit a long term client from leaving us for an undercutting competitor without at least giving us the opportunity to compete for their business. A few questions:

1) are these clauses normal in service contracts? - I understand they are called "Right of First Refusal" or something like that.

2) can someone provide me with some simple verbage, or a place where I can find out how to word such a clause?

Thanks!

Mike

[Mr. Knowitall]

I think this is a really bad idea. First, if I saw a clause in a contract where somebody tried to force me to renew if they beat a competitor's price, I wouldn't sign. What if I don't like your service? What if your competitor offers a service with features you don't provide - how do you compare? There's always going to be some point of differentiation in services provided.

Second, how would you enforce this? You're going to sue former clients, demand to know what they're paying their current vendors or what additional services they obtained (because you won't know before you sue them) and try to force them to pay you damages or rehire you? If word of one such lawsuit gets out within the community you serve, I suspect you will have entered into your last service contract.

If you really want to try something like this, have a lawyer draft your contract.