Defining a Towing Contract
A towing contract is a written agreement between a towing company and a customer for the use of the towing company’s equipment and/or facilities. A secured or possessory lien gives a towing company the right to possess, hold or sell, your property until payment is made for the services. Related towing services include vehicle storage and salvage. The towing contract is the towing companies only way to ensure that they have a proper possessory lien.
Since a towing company will be paid for its services by the customer and/or an insurance company , the towing company often has a financial incentive to exceed the authority granted by the customer in the towing contract. The best way for towing companies to ensure that their bills are not disputed by customers, insurance companies and/or third parties is to ensure that the towing contract is clear and unambiguous.
Essential Components of a Towing Contract
As with any other service contract, there are key components to a towing contract. The contract should be DETAILED and specific in all respects. It should clearly delineate the parties involved — most importantly the Towing Company and the owner of the vehicle. A GOOD towing contract should: (1) contain a description of the vehicle in enough detail for someone to locate it and identify it as the one your company has in its possession; (2) set forth the term of the service — is it monthly, annually or otherwise?; (3) describe all fees, including fees for extra services; (4) prohibit the removal of all vehicles EXCEPT during regular business hours and upon the presentation of a receipt indicating the vehicle has been paid for; (5) set forth the conditions under which the customer can terminate the contract and whether it can renegotiate down the fees for that until the owner of the vehicle pays the fees; (6) provide for a good faith acceptance of vehicles — meaning that only those vehicles need to be accepted by the Towing Company whose owners have not terminated their contact.
Different Types of Towing Contracts
Types of towing contracts can be commercial towing agreements, roadside towing contracts or private property towing contracts. There are other kinds of contracts that deal with towing, however I have only handled these three types and will use them here as examples.
A commercial towing contract is one which a commercial lot owner will enter into with a commercial towing company to provide the towing services for their lot. A lot owner will sign a commercial towing contract for several reasons. These include financial benefits, perceived liability benefits and a desire for someone with more experience to handle the potential towing situations before they arise.
A roadside towing contract could vary from place to place, however almost all roadside towing contracts operate similarly. A customer will enter into a contract with a towing company, allowing that towing company to come on to that customer’s property when the customer is not present. The customer will pay for this service under the understanding that this towing company will come to their vehicle whether the customer is two blocks away or twenty five miles away. Roadside towing companies usually enter into an agreement with a commercial lot owner or a gas station for example, to advertise their roadside services, thereby providing the customer with a discount or other benefits.
A private property towing contract is most commonly used by a business or shopping center. The business will see a problem with vehicles parking in their property that do not belong to their customers, and therefore they decide to enter into a private property towing contract with a private property towing company. The private property towing contract will record in writing what areas of the property the towing company can legally access and where the towing company is forbidden from accessing. Private property towing contracts are usually agreed to by both parties, and the private property owner is required to post signs on their property advising customers that private property is being towed.
Most towing contracts will have some similar aspects to them without regard to the type of towing company involved. One such aspect to focus on, is is the towing contract automatically renewing and who is that towing contract assigning their interests to?
How to Write a Towing Contract
Towing contracts should have the following clauses:
Obligations of the parties. What exactly does the customer have to do in order to ensure that the agreement remains in place?
License requirements. In many states, it is essential for towing companies to be registered as Licensed Investigators.
Fee Schedule. How much will the customer have to pay? It is essential to clearly set forth what fees will be charged for specific services.
Claim. How long does the customer have to file a claim with the towing company? We recommend that all customers file claims within three (3) months after their vehicles were brought in.
Attorney’s Fees and Costs. As with all business contracts, it is best to be protected when it comes down to disputes. This means including a provision in the contract that lists the recovery of any attorney’s fees and costs.
Limitation of liability. While the customer must be give the chance to "cure" certain breaches of the contract in most instances, it is not always required to do so. The contract should include a detailed limitation of liability that is fair to both parties.
Termination. Some contracts must include a termination clause and others do not. For example, sharp contracts typically do not contain a way out, while doctor contracts require some type of notice for a patient to terminate their contract with the practice.
Agreement to arbitration. In some instances, disputes must be arbitrated and cannot be heard by a judge or jury. This clause will help minimize disputes and costs for the towing company.
Inspection and compliance. In order to protect both parties, the contract should include an inspection and compliance clause that ensures all parties involved meet the standards set forth by the law.
Compliance with federal and state laws. Like all business contracts, the contract must comply with federal and state laws. It should include a clause that states it complies with all laws at the time it is executed.
It is highly recommended to use an attorney to make sure your towing contracts are compliant. There are many areas that can cause problems for your company and it is best to avoid these pitfalls.
What to Avoid When Drafting Tow Contracts
The best towing contracts are only as good as the people who create them, and if road wreckers and 311 contractors fail to insure their interests through firm agreements, it can cost them plenty. This is a highly competitive industry, and the value of reliable service on your part can’t be overstated. Subpar service will ruin your $300-per-incident profit immediately. Yet the best contracts can’t protect you legally unless they’re written properly. Handling this process effectively requires the intervention of an experienced Virginia Springs towing attorney on your side, but understanding these potential risks before meeting your lawyer will prevent you from falling into any of their traps. Understand the common mistakes that appear in most towing agreements.
Not Making Minimum Qualifications Explicit
This pitfall seems easy enough to sidestep, but its easy enough to get complacent. Be sure that every step of the client-engagement process is clearly defined, and that you do not take a job unless it first grants you the customer’s signature. Take no chances.
Unclear Jurisdiction
Whoever is being held responsible for further losses needs to be explicitly stated so there aren’t any lingering questions . Allowing room for interpretation opens up an avenue for arguments and lawsuits against you that can be easily avoided.
Poorly Formulated Compensation
The compensation structure must be clearly defined if you expect the job to run smoothly. Don’t hold back on listing the fees, whether they come from mileage, time spent on the job or fees for particular services in the vehicle-towing process. Defining a set price for your services avoids misunderstandings with contractors and other entities.
Generally Unserviceable Contracts
Get very specific when it comes to the particulars and peculiarities of the job, and detail exactly what you expect in the final product. Not bothering to be thorough enough is a big mistake that can cost you big time. If there are any new developments, don’t hesitate to amend the existing agreement or sign an entirely new contract.
Neglecting Professional Support Services
The best contracts don’t just include a phone number on the bottom. Retain professional support services to field calls and answer queries when you’re unavailable.
Towing and Towing Contracts: Legal Considerations
In addition to the industry best practices considerations, towing contracts must also comply with numerous federal and state laws regulating professional services through the licensing and oversight of state and national trade organizations. Service vendors that disregard the expansive body of regulations governing the industry, or simply choose not to read the fine print, may find themselves facing significant exposure for failing to comply with applicable legal requirements.
At the national level, the Federal Trade Commission (FTC) enforces compliance with the Driver’s Privacy Protection Act of 1994 (DPPA) which regulates the permissible use of state motor vehicle records information to prevent the illegal sale or use of this sensitive data. At the state level, there are comparable "privacy of personal information" laws to protect against identity theft and fraudulent access to personal information in the possession of state agencies.
Other regulatory issues may be national or state specific. For example, the federal bill collecting and fair credit laws regulate a towing service’s ability to charge late fees or send a payment default to a collection agency. The Magnuson-Moss Warranty Act and comparable state laws may apply to the extent that the manufacturer or dealer has vehicle warranties for the vehicle at issue. The Fair Labor Standards Act may also be applicable to certain service providers and industries.
In addition, owners of storage facilities should be aware of the Uniform Commercial Code rules for asserting liens against vehicles and other personal property, in conjunction with the requirements for disposing of stored property under the Texas Property Code if these goods are not retrieved in a timely manner. Unclaimed property issues may arise as well in cases where a customer has paid for a specific service but failed to pick up the vehicle after payment.
Reviewing Towing Contracts and Effective Negotiation
An agreement between the towing company and vehicle owner or driver may be written on a form, or a number of pages of text. These agreements sometimes even have an accompanying "price list" that will be attached to the agreement or petition to file an affidavit with a court if a dispute arises over a fee. Although the price list may not be referenced in the form contract, the contract may give the towing company or operator full discretion to charge the prices listed on the price list, so it is important to understand whether the price list is part of the overall contract. Generally, even where the price list is not attached to the contract, if the contract specifically says that it refers to the price list, the amount listed on the price list may be charged. If a company does not have a price list, it cannot unilaterally charge more than it has properly disclosed on the agreement (or the price list if one is incorporated by reference).
However, neither a price list nor a written contract can result in an illegal charge. A court may review whether towing charges violate the law. In other words, the court will review the agreement to determine whether any amounts charged or paid were in fact based on the services rendered or the amount necessary to accomplish the purpose of the contract, without being excessive. Charges in excess of those amounts may be considered unlawful under one or more of the laws governing this type of conduct. The simplest way to avoid disputes in the future is to request an explanation of all charges in a manner that is easily understood and check them against the price list, if any.
In view of the frequency with which these disputes arise, a few points are worth observing. Most "consumer" contracts should be read closely to determine whether the agreement has been altered in any way, such as by having the printed form crossed out or rewritten in the spaces provided . Any alterations, additions, deletions, modifications or other changes after an initial reading of the contract should be carefully documented in writing. When reviewing the contract, make sure every rate, charge, fee, service, benefit, or product that you may want to use or purchase is clearly spelled out in writing. If there are limits on charges, make certain that they are enforceable and that the contract states the maximum amount you will be required to pay for the services or products.
If an agreement is obtained on a form that was not drafted by the customer or vehicle operator (e.g., a tower’s standard form), the agreement may be a "contract of adhesion," which would limit the ability of the party who drafted the agreement to enforce provisions of the contract that are unfair or unreasonable. Like "fine print," a contract of adhesion may include certain provisions that place restrictions on your rights or benefits that are difficult to see or comprehend, or at least may not draw your attention to certain key provisions before you enter into the agreement. Under some circumstances, a court may not enforce provisions in these contracts.
One way to avoid problems arising from contracts of adhesion is to follow the procedures identified in the laws we’ve covered in this article. In addition to written or oral contracts, some jurisdictions require that these agreements be on a pre-printed state-approved or state-provided form (as is the case for storage unit operators). The written agreements must be reviewed by the customer or vehicle operator prior to execution. If an agreement is not being reviewed in person, it is helpful to have another party review the agreement within a reasonable time. However, if the contract is too long, no one is going to review all the details.
Hopefully, these comments will assist in reviewing or negotiating towing contracts.
