Purchase Agreement from Tesla

Mike Whelan
Chief Community Officer

Home solar panels are a huge business and Tesla is constantly in the news with their new solar panels and technology. In this episode of Contract Teardown, business attorney Jeffrey Pomeranz digs into Tesla’s solar panel Purchase Agreement. This is a large purchase for the homeowners and attorney Pomeranz  shows how a poorly drafted contract can get in the way of the sales cycle.

Questions in this Episode:

  1. Where does Tesla use simple terms and straightforward language?
  2. Do you have to let Tesla collect data on your system?
  3. How does Tesla pass on increased cost to the consumer?
  4. Will using a Tesla subcontractor void the warranty?
  5. When can Tesla change the client’s maintenance agreement?

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Tesla’s Purchase Agreement

Tesla Energy Products Purchase & Home Improvement Agreement is the document Tesla uses when selling their Solar Systems and Powerwalls to homeowners. Even though the products range in price from $10,000 to $50,000 and more, the agreement is only about six pages long and not written in lengthy legalese. This may sound client-friendly, yet Tesla still does a good job in getting advantageous terms. 

Contracts are best when they are simple. Whether it’s B2B or B2C, there are always opportunities when drafting contracts to make them shorter and simpler, although you might introduce some ambiguity for the sake of brevity. Keep your documents streamlined and concise. This will probably help you shorten your sales cycle without necessarily reducing your desired risk mitigation factor. Tesla does a good job incorporating these techniques.

This type of style and document is becoming more common on consumer contracts. Some of the elements in Tesla’s agreement highlight outstanding contract drafting techniques.

"If you are able to take any contract and make it into a digestible format, it’s going to increase your sales cycle." Jeffrey Pomeranz

Short and Simple

When you put a document in front of a client, it’s nice to give them something easy to look at and digestible. The contract should also quickly identify things the clients really care about, like “How much will this cost?”, “When will this be installed?”, and “What exactly am I getting for my purchase?”

Once you get past these initial hurdles, you can move on to the more legalistic terms and conditions. This approach applies to both large and small clients.

And instead of using formal language to define the parties, Tesla uses “You” for the client and “We”, “Us” and “Ours” for Tesla. This friendlier language is a nice shorthand and easier for the client.

This agreement also references the price sheet, along with separate warranty and privacy policy documents. The technique, of including other parts of the contract by reference, makes the agreement less complicated and allows Tesla to change those other documents without changing or amending the original purchase agreement.

"If you find yourself not wanting to overcomplicate a document, this is a good shorthand if you can incorporate those other documents by reference." Jeffrey Pomeranz

Depending on your audience, you can craft a document using these techniques without the client asking, “Why am I getting a 15-page contract?” In this agreement, very few sections exceed six or seven lines.

Straightforward Purchase Section

Tesla’s purchase clause is simple, to the point, and only three sentences. It says, “You agree to purchase…” and “We agree to sell…” and then references the detailed Price Sheet.

This is a nice way of describing both parties’ obligations. Not all purchase agreements do a good job of pointing this out.

If you ever get to enforceability, this makes it clear to the client, “You have an obligation to buy from us.”

Pricing – or If We Pay More, You Pay More

In the past 18 months, many businesses experienced difficulty in getting needed parts and supplies. Covid-19 brought on some of these supply difficulties. Shipping problems also included a ship getting stuck by the Suez Canal, causing backups.

If your business provides services or goods and depends on materials from a third party, you have a vulnerability. If you have hard terms with your vendor, you need to make sure you can pass any increased supply prices on to your client.

For example, if Tesla needs to buy parts from a supplier and the pricing jumps 300%, Tesla needs the ability to pass that increase on to the client. That is exactly what the Pricing section does.

If you sell products in an industry with a longer delivery runway, like six months or more,  you may be more susceptible to price increases. This is the case in the solar industry with permitting, inspections, and more.

If Tesla’s costs jump during that time period, they have the flexibility to pass that increase on to the client. However, if the client does not want to pay the increase, they can cancel the contract and forfeit the $100 deposit

"The big picture is to understand what your client is selling. If there is a potential for prices to increase, because of the runway, make sure the client has the ability to remain nimble." Jeffrey Pomeranz

Installation – Who is “Us”?

The Installation section is fairly standard, except for a conflict later in the contract.

The Installation section states that  “Tesla, their affiliate, or subcontractor” shall do the installation.This is very common in many industries so the selling company can maintain a level of competence in the installation process.

But Warranty Exclusions Section 13 states that Tesla can exclude “any material or equipment connected to your Products that was not installed by us .” The “us” here is defined earlier in the contract as “Tesla” and not as “Tesla, their affiliates and subcontractors.”

If a Tesla affiliate or subcontractor does the installation, are repairs covered under the warrant, or are they excluded?

This is probably poor contract drafting, but is something that the client should have clarified before buying.


1. Warranty Exclusions
The “Workmanship” warranty above does not cover any defect caused by… (5) any material or equipment connected to your Products that was not installed by us…”

Price Sheet as a Separate Document

Tesla includes the Price Sheet in the agreement. For example, when the client signs the agreement electronically, they sign one PDF form.

But you really can think of the agreement and the Price Sheet as two entities, with the Price Sheet included by form and reference. This is a smart move by Tesla.

If there are price increases, which will be reflected in the Price Sheet, the client is agreeing to those price increases. Tesla has not internalized any risk. They are saying, “If our prices are going up, you are paying more. If you don’t want to pay more, then we won’t install it for you.'”

In the Tesla contract, ‘Warranties are pretty narrow. Exclusions are pretty robust.’ - Jeffrey Pomeranz #ContractTeardown Click To Tweet

A Single and Separate Privacy Policy Is Ideal

Tesla’s Privacy Policy is an explicitly separate document referenced in the agreement. To the extent you can, having one separate privacy policy to cover all contracts is probably in your client’s best interest.

As companies grow, one of the challenges they have is contract management. Having several versions of privacy policies spread throughout different contracts and agreements is a nightmare.

Having a separate privacy policy keeps the purchase contract shorter and simpler. But more importantly, it keeps Tesla from having to update every purchase agreement every time there is a change to the Privacy Policy. One global privacy policy for all entities is ideal.

The only downside is that you need the infrastructure to house and store the privacy policy, along with all versions of the policy. If there is a future dispute, it is essential to provide the privacy policy version that was in force when the parties signed the contract.

Tesla Monitors Your Data

When you sign this contract, you agree to Tesla’s monitoring. But most people who buy this type of system understand there needs to be some communication with the company to make sure the system installation is working properly, and the software is reporting accurately. This ensures that the homeowner gets the benefits and credits they deserve from the solar system.

Ironically, if you purchase solar panels so you can live off the grid, you must agree to maintain an internet connection to allow Tesla to collect the needed data. A small hitch to living a disconnected life.

People would be naive to think that this technology has no oversight by Tesla.

A Separate Owner’s Manual

The Maintenance and Operation Section is pretty commonplace, and Tesla did well by keeping this one brief. The agreement refers to a separate Owner’s Manual, which can be changed or updated separately from this agreement. This also helps keep Tesla nimble.

Like the Privacy Policy, Tesla is not locked into one unchanging Owner’s Manual. Tesla can update the User’s Manual as needed and simply send you notifications.

Narrow Warranties and Robust Exclusions

Tesla’s Warranty section is pretty narrow, but its Exclusion Section is fairly strong in Tesla’s favor. Tesla is basically just shifting much of the risk back to the consumer.

Tesla is saying they are only responsible for things they touched or their design, but they are not responsible if anything else goes wrong. This includes items like force majeure and failure by the client to maintain the system properly.

With a separate Owner’s manual, Tesla can shift more risk to the client in the future. If Tesla notices recurring issues in their system, they can update the Owner’s Manual and implement increased maintenance requirements on the owners. If that issue goes wrong, the owner may have failed to properly maintain the system, according to the new Owner’s Manual requirements, and Tesla might deny the warranty.

Arbitration

Interestingly, the Arbitration section is at the back of the agreement in Section 18, with no bold or capital letters that are often seen in standard arbitration clauses.

The Governing Law Section 17 immediately preceding, says, “This agreement is governed by the laws of the State where your Products are installed.” This makes sense because of possible state regulations regarding installing solar systems, real estate laws, permitting, and more.

But arbitration is a way for corporations to stay out of the court system. Typically, there is an economic barrier to entry for the clients. Arbitration has the expense of paying for the arbitrator, in addition to your lawyer. But here, Tesla pays all the client’s arbitration fees, and the arbitration is in the city or county of the client’s residence.

And over time, the arbitrator may hear many of the same types of cases from the same company. While there may be no bias, the company views how these cases are likely to be arbitrated. Since arbitrations are private, unlike court cases, the client does not have access to this information.

Arbitration is a nice way to limit your exposure if you are a large company, especially when dealing with consumers.

Simple Paves the Way to Sales

Everything matters when you try to make the contract easy for the consumer, including language, format, font size, spacing, font type, and more.

It’s easy to draft a formal contract that you would expect to see from a large law firm for an M&A agreement. But you have to know your audience. Tesla is selling to a consumer who may spend hundreds of thousands of dollars. Since a nimble contract shortens the sale cycle, that is what Tesla created.

Keep the contract simple, malleable, and nimble. One way to do that is to incorporate by reference other agreements that can be changed post-contract signing, like Owner’s manuals, Privacy Policies, and even Price Sheets.

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Show Notes

THE CONTRACT: Tesla’s Purchase Agreement

THE GUEST: Jeffrey Pomeranz is CEO at Empire Street Realty, and a member of Pomeranz Law. As a senior legal executive, he offers significant legal and compliance experience advising private and publicly-held corporations. He can be found on LinkedIn or at www.PomeranzLaw.com.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

Transcript

Jeffrey Pomeranz [00:00:00] How much is it going to cost and what do you do? 

Intro Voice [00:00:02] Welcome to the contract teardown show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world. 

Mike Whelan [00:00:16] In this episode, business attorney Jeffrey Pomeranz digs into the Tesla Solar Panel purchase agreement. This is a consumer contract, but for a very large purchase. And Jeffrey focuses on how the contract process can get in the way of a sales cycle. So let’s tear it down. 

Mike Whelan [00:00:38] Hey, everybody, welcome back to the contract teardown show from Law Insider. I’m Mike Whelen. The purpose of this show is exactly what it sounds like. We take contracts, we beat them up. We’re sort of mean occasionally nice, but not often. I hang out with smart people like my buddy Jeffrey Pomeranz, who is here. How are you, Jeffrey? 

Jeffrey Pomeranz [00:00:58] Doing well. Thank you for having me. 

Mike Whelan [00:01:00] Cool. I’m excited because we get to talk about a sexy technology that happens to be in the news today because Elon Musk’s dad is a creep. We are talking about Tesla energy products purchase and home improvement agreement. Let me show this to you guys before we dig into this thing. I’m thinking this is like the battery side of the business, right? Jeffrey, what is this document? Where are we going to see this kind of document? 

Jeffrey Pomeranz [00:01:25] It’s to install solar panels on homes. 

Mike Whelan [00:01:30] Got it. So and so what’s it representative of like? Why are we talking about it on this show? What can this teach us as we route into this particular document? Thinking about, you know what? People are going to be able to pull from it? 

Jeffrey Pomeranz [00:01:41] So depending on industry, I’m a big fan of keeping it simple. So whether it’s B to B, B to C, I think contracts, there’s always opportunity to have them be shorter. Fewer words is less ideal to add more words to a sentence or paragraph, or it’s not going to necessarily improve it. So if you get ambiguity with it so you can keep your documents streamlined and concise, you’re probably going to shorten your cell cycle and not necessarily reduce the risk mitigation that you’re aiming for. Right? 

Mike Whelan [00:02:17] Yeah. And this is I mean, this kind of product is targeted to consumers. So there’s an interesting, you know, probably a savvy consumer, but there’s an interesting like, how much do you talk with these people? But let’s talk about you. What’s your background? What’s bringing you to documents like this? Tell us about yourself. 

Jeffrey Pomeranz [00:02:35] Sure. So I worked initially at a law school and for about a decade in house. I worked for two rather large, privately held companies, one multinational, publicly traded company. And after about a decade, I open up my own firm. Almost four years ago, and I’m seeing this type of document a lot more on the consumer side. But I think some of the elements that we’ll go through today highlight some really good drafting techniques for your audience and the things that I’ll call out that you can really benefit from any type of relationship. 

Mike Whelan [00:03:08] Cool. Yeah, no, that’s perfect. So what we’re going to do, Jeffrey, is I’ll lead people into this document and we’ll just go through some of the points that you had to add. And obviously, wherever you want to add some, some insights. So let’s start at the beginning. This is the products purchase and home improvement agreement. And you’ve got some predicate stuff, some purchase, order looking, you know, language all incorporated into the agreement. There’s a price sheet and stuff. So talk to me about the initial, you know, identifying the party is the section with the customer signing it. Tell me about this sort of predicate. One page your purchase order type part of the document. 

Jeffrey Pomeranz [00:03:44] OK. So I think overall, maybe just taking a step back from the preamble and just overall structure, having a document that you can put in front of whomever they begin was let’s just use a client as this is. It’s nice if you can give them a summary that they can look at. It’s digestible and it identifies really what they care about. How much is it going to cost and what are you doing right? And if you can get past that initial hurdle, then worry about the terms and conditions. And I do this in my own engagement agreement with prospective clients. I I’ve structured this for large institutions and smaller businesses that do a million to 10 million in revenue. It it’s it’s applicable across the board. So in this one, you do have this general price sheet, Ivy, scroll down. It shows the systems that are being installed, but just the very top use of the word or when you’re defining an entity. And in this case, it’s you, you ever signing it and the Tesla entity we, us or our it’s a really nice shorthand where it makes it more digestible again, depending on who your audience is. So if you’re working with consumers. To find them is you and you as us or we or our or that approach rather than company and client where someone’s going through it and it comes off as very legalese, ultimately of the same result. It’s just more digestible. Again, whether or not people agree, this is a completely separate conversation, but I’m just being realistic with that. But if they are, it’s something that an ordinary person can get through. And if you’re in consumer type space, it’s probably better to drop things in this manner. The second sentence talks about the price sheet, which is below and then any attached terms conditions, which again, it’s a nice shorthand and throughout this document actually do a good job of referencing privacy policy, a specific warranty for a particular type of product. So if you find yourself not wanting to over complicated document, it’s a good shorthand. If you can incorporate those other documents by reference sales or has a really robust library on their platform where they’ll give you a short one or two page document. And then they have all different types of contracts available online, which they archive and then update from time to time. So depending on your sophistication level and the structure of your business, the one you’re representing. These are all nice techniques to present something that anyone can look at and not feel like Why am I getting a 15 page contract? 

Mike Whelan [00:06:33] Right, right. And speaking of the structure, you know, to your point, there’s sort of the one pager, you know, purchase information, and then they jumped down to what they’re calling the terms and conditions. So here’s here’s the rest of the more legal sounding, you know, the stuff that you hope people will go through and keep reading, but they probably don’t. So let’s let’s jump into that. Talk to me about section one there. Just the purchase information. 

Jeffrey Pomeranz [00:07:01] Sure. So in this case, it’s a really nice wedding and you’re in a complementary argument, was it to quote unquote tear down? But in this, if you are selling something to find that we are selling you x and you are buying why affirmative obligation going both ways, not all purchase Typekit agreements do a very good job of spelling that out. And if you’re ever getting to the point of enforceability, you want to get clear you have an obligation to buy for us, and that’s what section one is. But you look at it very few of the sections, and as we scroll through, you’ll see exceed six seven long warranty sections a little bit robust. I don’t jump ahead, but sure, overall you’re able they’re able to address these on into complex concepts, what they address each of these points in a very simplistic way. 

Mike Whelan [00:07:59] So, yeah, and they they do that with that sort of directness moving on to price. There’s quite a bit in here about how they’re trying to push off different kinds of liability. Talk to us about Section two and Section three talking about eligibility for rebates and rebates and incentives. And then again, changes to the price sheet. What’s Tesla doing with these sections? 

Jeffrey Pomeranz [00:08:23] So I think we’ve seen in the last year and a half in response to COVID and then what happened with the the canal getting blocked for whatever period of time that was? A lot of industries have been impacted not be able to receive shipment or factories not open heavy in the construction industry. So if you are in a if you’re providing a service or supplying goods and you’re relying on a third party, whatever you say, we’re in the middle of whatever you’re selling, you’re selling widgets or in this case, the systems. If you have hard terms with your vendor, you need to make sure that whatever you have with your vendor, you can pass on to your client and vice versa. So you’re not the one in the middle of holding the bag. So to give you some specific. If Tesla, for instance, needs to buy part from a supplier and the pricing jumps three times, Tesla needs the ability to pass it on to the client. And that’s what Section three does. So if you’re looking at selling something and there’s a long runway, which in this industry there is just remaining involved, they need to send someone else actually a set of look at the overall system that’s going to be installed. So it’s not just a quick on all. There might be a six month runway from start to finish. And I don’t know what Tesla does, but just being in the industry as a whole, if the pricing jumps during that period of time, there needs to be some flexibility to pass that cost on the client. And that’s what they’ve done in Section three. And if you as a client don’t want to pay that increased price and you can cancel out the $100 order that you paid. Right. So big picture is understand what your client’s selling and if there’s a potential for pricing to increase because of the runway, make sure that the client has the ability to remain nimble in its price for this client. 

Mike Whelan [00:10:21] Hey everybody, I’m Mike Whelen. I hope you’re enjoying this episode of the contract teardown show. Real quick, I want to ask you to do me slash you really a quick favor. Look down below. You’ll see a discount code to join the Law Insider Premium subscription. When you do that, you get access to more content like this. You’ll see webinars daily tips on contract drafting, not to mention access to the world’s largest database of sample contracts and clauses. It will help you write better contracts faster if you want to do it. Right now, there’s a code below, so get there. Also, if you’re part of a larger team, if you’re in-house or in a law firm, just email us where it’s sales@LawInsider.com will make sure you get a deal as well. Come join us in the community. The code is below. Let’s get back to the show. 

Mike Whelan [00:11:07] Yeah, and they I mean, speaking outside, you know, parties that you do and do not have control over in section four, they even give some power to an outside party that they do in fact, have control over. What about installation and service? It specifically says installation will be performed by us, our affiliate or subcontractor. What do you think about this authorization for the subcontractor to come in? 

Jeffrey Pomeranz [00:11:31] Pretty standard. If you are providing the service you want to have, the ability to engage subs doesn’t surprise me that they have local installers to go away to ship risk and make sure you are subject matter experts. What I do find interesting, though, and I apologize but to jump ahead? Sure. In Section 13 sub five, they talk about the carve outs or the exclusions to the warranties that they’re providing. And it says any material or equipment connected to your product that was not installed by us. So at the very beginning, I mentioned who is us, as is the Tesla entity, but it now they have their subcontractor installing it. Now I question whether or not that warranty is excluded or whether or not there’s actually a warranty. That’s a fact. My guess is this was not the intent. They probably should have said by us or one of our subs or affiliates so could be poor. Drafting could be intentional, but something that I would want to make sure because that would not be well received if I was representing someone who had warning systems installed. And then we try to exercise our rights under the warranty. And Tesla denied it, which is probably when I would get brought in. And if that was the case, and I go here and Tesla said, Look, we didn’t install it, even though it was one of their subs, that could be an interesting situation. 

Mike Whelan [00:12:54] Yeah, yeah. And you know, speaking of sort of. The ability to change things, I’m looking at five and it talks about the price sheet and makes reference to changing prices and the price. It’s interesting this relationship between this part of the document and that price sheet. Talk to me about that. Like if if they’re not incorporated, why include it all in one document? Why not have two different documents? What’s the relationship between these two pieces, according to sections like Section five? 

Jeffrey Pomeranz [00:13:23] I mean, there’s technically it’s one document shows up in PDF format, as I’m sure through Esten excuse me platform, but you really could think of them as discrete entities. You have a price sheet and simply incorporates the other document reference, but they’re smart here because they say you agree to pay whatever is in the price sheet and in section four, which we’re just looking at or three, rather where there changes to the price sheet, you’re paying those if you’re going to continue moving forward with installing a system, even if our pricing increases. So just looking at how they’ve structured it. Tesla hasn’t internalized any risk. They’re saying a fair price to go up, you’re paying more. You don’t want to pay more than we will install it for you, right? 

Mike Whelan [00:14:07] Yeah, it’s interesting. I mean, if you jump down to eight, they do. What’s what I’ve seen is pretty common in these situations, which is to have an outside document of a privacy policy. What do you think about doing that? I mean, some parts are all together, but they’re sort of separate. And here’s and explicitly separate document. Do you like that kind of approach, or do you think privacy terms should also be in this same document? 

Jeffrey Pomeranz [00:14:31] I think to the extent you’re able to have. One privacy policy govern all contracts, it’s probably in your best interest, so whatever. My guess is this privacy policy is the same one that they use for their vehicles and go back, look at that. But. As companies grow and they one of the challenges they’ll have is contract management, contract compliance and putting in those controls, so you’re not having disparate terms based on whoever’s touching a particular document. So this is actually aside from keeping the document shorter, you’re also creating a really nice control because if you have to update your privacy policy, you don’t have to remember to go in and update this equipment purchase agreement. Your whatever terms conditions govern the software and that’s in the car and whatever the products that they’re selling. It’s just one privacy policy for the entity or the entities globally. And the more that companies can do that better off they are, the the challenge, though, is you need a location for that, those terms and conditions to be housed. And if you update them, you need to archive them. Because if there were to be some type of dispute. Well, which were the governing private, which was a governing piracy privacy policy at the time that this dispute arose. Right. That’s that’s really the only drawback is you need that infrastructure, but you have it without question best practices. 

Mike Whelan [00:16:02] Well, and speaking of privacy, I’m noticing in 10 something that’s interesting that that essentially you’re going to agree to allow monitoring. You know, I’ve got tools that, you know, my Apple phone and Google will say, can we if we want you to affirmatively agree that we can monitor your use of the tool? Not, not so here. Do you do you like Section 10 in the way they’re handling that monitoring? 

Jeffrey Pomeranz [00:16:26] I mean, you, you effectively are right. You if you’re signing it, you are agreeing to it. But this is, I think, most people that are obtaining this type of system understand that there needs to be communication between the improvement that was done to the whole, i.e., the installation of the Solar System and the company, who is making sure the software is working and that the energy that’s being received by the panels is fully optimized. And you’re recognizing the benefit, which is why your utility bill will be heavily or reduced or eliminated. Right. So they need it for it. I mean, I think people would be naive to think that with all the technology out there that there, that there isn’t some type of oversight from third parties. 

Mike Whelan [00:17:14] Well, and it gives this affirmative duty that you have to maintain your internet connection, right? Like this is a if you’re trying to live off grid, that might be one of the reasons that you have this tool. This, you know, these solar panels is because you want to live off grid and yet you, you, you have to maintain an internet connection and then an eleven. It continues to talk about that to a degree in in what I think is a standard bit of language that you got to use the thing right? Right. We’re not going to own risk if you don’t operate according to the owner’s manual. What do you think about that section number 11? 

Jeffrey Pomeranz [00:17:45] Pretty commonplace. I mean, I would expect this, but again, when I’m looking, the reason I picked this document is I like the brevity of it, and I’m I’m looking at a maintenance and operations section again. Giving reference to an owner’s manual, which may change from time to time keeps it nimble. So Tesla, in this case, is not locked into their one manual that the issue on this particular day. It’s nice when your contacts can do that, you just need to be careful that it doesn’t come illusory. Where and I’ve seen this. Sure. Anyone listening to this conversation has or someone will try to slip in, or we can modify the terms in our sole discretion and don’t provide you notice. And at that point, you might be dealing with an industry agreement because if one party can just change it and you don’t really have a contract. By contrast, here they’re simply saying we may update our owner’s manual and we’ll give you notice of it. You’ve already bought the system, so it’s kind of a moot point, right?

Mike Whelan [00:18:43] Yeah. And they’re they’re trying to keep going with handling that risk allocation in 13 and 14, the sections that we often talk about what’s excluded from the warranty and what’s the limitation of liability. What do you think about 13 and 14? 

Jeffrey Pomeranz [00:18:57] So robust. So it’s actually interesting if you look at, well, limited warranties, it’s very narrow and I referenced it before with respect to the inverter. There’s specific there’s a reference document that I guess you could find online with an arbitration provision, which they call out. And actually, this agreement has arbitration as well. But. Warranty is pretty narrow, exclusions are pretty robust. Again, just shifting risk back to the consumer. We’re only in a response for those things that we touched and come in the design of what we’ve done. But if there is any type of force majeure or events beyond their control, your failure to maintain and operate products, and again, this is a good tie back to the operations manual because at some point they’re going to establish it’s not really case law, but internally it will be of, you know what? We don’t really do a great job of disclaiming that responsibility in the operations. No, no. We we’ve had some issues with it. It gives them the ability to update it. And then your failure as a homeowner not to maintain your system in accordance with that updated manual would provide Tesla the opportunity to deny warranty coverage. 

Mike Whelan [00:20:14] Mm-Hmm. Yeah. Speaking of, I was thinking about arbitration. If you go down to 18, you know, we’ve talked about arbitration before on the show, and it’s interesting to me that this is sort of tucked into the end, which is often true. But whether, you know, arbitration clauses can often be really troublesome and I’m like, I’m looking at this, I see no capital letters, I see no bold, you know, it just seems like a standard, absurdly long paragraph like the other paragraphs. But what do you think of this agreement to arbitrate? Do you like where it’s located? You like how it’s written? What do you think about it all? 

Jeffrey Pomeranz [00:20:48] Governing law up being seventeen is the state where the products are located, which actually find interesting. I mean, they may just do it from a compliance standpoint that some states may require that if there is some kind of movement on all you have to litigate in that particular state or that governing law would apply. Arbitration doesn’t surprise me. You have dealt with other large institutions before, and it gives Tesla the ability not to be in the court system because they’re in arbitration and if if each party is paying their own way and like I’ve seen other companies do that, I don’t recall this one that who responsible, but civilly, each side will pay the arbitration. There’s a nice barrier to entry. Court is a filing fee. Arbitration can get expensive because you’re paying effectively a third attorney to oversee whatever the dispute is, so it’s a good way to stay out of the system. They will have probably a nice relationship with the arbitration group that’s handling it. Sure. And I’m not saying there’s a bias there, but if they’re seeing the same case over and over and over, they’re going to have a pretty good handle as far as how these things are going to play out. So it makes sense again, if you’re looking at a large institution and ways to mitigate your exposure, this is a nice way to do it, especially if you’re dealing with consumers, right? Yeah, the consumer will arbitrate, right? 

Mike Whelan [00:22:18] Speaking of, I mean, stepping back to the big picture, you know, you’ve made reference to what you want a consumer document to look like. This is an interesting thing because I don’t know. I sort of this feels very different to me than I downloaded a game app on my phone and I got to click through a bunch of approvals in order to go play it again. You know, if you’re buying solar panels from Tesla, you are spending some money. 

Jeffrey Pomeranz [00:22:41] And yeah, yeah, yeah, yeah. 

Mike Whelan [00:22:44] They talk about finance. Like, do you think for the size of I would expect somebody to read this more thoroughly than they would a game app? Maybe not. Do you like the way this is presented? It’s a consumer contract, but it’s fairly long, but you know what I mean? What do you think this is right size for the right problem? 

Jeffrey Pomeranz [00:23:05] I think if you’re able to take any contract and make it into a digestible format, it’s going to improve your cell cycle. And just again, if this was the same document and you can talk about types, font type, font size, spacing in the document, all those little things, they matter. And it’s very easy to do a very formal contract that you would expect to receive a big law firm on some type of M&A activity. And that’s fine, right? Because you deal with sophisticated parties on each side. If that’s not your target audience, though, it’s like anything else, right? Like who’s your audience? We’re having this conversation. We’re talking about contracts, so we’re going through a contract and trying to offer some value. Who’s your client and if the reader of that is someone that is spending this is like a couple of hundred thousand dollars, make it easy for them. It’ll shorten your cell cycle. And if you’re, they’ve done a good job of making it nimble, malleable to the particular situation. If we didn’t touch it, but there’s one section talking about it. There’s some other products. In other terms, conditions would apply. So they have like a catchall in there, so it can be for anything that they sell. It’s just a nice way to structure documents. So they picture keep it simple. And if you’re able, take out document or sections that might apply across the board. So keep that document lighter for the reader. 

Mike Whelan [00:24:34] Yeah, my dad, who was a sales manager of my whole life growing up, he used to always say, the more you have to educate the customer, the longer it’s going to take. The customer does decide to buy the thing, and you really don’t want your salespeople giving legal counsel on how to read one of these things. So yeah, I like where your head’s out there in terms of keeping it brief enough to fill the function and make sure that the sale happens because that’s all Tesla cares about anyway. Is making the sale happen so very cool. I appreciate you hanging out with us. I appreciate your insights, Jeffrey. If people want to learn more about what you do and connect with you, what’s the best way to reach out? 

Jeffrey Pomeranz [00:25:09] Sure, I’m been very active on LinkedIn, so please do follow if you’ve enjoyed this and if you’d like to reach out directly, my website is www.Pomeranzlaw.com. 

Mike Whelan [00:25:20] And we’ll have all that information and this document in the blog post over at LawInsider.com/resources. And if you want to be a guest on the show, maybe you can be a little more mean about the contract than Jeffrey was and beat it up. Just email us at where it community@LawInsider.com. We will see you guys next time. Thank you again, Jeffrey. You all have a good day. 

Jeffrey Pomeranz [00:25:42] Our pleasure. Thank you. 

 

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