Perspectives

If one of your goals in 2025 is ensure your contracts are more secure, you’re not alone. Contracts are often viewed as administrative necessities, but for businesses involved in capital equipment sales-whether it’s large machinery, medical devices or construction materials-contracts are powerful tools for mitigating financial and legal risks. Poorly drafted agreements can lead to costly disputes, lost revenue, and exposure to liabilities that could threaten the financial stability of your business. By incorporating key provisions, you can safeguard your operations and reduce potential risks. Let’s explore three critical contract terms every capital equipment provider should prioritize.

Limitation of Liability: Safeguard Your Financial Interests

A limitation of liability clause protects your business from excessive financial exposure by capping the damages you may be required to pay in the event of a dispute or breach. For capital equipment providers, this protection is crucial given the significant cost associated with product failures, delayed delivery, or operational downtime.

How it works:

This clause limits liability to a specific dollar amount, such as the contract value or a predetermined ceiling, ensuring your exposure is manageable. For example, if a client incurs significant losses due to malfunction, your liability could be limited to the purchase price of the product rather than broader, unpredictable costs like lost profits or third-party claims.

Best Practice:

Be precise in defining the cap and consider excluding specific types of damages, such as consequential, incidental, or punitive damages. Keep in mind that enforceability may vary by  jurisdiction, so consult legal counsel to endure your contracts are legally sound and enforceable.

Warranties: Clearly Define Your Obligations

Warranties establish the scope of your obligations and help set customer expectations, which is critical in capital equipment sales where trust is essential. Warranties can be express (explicitly stated) or implied (automatically applied by law). Managing these warranties properly can prevent misunderstandings and legal disputes.

Express Warranties:

These are explicit promises regarding the product’s performance, quality, or lifespan. They’re often detailed in contracts, marketing materials, or technical specifications. Missteps in how these promises are worded can lead to overcommitments and liability exposure.

Implied Warranties: These include written guarantees like the warranty of merchantability (the product will perform as expected) and fitness for particular purposes (the product is suitable for the buyer’s specific need). While these are automatic in many transactions, they can often be limited or disclaimed through carefully crafted contract language.

Best Practice:

Specify what is covered and for how long. If applicable, disclaim implied warranties to avoid unforeseen obligations. For example, a clause such as “The product is sold as-is with no implied warranties” can significantly reduce your risk.

Indemnity Clauses: Shift Liability for Third-Party Claims

Indemnity clauses allocate the financial responsibility for third-party claims to a specific party, which is essential in capital sales where the risk of product-related claims is higher. These provisions protect your business from bearing the financial burden of lawsuits related to product performance, safety, or improper use by the customer.

How it works:

If a customer or a third party files a claim due to a malfunction, defect, or accident, an indemnity clause can transfer the responsibility for legal costs, settlements, and damages away from your company. This is particularly valuable in industries like construction, healthcare, and heavy equipment, where operational risks are significant.

Best Practice:

Ensure the indemnity clause defines the scope of claims covered and the extent of liability. In some cases, mutual indemnity-where both parties agree to indemnify each other under certain circumstances-can provide balanced protection.

The Bottom Line: Protect Your Business Through Smart Contracting

For capital equipment providers, contracts are more than legal agreements-they are essential risk management tools. By integrating provisions such as limitation of liability, clear warranties, and well-structured indemnity clauses, you can significantly reduce your exposure to financial loss and legal disputes.

Taking the time to review and refine your contracts with experienced legal counsel ensures that these provisions are both enforceable and tailored to your unique business needs. Protecting your business today with robust contract terms can prevent costly issues down the road and strengthen your financial stability. Take action. If you’re unsure whether your contracts effectively reduce your risk, now is the time for a review. Contact Wagner, Falconer and Judd for expert guidance on drafting capital sales contracts designed to protect your bottom line.

In light of recent extreme weather events, it’s crucial for businesses to ensure their contracts include a Force Majeure clause. This provision protects parties from liability or obligations when unexpected events beyond their control prevent the fulfillment of contractual duties.

What Does Force Majeure Cover?

A Force Majeure clause typically applies to situations such as:

• Natural Disasters: Hurricanes, floods, wildfires, or other severe weather events.
• Government Actions or Regulations: Unexpected regulations, travel bans, or other state-imposed restrictions.
• Labor Strikes or Civil Unrest: Disruptions in operations due to strikes or protests.
• Pandemics or Public Health Emergencies: Events similar to the COVID-19 pandemic that impact business operations.

Why Force Majeure Clauses Matter?

Including a Force Majeure clause in contracts is essential for businesses to mitigate risks, provide flexibility, and avoid breach of contract when unforeseen events occur. Here’s why:

Mitigates Risk: A Force Majeure clause reduces potential liabilities by freeing parties from obligations when events beyond their control-like natural disasters or pandemics-disrupt operations.

Provides Contract Flexibility: This provision allows for the adjustment or suspension of obligations during disruptive events, ensuring businesses can adapt without facing penalties.

Avoids Breach of Contract: By acknowledging the impact of unpredictable events, a Force Majeure clause helps prevent breaches and protects relationships between parties.

How This Plays Out in Practice

In real-world scenarios, Force Majeure clauses are invaluable when dealing with:

Supply Chain Disruptions: When extreme weather or other factors interrupt supply lines, the clause provides relief from penalties.

Service Interruption: If a company cannot perform services due to uncontrollable circumstances, it avoids liability by invoking the Force Majeure provision.

By including this clause, businesses can protect themselves from undue risks and financial burdens when events outside of their control occur. It’s a proactive step that provides flexibility and helps manage unforeseen disruptions effectively.

If you’re looking to strengthen your contracts or need guidance on incorporating Force Majeure clauses, our legal team at WFJ is here to assist.

Addressing defaults and outlining remedies within contracts is crucial for protecting businesses from financial risk. For finance teams, it is essential to ensure that these provisions are robust and clear, providing them with the necessary tools to respond effectively in the event of a customer’s default.

A default occurs when a party fails to fulfill its contractual obligations, such as making timely payments or or adhering to the terms of a lease or purchase agreement. To mitigate the financial impact of a default, contracts should include late or missed payments, failure to maintain insurance, or unauthorized use of equipment. By clearly defining what constitutes a default, the dealer can act swiftly and decisively when a breach occurs.

Once a default is established, the contract should provide a range of remedies to protect the businesses’ financial interests. Common remedies include the right to repossess any equipment, acceleration of payment obligations (where the full amount due becomes immediately payable), and the imposition of late fees or interest on overdue payments. The right to terminate the contract and recover damages, including the cost of retrieving and refurbishing the equipment, should also be clearly articulated.

To further strengthen these protections, finance teams should ensure that contracts include provisions for legal fees and costs, allowing the dealer to recover expenses incurred in enforcing the contract or pursuing legal action. Additionally, contracts should specify that any waiver of a default or delay in enforcement does not constitute a waiver of the dealer’s rights under the contract, preserving the dealer’s ability to enforce the agreement in the future.

It is also important to include dispute resolution mechanisms, such as arbitration or mediation, which can provide a more efficient and cost-effective means of resolving conflicts without resorting to lengthy litigation. These mechanisms should be clearly outlined in the contract, along with the steps required to initiate them.

Finally, finance teams should work closely with legal counsel to ensure that default and remedy provisions are tailored to the dealership’s specific needs and are compliant with applicable laws. Regular review of contract templates and updates in response to changes in the law or business practices is essential for maintaining effective protection.

The landscape of workplace safety inspections is evolving, with new regulations from the Occupational Safety and Health Administration (OSHA) reshaping the dynamics between employers, employees, and third-party representatives. Effective May 31, 2024, a revised rule grants employees the right to choose a representative, whether an internal colleague or an external third-party, to accompany OSHA inspectors during workplace inspections.

This significant shift is designed to bring clarity and inclusivity to the inspection process. No longer bound by formal credentials, such as safety engineering or industrial hygiene qualifications, third-party representatives can now be selected based on their knowledge, skills or experience relevant to the workplaces’ hazards and operations. The purpose is clear: to facilitate effective and thorough inspections that prioritize safety and compliance.

However, with this newfound flexibility comes a need for careful consideration and preparation on the part of employers. Understanding the implications of this rule and how to navigate them is crucial for maintaining compliance and ensuring a smooth inspection process.

Key Points in the Revised Rule:

• Expanded Representation Options: Employees now have the freedom to choose either an internal colleague or an external third-party as their representative during inspections.
• Inclusive Representation Criteria: Third-party representatives are not limited to individuals with formal credentials. Instead, their selection is based on their ability to contribute positively to the inspection through their knowledge, skills or experience.
• Compliance Officer’s Discretion: The Compliance Safety and Health Officer retains ultimate authority to determine whether a third-party representative is reasonably necessary for an effective inspection. This decision hinges on the representative’s potential contribution to the process.

Employer Response and Preparation

In anticipation of these changes, employers must revisit their policies and procedures related to OSHA inspections. This includes:

Analyzing Good Cause: Employers should be prepared to assess whether there is a legitimate argument against the presence of a third-party representative and articulate objections to the compliance officer.

Monitoring Representative Activities: Employers must ensure that third-party representatives adhere to the scope and purpose of their presence, preventing any behaviors that could disrupt or interfere with the inspection process.

Ensuring Transparency: Employers can promote transparency by staying informed about the selection process for third party representatives, potentially through active involvement in safety committees.

Addressing Union Concerns

While unions may view this rule change as an opportunity to increase organizing activities, it’s crucial to emphasize that the presence of third-party representatives is strictly for aiding in inspections. Compliance officers retain the authority to exclude individuals whose conduct disrupts the process.

OSHA’s revised rule on third-party representation in workplace inspections represents a significant step towards inclusivity and effectiveness. By empowering employees to choose representatives based on their expertise, the aim is to enhance safety and compliance standards. However, employers must be proactive in understanding and implementing these changes to ensure a smooth inspection process while maintaining a focus on workplace safety and compliance.

As employers adapt to to these changes, it’s essential to see guidance and expertise to ensure compliance while maintaining a safe working environment. If you find yourself grappling with updated regulations or need assistance in developing effective policies and procedures, we’re here to help.

In the construction industry, where flexibility and specialized skills are heavily sought after, the classification of workers as independent contractors has long been a common practice. Independent contractors bring a range of talents and expertise to construction projects, offering unique advantages for both employers and workers.

However, recent developments in labor regulations have brought about significant changes in how independent contractors are classified, particularly in the construction sector. It is crucial for all stakeholders involved to stay informed and adapt to these new requirements to ensure compliance with the law.

The reclassification of independent contractors have significant implications for construction projects. From compliance with wage and hour laws to eligibility for certain benefits, the changes affect how construction businesses operate and engage with their workforce.

The New (Old) Regulations

Beginning March 11, a new Department of Labor rule will change how employers determine if a worker is an independent contractor of employee. The federal rule, first proposed in October 2022 and published in the Federal Register January 10, will reverse a rule made late in former President, Donald Trump’s term.

The 2021 shift by the former President’s administration altered worker classifications to focus on two factors: the nature and degree of control over work, and opportunity for profits or loss. Under the new framework-a return to the standard before the 2021 alteration-six nonexhaustive factors will determine a worker’s employment status.

The Six Major Factors When Determining Employment Status:

• Worker’s opportunity for profit or loss
• Investments made by the worker and the employer
• Degree of permanence of the work relationship
• Nature and degree of control over performance of the work
• Extent to which the work performed is an integral part of the employer’s business
• Use of the worker’s skill and initiative

There are Mixed Reviews

Construction employer groups balked at the change-calling the final rule’s standard “ambiguous and difficult to interpret”. (Associated Builders and Contractors).

Labor groups, on the other hand, applauded the update.

“Simply put, this rule will ensure the basic rights of all workers, consistent with the Fair Labor Standards Act.” (United Association of Union Plumbers and Pipefitters.)

Acting Secretary of Labor Julie Su said the final rule would ensure a level playing field for workers, particularly vulnerable workers who are misclassified and lose out on minimum wage, overtime pay, and other protections under the FLSA. Worker misclassification is prevalent in the construction industry: an estimated 1.1 million to 2.1 million workers are misclassified or paid off the books. (Century Foundation)

Final Thoughts

Employers, and especially employers who utilize the work of specialty and independent contractors, should conduct thorough audits of the employees and their current classification. Failing to comply with federal and state labor laws often leads to costly consequences such as legal penalties, back pay claims, and damages. Additionally, proper employee classification contributes to a fair and equitable workplace, building trust between employers and their workforce.

Employers would benefit from consulting with a lawyer will versed in employment law to assist in their audit of worker classifications. The attorneys at Wagner, Falconer & Judd stay up-to-date on the various laws that impact the classification of employees by state. Learn more about our services and get started today-that way you’ll be ready for the next employment law updates!

It is no secret that the construction industry has been facing significant issues completing its project backlog that have caused stress on business.  Since construction is one of the largest sectors of the U.S. economy, most can appreciate these concerns, as they in turn impact many other sectors of business.  The two main problems most of the industry is navigating are: supply chain issues and shortage of workers.  First, current supply chain issues are pushing delivery dates to double or triple their typical timelines, which make planning projects difficult and deadlines tough to uphold.  Further, even when materials or equipment are available, US Inflation at a current rate of 8.52% is driving costs to unprecedented highs.  Second, the effects of the pandemic have left a significant shortage of skilled workers in the US labor market.  It is difficult to retain quality employees and challenging to hire new or replacement workers.  This labor shortage puts pressure on any project to complete the work on time and within budget.  In some instances, construction firms have taken a laxer approach to compliance, often with dire consequences.

However, these pressures on construction firms should not cause HR departments to “throw out the baby with the bathwater.”  In May, during hearings, the EEOC cited the construction industry’s culture of racism and sexism and commented that, with much of the $1.2 trillion Infrastructure Investment and Jobs Act being earmarked for construction firms, the Act should not fund an environment of hate.  It is safe to say that construction firms are squarely in the EEOC’s enforcement crosshairs, which is never a good place to be.

Consider a case that a Washington HVAC contractor recently settled with the EEOC.  The case involved allegations against the HVAC contractor’s owner who was accused of sexually harassing female employees, including telling women they did not belong in the building trades, engaging in nonconsensual touching, leaving condoms and lubricant out in public areas of the building, and asking women to wear more revealing clothing.  Ultimately, the contractor reached a settlement with the EEOC agreeing to be subject to federal oversight for five years and pay out a total of $361,000 to seven women who were subjected to the owner’s harassing conduct

Against this backdrop, it has never been more important for construction firms to recommit to compliance: starting with its anti-discrimination and anti-harassment policies.

Review: HR representatives should review existing policies and ensure they are up to date.  If any changes are needed, or an audit reveals some employees have not received the policy, HR should undertake to ensure all employees receive and acknowledge receipt of the policies.

Train: All employees and managers should receive anti-discrimination and anti-harassment training, ideally on an annual basis.  Companies should ensure that they comply with any specific state or local laws requiring employee and manager training.

Enforce: Compliant policies are no good if they are not properly enforced.  HR must take all allegations of discrimination and harassment seriously, regardless of the position of power the alleged perpetrator may occupy.  Companies should conduct thorough investigations.  Employees should be subject to appropriate remedial action, including termination of employment if the circumstances warrant.

Simplify your compliance needs by partnering with Wagner, Falconer & Judd. Let our experienced employment law attorneys assist you with everything from employee handbooks, onboarding and training to termination. Contact us today to learn more about our services.