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Common Contract Mistakes

Brought to you by ProviderWatch

Important points to keep in mind

The Missing Piece.
Think about the last time you personally signed a contract at the gym, the bank, signing up for cable service, buying cellular phone service or contracting to have your septic system pumped.

Did the contract only ask for your signature or did you have to fill in your name, address, and phone number?

More than likely, you also had to provider your birth date, drivers license, and social security number. (Most companies stop short of asking for your first-born child) Those companies ask for that information, because they know how to use their contract to protect their businesses. You need to do the same!

Over 98% of providers fail to include a section for the parent's name, address, phone number, and identification directly on the contract.

This important step is commonly overlooked because the provider usually asks for this information on a separate "enrollment" form. Your contract should be a "stand alone" document. In other words, if you were faced with a legal dispute, the contract should contain all the necessary information and documentation
need to argue the case.

If you are one of the 98% who have forgotten to include this information on your contract, all you need to do is update it with a section for the parent to fill in this important information.

*Personal note: Be sure you verify any information provided to you. Look at driver's licenses and social security cards. If the parent is not willing to let you verify
the information they have given you, that should alert you that there may be a problem.*

Past Due? What Will You Do?
Now, lets go back again to the last contract you signed. In the fine print, there was a section that told you exactly what would happen if you didn't pay for the services you were purchasing. (You did read the fine print, didn't you?) No matter what company or service you were dealing with, I'm sure they told you step-by-step what they would do (short of kidnapping the family pet) if for some reason you didn't pay or were late in your payments.

Most daycare providers do not having a clear policy about what will happen if the parent becomes delinquent in their childcare fees.

If you are one of them, you need to state exactly what steps you will take. Even if you think your contract covers everything, go back and read it again. Is there anything you have left out?

Some questions to consider are:
.    How much time will you wait before taking action to collect on past due accounts?
.    One day, one week?
.    Will you charge any daily late fees?
.    How long will these daily late fees continue?
.    Will you charge interest on any unpaid amounts?

Be sure that you are very specific about the steps you will take. Many providers do have a policy listed on their contract that briefly talks about past due bills, but they limit themselves by stating that the parent will be liable for "court costs" incurred while trying to collect the debt.

This is a mistake!

You should always state that the parent will be liable for any and all collection costs. This way, if you decide to use a collection agency or do the collecting yourself, you are still able to recover any costs that you incur. For example; postage or printing costs, attorney fees for consultation, long distance phone calls, income lost due to closure of the daycare, etc.

Since ProviderWatch offers free reporting on all delinquent accounts, many providers even include a policy that informs the parent that their account information will be reported to ProviderWatch.

Remember, any time you have an unpaid daycare bill; you can immediately contact ProviderWatch with this delinquent account information. This is a free service and can be done via the website (www.providerwatch.com).

This is an example of the policy to inform parents of this action on past due accounts:

If your childcare account remains unpaid for any reason, be advised that your account will be reported to ProviderWatch immediately. ProviderWatch is a credit-reporting agency that specializes in childcare accounts. Your delinquent account being reported to ProviderWatch will likely make it more difficult for you to find childcare providers willing to accept your children until any such accounts have been paid. You may contact ProviderWatch if any childcare provider informs you that their decision not to accept your child into care is based in whole or in part on information received from this agency. ProviderWatch will disclose any delinquent account information on record so that you may resolve these accounts.

ProviderWatch * www.providerwatch.com * 1.866.267.3691

"Prior", "Previous", and "In Advance"??
The third most common mistake is using words like "prior authorization", "previous arrangement", and "in advance" in your policies.

For example: "The parent must pick up their child by 5:00 p.m. unless prior arrangements have been made."

Stop and think about that for a minute.

Imagine yourself standing in front of a judge trying to explain to him that  a phone call from the parent 20 minutes before 5:00  was not your idea of a "prior arrangement".

By themselves, these words don't mean anything...especially when you are standing in a courtroom trying to prove a case.

If you want to use terms like this, be sure to include specific information such as how much time will qualify to be considered "prior arrangement". Be sure you clearly state that you must approve of any changes in such procedures or policies. (The parent should not be allowed to make a judgment call on what will work for you.)

Also, when you are considering these policies, remember to require "notices" and "alternative arrangements" to be in writing as often as possible. This doesn't mean that you have to require a big fancy form every time; just a note from the parent will work. It is best to have both signatures on these types of documents, yours and the parent involved. Save these notices in the child's file!

Important Addition!
No matter what, be sure your contract includes information allowing you to update your contract!

Towards the bottom of your contract make sure you have a section that clearly says you have the right to update and/or change the terms of your contract as needed. You will of course need to stipulate that the parent will receive a written notice of any changes, 14-30 days in advance of the changes taking effect. This gives the parent plenty of time to review your proposed changes and decide if they want to be bound by them. We recommend giving a 30-day notice rather than 14 days.

People usually don't like change, so give them time to adjust!

If you don't include this policy, you may end up being stuck with your existing contract, even if you decide there are changes you want to make!

What Now?!
Now that you know what some common contract mistakes are, re-read yours!

Have you made some of these same mistakes?

Don't panic! Just use the information in this exclusive report and fix those areas. It shouldn't take long to make the necessary changes. Remember that you will need to let your childcare parents know that you are updating your contract!

If you see some of these common errors in your own contract, the chances are that there are probably more! On average, the contract review specialists at ProviderWatch find 10-12 mistakes, errors, or omissions on a childcare contract. It is terrible to get stuck in a situation just because of a simple mistake that could have been easily fixed!

Providers lose in small claims court every day, simply because they didn't know what to write or how to write their policies. Almost every situation could have been different if only the provider would have had an effective "winning" contract.

Whether applicants have:

  • bounced checks
  • left without notice
  • refused to pay their co-payment

No matter what the reason, when you use a free ProviderWatch account to effectively screen every applicant, you will know right away if the parent applying to your daycare has any reported unpaid accounts with other providers.


You may freely share this article on your website or with your provider organization as long as the following citation remains. "Article courtesy of ProviderWatch. ProviderWatch was founded in 2000 to give U.S. childcare providers a place to report and screen applicants for unpaid daycare bills. They provide simple, free tools for childcare providers to make more informed choices and reduce financial risk."