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.
Hi Wendy. I am looking into this and hope to get back to you soon. In the meantime, could you share a little more information on the "onerous provisions". You may email me directly at firstname.lastname@example.org if you prefer not to detail the provisions in an open forum post.
Roselle, thank you. Some provisions we strive to avoid are unlimited liability, indirect/consequential damages, and the duty to defend. Wondering if other architectural firms are accepting these terms, or finding strategies to effectively negotiate with stonewall clients.
I reviewed such contracts in the past for a large arch/eng company working in the utility industry. Must haves are waivers of indirect consequential damages and a limit of liability (LOL). However, we sometimes accepted 2 or even 3 times the contract value as the LOL. We accepted duty to defend but indemnity was for third party claims of property damage, bodily injury, death...not breach of contract. Most sophisticated clients understand the waiver of consequential damages and accept it, provided it's mutual. We'd get the LOL (or walk away) but sometimes it was higher than we liked. What makes you think some of your contracts are not insurable? You have CGL and PL insurance, right?
this is a provision that never goes away, but seems to vary in its frequency.
in February this year, I answered the question from a buyer's perspective and you can see the answer I gave in the member library (see under Resources). The points I make there apply in reverse for you, as a seller.
I think it is important to understand your buyer's motivation - what are they really trying to protect? If, for example, it is a mechanism to reduce the need for regular market testing, it may be to your advantage to agree a mutually acceptable MFC clause. Perhaps in return you might request an extended contract term.
Ultimately, I think most MFC clauses are relatively meaningless. You will probably commit that you will not offer lower prices on the same terms and in similar volumes; this actually gives you tremendous flexibility. But it may satisfy the need of your counter-part in Procurement to show that they successfully 'protected' their position.
I am also going to send you a link to a survey we undertook several years ago because in most respects, I don't think much has changed on these particular clauses - except perhaps that technology may be giving you better insight into pricing variations and whether or not you are complying with the terms agreed.
Hi Anne, one way to deal with this is probably to put a Master Services Agreement in place for long-term vendors that includes the general obligations you want covered in each statement of work. By doing so, you only need to refer to the clause number and not mention the specific obligations every time.
Hi, you don't specifically say what kind of IT contracts, but here is a good one related to software licensing and software-as-a-service (SAAS).
We offer a training "Opstellen en beoordelen van IT contracten" (Drafting and reviewing IT contracts), but it is in Dutch and given in the Netherlands (I don't know if this is an option for you).
itcontracten.heliview.nl/ (we can offer a discount for our relations)
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.