The question regularly arises: “My client doesn’t like [provision] in the contract/representation agreement. They want it removed. Can I do that?” The simple answer is that you can usually modify or remove provisions in a contract. Contracts are very malleable objects; they are putty that you can adjust and modify as needed. There are, however, some hard walls. Your listing agreements will always need to follow the rules in ORS 696.805 and OAR 863-015-0130. Your representation agreements will need to follow the rules in ORS 696.810 and OAR 863-015-0133. Your contracts will need to follow all state and federal law requirements. For example, all sale agreements must contain a mandatory statement under ORS 93.040(2) [the big bolded “THE PROPERTY IN THIS INSTRUMENT MAY BE IN A FIRE PROTECTION DISTRICT” language]. These mandatory provisions are oftentimes why pre-drafted form libraries are a form of risk management; custom-drafted contracts will still need to contain all the mandatory provisions.
Outside the mandatory provisions, though, a contract can be changed in many ways. When a client asks you to remove an indemnity provision in your representation agreement, nothing at law stops you from taking that provision out. However, you need to balance the risk of losing a protective provision with the benefit of gaining a client. Brokerages are advised to look through their various contracts and critically consider the usage of each provision and to discuss whether it is a provision that the brokerage would be willing to let a client remove.
Clients regularly dispute several of the provisions:
- Dispute resolution provisions. Lawyers regularly contest the arbitration and mediation provisions on a contract in the belief that it’s infinitely better to take issues to court. Oftentimes, mediation and arbitration are seen as a faster and less costly version of litigation [for arguments in favor of mediation, mediation or arbitration groups regularly publish opinions, e.g., https://www.jamsadr.com/insight/2015/why-are-attorneys-afraid-of-conflict-in-mediation]
- Holdover provisions, entitling an agent to compensation when the agent’s actions result in the sale of the property some time after termination of the agency agreement [e.g., client fires agent on the day of closing and then signs all the paperwork, arguing “the agent didn’t walk me over the finish line”].
- Indemnity provisions. Indemnities are risk-shifting provisions that hold one party responsible for the cost of representation and defense in various situations. Oftentimes, indemnities defend the agent when the client’s misrepresentations cause lawsuits. E.g. client lies to agent about the lack of permitting and when the Buyer later learns about it, they sue the agent for not advertising the lack of permits. Indemnity would mean “seller pays for agent’s defense.”
Whether your brokerage accedes to a client’s request to remove these provisions should be a decision of the business itself.