Contracts: How Long is Long Enough?

Contracts are a pertinent part of a business.   We have them for nearly every service a business needs from rent, to cell phones, to Internet, to waste. Despite how many contracts we have, neither party ever feels comfortable entering into a “long-term” contract.  Most people and businesses try to keep their contracts to a year, or three years at the very most.

Why is this? 

Do people prefer shorter contracts because they think they will find a better service?  Do they think it is best to go year to year?  Or is it because you are not offered 5-year contracts for these services?

Lengthier contracts mean a set price for a longer period of time.  The longer the contract the longer your rates are locked-in, resulting in more savings for you and your company.

Shorter contracts mean price increases every time the contract is renewed.  Which is only costing your company money.  Nearly every time a contract ends the price goes up for the next year’s contract.  Let’ say you were going to change servicers, if you do not cancel the contract in the time period the company specifies, your contract is auto renewed. This means you do not get a chance to renegotiate price, and you are locked in for another year, with their new pricing.

So why do businesses continue to utilize one-year length contracts as opposed to 5 or 10-year contracts? Doesn’t it make more sense to lock in prices for a longer period of time, instead of potentially high increases each contract renewal?

So tell us, why don’t you or your company enter into longer contracts, say a five or ten year contract?

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One thought on “Contracts: How Long is Long Enough?

  1. Pingback: Contracts: What Seems to be the Problem with Longer Terms | Refuse Specialists

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