Clearly it is desirable to have consistency of law and jurisdiction to support likely interpretation and adjudication. However, this is not always possible and so it becomes a matter of assessing and mitigating the potential risks that might arise.
In this instance, they are probably quite low because you are dealing with jurisdictions that have broadly similar forms of jurisprudence and both operate on Common Law principles. If the legal systems were fundamentally different, or if the rule of law itself were less effective, the answer might be very different.
• APL Norway AS
I suggest that you keep the same laws. Check your Dispute Resolution Clause, there may be some tricky language. If your Client goes into dispute with your supplier, you as the Contractor, will be the piggy in the middle if you have two different laws. You, the Contractor, will become liable for any discrepencies between the two laws towards your Client. The Supplier only has an agreement with you and not the Client.
Note from experience, if a case goes to arbitration, the first question should not be, which law shall apply?
I haven't observed such a trend, though I'll see what data we can get. A factor in this could be that the courts - certainly in UK and Australia - now expect that the parties will have attempted some form of dispute resolution prior to coming to court. So perhaps this is a 'behind the scenes' issue.
• Rio Tinto
Thanks Tim, good point.
I don't know about trust being an issue, but at least in the U.S., arbitration is usually just as expensive, if not more expensive, than litigation. This is especially true if the arbitration involves a panel of arbitrators. Most of my clients did not want a mandatory arbitration clause in the agreement for that reason (aside from the fact that there is no appeal in arbitration). After practicing law for over 16 years, I only handled maybe 20 or 30 arbitrations but countless lawsuits. Lawsuits are cheaper and appealable.
• Rio Tinto
Thanks for that last reply. That is the feeling we have here too and I was wondering if it is shared more widely. Do you find your counterparties agree generally and prefer litigation to arbitration?
Yes, my counterparts definitely agree. Arbitration sounds great in theory, but the only real advantage that any of my clients appreciated is the fact that arbitration documents do not become public record. For very small companies (sole proprietorships) involved in fairly minor disputes, arbitration with a single arbitrator is feasible, but about half of my clients in those situations preferred mediation instead, and then non-binding arbitration. I would say for medium to large companies, litigation is preferable.
The IACCM Top Terms and 10 Pitfalls research offer a whole new perspective on these repeating conversations. Are they using particular standard documents or are you seeing a whole range of idifferent versions?
Regretfully they are mostly very different. Even the customer's who use the same form, typically alter the document slightly from project to project. We have experimented using both Word and Adobe Acrobat to "compare" documents but had very limited success with that.
• CMS Group, Inc.
My company has a program (CAT - Contract Analysis Tool) that reads all Microsoft Word and Excel contract documents and extracts the words or phrases you specify to find, and any date references. It can process upwards of 100 documents in 30 minutes and results are easy to filter and view. The contract documents with those keywords are highlighted and indexed for hyperlinks from the excel results file. It's an application using Excel.
If anyone has an interest in having a contract analysis performed, or interested in subscribing or licensing this application please contact me.
• Sysintellects LLC
I trust you are doing fine.We would be happy,if you could share your contact details so that i can inbox you the same.
Thanks Kent for your caring - its very interesting to view how the Contract could be managed in other companies and compare with current process and so on we able to adapt and refine the process. Thanks for your offer i believe it would be a great help.
• Qatar Petroleum
We have similar situation when vendors/suppliers/bidders propose deviations/exceptions to our standard terms and conditions. Legal department propose the alternate text followed by exhausting and long winded discussions between both parties reaching no where. I would like to know the items that end in stale mate and those which get resolved by mutually agreed alternate text. Are you using standard terms and conditions or they propose their own terms and conditions for your review and acceptance? Do you have same set of builders participating in the bidding process? If yes, you can have a mutually agreed terms and conditions which can be used in all future contracts. This will prevent delays.
Sharon, what is the context of your question? Most companies I've seen have a fairly robust process for screening suppliers. Depending on the nature of the business and the agreements you have with your customers, your company's risks for the supply chain may vary.
My company uses MK Denial website to check if a supplier or its BODs are deemed denied or restricted parties. This is a regular process whenever we register new suppliers or re-validate existing ones.
I attended a tech conference this week and this issue came up in the context of shadow IT and differing strategies around stopping unauthorised tech services.
The responses differed but the most interesting response was from a health company which employs lots of young people and had a constant problem with shadow IT. They have solved the problem by putting all data sensitive apps into a locked down environment and opened up for other services that employees wanted to do their jobs.While they did not mention the licensing issues maybe the answer is that with the SaaS offerings they can be easily cancelled. Maybe a policy for an organisation could say ok for the company to pay for a SaaS in the allowed open zone but individuals take on the related legal obligations.
Some corporations monitor which suppliers are most often used and negotiate master terms that acknowledge the click-through terms are overridden by the negotiated terms of the master agreement.
It isn't a perfect solution, but it can generate a high proportion of coverage.
The answer on this, unfortunately, will be that it depends. That is, it depends on what the IP clause in the contract specifically states. Do you have a specific contract or clause that applies to this situation?
The clause reads as standard;
"all Intellectual Property conceived or made by X in the course of providing the Services shall belong to Y."
The problem is that the project is being funded by a third party, and part of our agreement with that third party is that they will own all IP arising from the project. We are contracting with another party to deliver one element and our funder is asking that we name them as the owner of IP in the abovementioned clause in the contractual agreement between us and the other party.
Usually the only parties that have any rights to the IP are those parties to the contract. Should another party want access to the IP then the best way to protect the first two parties is that the third also becomes a party to the contract or another way is that the third party enters into a confidentiality agreement with the first two parties explicitly for the purposes of accessing the IP.
In your case you might need the separate agreement as the people you have contracted to may not want to share or assign any rights to their IP with the project financier.
I assume you refer to the indemnification clause in the context of third party claims, correct? Whether a breach is considered material or not remains a question for the courts (at their discretion). However, typically in the context of SW agreements, material breaches would include breaches of IP and breaches of confidentiality/privacy. As software vendors, we consider a breach of payment to be a material breach but, again that is subjective and subject to interpretation. I would not agree to this change if I were you because this creates risk uncertainties to your disadvantage as a software vendor.
A friend of mine works in the same organisation as you (as a Contracts manager with a legal background) and is an IACCM member so, if you want, I can ask him to contact you and perhaps you guys can discuss this matter internally. Let me know.
All the best.
• Hewlett-Packard Company
Please contact the Office of the General Counsel for assistance in these matters. We are here to help. If you are in the US, feel free to contact me directly.
David, as you are probably aware, MFN clauses are inevitably problematic unless there are independent sources of price comparison. In many cases, even if there are research companies offering data, the most highly negotiated deals are protected by confidentiality undertakings. And even when some data can be accessed, it is usually possible for a supplier to claim that price differences reflect other differences - for example, in risk allocation, availability, volume or term of agreement etc. In my experience, MFN clauses are of limited meaning or value.
However, this does depend to some extent on how much you trust the integrity of your supplier and also you should be clear about your own goals. For example, do you really need to have better prices than all other customers, or is your real sensitivity that you want better prices than your competitors? Must you really be best, or perhaps it is sufficient to be in the top 5 or 10%.
You might make such a provision subject to periodic confirmation by the supplier, making it clear that misrepresentation would represent a fundamental breach of the agreement. You can require independent audits, though few large suppliers will agree to this and the cost may be prohibitive. You could commission periodic research which, depending on the market and the nature of the service, may yield practical results.
I would suggest that your real concern here is that you want to ensure pricing remains fair and reflects market trends. Often the only way to test this is by regular market testing via competitive bidding. Such an approach has little attraction for you or the supplier - it is expensive and potentially disruptive. So you might consider a clause modelled around the principle that the supplier has responsibility to demonstrate not only that your prices are the best they offer, but also that they are among the best available in the market. But again, be cautious that in your focus on price you do not lose sight of broader issues of value. There will always be someone cheaper, but what is the cost associated with 'being cheap'?
Thanks for your comments Tim. In this case, we are actually the supplier who has (unfortunately) agreed in the past to include a MFN clause in certain ongoing agreements. This was done so at the absolute insistence of a handful of our customers. While we readily see the downside of agreeing to such a restriction, it's amazing what gets negotiated at the 11th hour when finalizing a deal with a major client! In any case, we are now faced with creating some validation analysis that would support our adherence to the "spirit" of the clause. What makes it difficult is that the services that we provide (market research) have some common aspects across clients, but no 2 packages are exactly alike. While this may ultimately be our saving grace, we do feel the need to prepare some form of validation in case one of these customers request an audit of some kind. At this point we are doing our best to note both the common aspects across specific client deals, as well as outlining the variables that might affect the ultimate prices we charge. While we feel that we are in full compliance with the clause, providing evidence of this for our customers is proving to be a bit of a challenge.
• Sodexo SA
David, A useful comparison may be drawn between your situation and the delivery of FM in the PFI market, where benchmarking is a standard requirement.
It is normal practice in such scenarios to make 'adjustments' (e.g. adjusting for the size of buildings, No of occupants etc) to comparators so that the benchmarking exercise is 'fair'. Whilst this is an inexact science it is an attempt to demonstrate compliance. This type of approach can be dismissed by a client, but ultimately if the client chooses to be difficult they could reject any approach you take.
Demonstrating different options to them will show your willingness to work with them and may encourage them to engage in dialogue about what will satisfy their concerns.
David, I agree with John's observation. Given that there is rarely - perhaps never - an exact 'like for like', comparisons will always have a degree of subjectivity. It is good that you make efforts to validate your position.
As mentioned in my previous reply, you may want to think about alternatives with the customer and discuss their real concerns. In particular, if you can build confidence over the market competitiveness of your pricing, there is potential for a 'win-win' by avoiding the need for future competitive bidding as a method of validating your price. This seems to me a much more productive and relevant discussion. Meantime, I think just continue your monitoring.