Your office equipment supplier has gone bust. Now what?
Does your agreement still stand? Who will provide the maintenance? What liabilities do you have to the finance agreement?
There’s a lot to consider, and you must understand what you’re responsible for to avoid getting caught out with a new agreement that just isn’t right for what you need.
The global pandemic has seen many office equipment suppliers disappear, so right now, there is a high chance you could be contacted at some point by an incoming company.
Expect to be contacted by a new supplier
When your supplier goes bust or is taken over by another operator, often the first you will hear is when a new supplier contacts you. It’s generally at this stage you can expect the upselling tactics to kick in. Look out for:
- A call and usually a visit.
- A request to review your contract – and the soon-to-follow offer of a ‘better deal’.
- Other incentives – possibly even an upgrade or offer of an additional machine for free
- Seemingly more favourable maintenance or support terms
All these will no doubt sound very tempting. And all you will likely be asked to do in exchange is sign a new contract on their own agreement terms.
And that, right there, is where they get you.
Understanding where the industry benefit is and how the profit is made will help you to spot the scam
Often there is very little value for an incoming supplier in taking over a lease agreement. So if you’re going to protect your organisation from being taken advantage of, it’s essential to understand precisely what and where the benefit is for the supplier.
So let’s look at that benefit and why companies buy competitors, in the office equipment industry. It’s all down to M.I.F (Machines in Field), or perhaps that should be E.I.F (Equipment in Field), or in layman’s terms, how many machines are installed and how much does each machine generate over how long a contractual period.
The sting will almost always be found in the maintenance contract. Because in the print industry, the only real value the dealer has in any sale is in the maintenance contract and not in the office equipment lease.
Think of it as the profit from the lease merely covers the salesperson’s commission and expenses, and, once sold, the lease has no real value to the dealer; he can’t really store it up or protect it. Because, to be honest, anybody can sell a copier on lease, which means you can buy them anywhere, and you, the customer, are only tied to the lease company – not the person who sold it to you.
So the real long term value commodity for the dealer is the service & maintenance agreement. The longer, the better. The higher the periodic charges, the better. The more extra charges built into the agreement, the better. They all add to the value of the deal you bought into for the dealer who sold it to you.
The difference between a lease company selling out and going bust
There is a difference, often a small one I grant you, but nonetheless a difference between an office equipment company that ceases to trade and one which sells out to a competitor. While both come with high risks for you, the customer, the supplier who ceases to trade often carries more risk and for a number of reasons:
The official administrator might sell the company user base MIF (you) to the highest bidder
Invariably the owner or at least one of the directors of the failed company will try to monetarise the MIF – often unofficially and for a cash sum.
Former employees likewise sell the MIF to one or more bidders. This means you could have more than one company telling you they are the new owners and trying to convince you to sign their agreements. It is not uncommon for customers to find themselves with two or more agreements alongside the original one.
Then you have the less than honest leasing company (and there are more than enough of those still trading) who, for whatever reason, falls out with the supplier and leaks details of the dealer’s MIF to competitors, leaving you with salespeople calling to resign your agreements, seemingly with the blessing of the leasing company. This does not absolve you from liability to the original supplier. If you call the leasing company to check out the situation, they will tell you they no longer deal with the original supplier, often leading you to believe the supplier is no longer in business.
Then there is the company take over, where your supplier sells out to another organisation, you should expect a notice this has happened, but regardless of whether you receive one or not, you can expect your new provider to come out and visit.
In fact, it is so important for them to meet you face to face; there are even binding terms appearing in contracts now that state you have to allow their salespeople in to meet with you and at their request.
Once there, they will often attempt to sign you up to their current maintenance contract on the basis that you will only then enjoy their improved level of service, which is complete fiction. And if, for example, you’ve only got 18 months left on your current agreement, they’ll want to put that back to at least five years – often on much less favourable terms. This can often mean becoming tied into a maintenance deal for longer than is necessary – longer than the lease itself – or agreeing to terms that are excessive for your needs – potentially costing £££s more than you need to pay.
Contracts are binding, even in a takeover
When we sign a contract, remember it’s a two-part arrangement. You are committing. You agree to pay what you say you’re going to pay for a given period when it is due and to do what you say you’re going to do. It is the same for the supplier – and that includes the new one, they must also fulfil their contracted commitment.
So when a company goes bust or sells out, all your rights from your original agreement are fully protected.
Never feel obliged to sign any new agreement – in fact, in most circumstances, we would advise against it as it is likely to be used as a tactic to lure you into paying more in the long term. That’s why incoming companies are always so keen to get you to sign – because once you are in their contract terms, it is often easier for them to manipulate your terms further down the line.
Stick with your original agreement – it is still valid
When a new company takes over, the important rule of thumb is never to sign anything without getting an independent contract check first. Fair Contract Associates offers a low-cost contract checking service, so you can get peace of mind that everything is in order. Otherwise, stick with the original agreement and make them see it out. They are legally bound to.
Check whether your contract is even legally binding
Over the past few decades, many clients have come to us having fallen foul of these takeover scam opportunities. We recently found one client’s 2017 telephone contract had been ‘taken over’ in 2019 by an incoming telephony supplier with no legal entitlement to the agreement whatsoever. Yet, the payments had continued to be made month after month, year after year, with the client being none the wiser.
Under closer examination, when the client contracted our support, we found the original agreement had been written in 2017. Yet, the new company that were claiming rights to the contract had actually been dormant until March 2019. When the client requested copies of the agreements, the terms and conditions had been altered to make it look as though the client was still dealing with the same company as he had been previously – handing over vast sums of money in the meantime.
It is only when we got involved and requested the ‘blue ink’ original contract that the original owner of the contract was revealed and was the one that had been liquidated, without any notice to the customers.
So what does a good contract ‘take over’ practice look like?
When ownership of an agreement changes, all parties to the agreement must be notified – this is usually done with an official letter. It doesn’t have to be much of a letter, but it has to go out to inform you that the contract has been novated (placed with a new party) and provide details of the new owner. Without that official novation process taking place, the original terms and conditions cannot apply because you cannot be party to an agreement where you don’t know who the other half is. Without an official novation, it becomes less safe for the supplier to try and enforce the agreement.
Remember, it is not a legal requirement for you to amend any terms of the original agreement, nor do you have to enter into a new agreement because the supplier has sold out (no matter how hard they might try to convince you otherwise).
With 53 years in the industry, we know the tricks of the trade and have worked hard to stamp out bad practice.
We help buyers at whatever stage of the purchase process they’re at, and we don’t take payments from suppliers in doing it.
Here’s how we do it:
- We offer a fully independent low fee contract checking service – so you know exactly what you’re getting and what you’re paying before you sign anything.
- We have a Fair Contract Charter, so when you use it, you can be completely confident your vetted and approved supplier will give you a fair and honest deal.
- We take on the scammers for you. If you’re stuck in a bad contract, we’ll help you renegotiate your terms and potentially save you thousands.
Need contract support? Book An Appointment today.