There are several books to provide guidance on this readily available from Amazon. There are even model templates you can download - for example, itlaw.wikia.com/wiki/Outsourcing_Agreement_(No._1) - though I would use them more for guidance than in practice. You will also find articles in the IACCM member library that can assist with things like SLAs or KPIs, as well as discussion of clauses that need particular attention.
IACCM member and drafting expert Ken Adams has written on this topic and actually recommends use of 'non-trivial' within contracts (see www.adamsdrafting.com/rethinking-material-and-mac/).
It seems to me that non-trivial should be seen in a context similar to de minimis. It relates to scale - and we must recognise that the parties may see that in different ways. For a mega-corporation in B2B, $100 is probably trivial and not worth collecting, whereas for a small business it may be seen as material. AB2C company, on the other hand, is likely to pursue a customer for $100. And in the event that an employee is found to have stolen $100, that is somehow always significant, though the employee would probably argue otherwise.
Ken Adam's suggests that the definition of non-trivial should include defining from whose perspective, which (based on the examples above) seems wise advice. And unfortunately, for you, it seems the only way to decide is to illustrate why the amount involved is not trivial. Ultimately, if the client claims it is trivial, I guess they should have no objection in paying.
Whether we use material or trivial as the term of art, the fact remains that it is not a fixed reference point. Whenever a reference point is not fixed, the parties must make reasonable efforts to agree. If the customer here insists that all but the most egregious variance is merely trivial, the seller really has no specific protection in the contract. The resolution of these issues typically comes down to the quality of the relationship between the parties. Is the relationship collaborative and productive? If so, you can expect basically acceptable results.
This sounds very strange. Are you sure that the exclusion under the second part refers to the principal, or is it referring to conduct by the reseller (in which case it would be reasonable)? Is it a mis-type?
Clearly the principal cannot deny all liability for its actions, so the clause is not enforceable. In itself, that does not invalidate the rest of the contract.
• Smith Assured
I am sure the principal is intended in the second half.
Here is another example from the reseller agreement of a different software product supplier(it is all in capitals in the original):
"To the maximum exetnt permitted by applicable law, in no event will (Product Supplier) be liable for any services provided by (Reseller), be liable for any claims arising out of or related to this Agreement, or be liable to you for any incidental or consequential damages including lost profits, lost savings, or other incidental or consequential damages arising out of the use or inability to use the software or software programs, even if (Principal) or a dealer authorized by (Principal) had been advised of the possibility of such damages."
I've seen clauses like this before and rejected them every time. I just don't see the business case for such clauses and every time I will reject them.
One of my favorite authorities on legal usage in drafting contracts, Ken Adams, says:
'When drafting a provision referring to a period of time, you need to determine not only when the period begins or ends and how long it lasts, but also what unit of time it is stated in.
The smallest unit is the day, consisting of 24 hours from one midnight to the next. When denoting periods of time in days, I generally use business days rather than simply days. A business day is generally defined in contracts to mean any day other than a weekend or a public holiday in a given jurisdiction, or any day that banks generally are, or a named bank is, open for business. Using business days would ensure that the last day of a notice period is a business day. This would spare any party the awkwardness of learning, for example, that according to the notice provisions of its contract, the fax it sent on Sunday, the last day of the notice period, must be considered to have been received on Monday, too late to constitute the valid notification' (Adams, 2001, pp. 87-88).
Adams, K. A. (2001). Legal usage in drafting corporate agreements. Westport, CT: Quorum Books.
• Deutsche Pfandbriefbank AG
Depending on the country / jurisdiction you are working in or where the contract should be applied to, it might be useful to be even more specific in the definition of 'days', two examples:
In Germany (and I assume also in other countries) there are the following possible 'days' (legal or business defined terms):
-- Days - usually calendar days
-- Workdays (german word 'Werktage') - Days, where (from a legal perspective) work is allowed without restrictions, i.e. in Germany Monday to Saturday (=everyday unless it is Sunday or a public holiday)
-- Working Days or Business Days ('Arbeitstage') - Days, where in specific industries the actual work takes place, i.e. in most cases Monday to Friday unless it is a public holiday
-- Weekday ('Wochentag') - Monday to Friday regardless of public holidays
-- Bankdays ('Bankarbeitstage') - Business Days with the exclusion of Christmas Eve and New Years Eve
If you have customers in Israel, working days may be Sunday to Thursday ...
The conclusion: Especially in international contracts it is useful, to have a precise definition of the '... Days' term you use.
I feel "day" if not defined in the contract shall be considered as calender day. Working day shall be considered only if it is explicitly mentioned in the contract, as the no. of working days changes depending on location, local festivals, national holidays, weekly off days etc.
Moreover, we have to check the other references in the contract like completion period, run test period etc which may be indicated in the no of days, where we can not expect from the contractor to consider the period in working days.
You could always check out the Air Force FARSite. They may have summaries there.
• Rockwell Automation
Just saw this post. If you go to the enclosed link you'll find a pdf version of the FAR Matrix which provides the authority and applicability of all Part 52 clauses, by acquisition type and contract type. I'm not aware of a similar resource for the DFARS. acquisition.gov/far/index.html
• Department of Homeland Security (DHS)
The DFAR is a supplement to the FAR. It outlines prodecures and provides DOD specific guidance. Major agencies in the US system each have a supplement. Let me know if this helps.
I guess the answer depends to a large extent on the nature of the transactionbeing covered and the resulting potential for damages claims. To the extent that nugatory refers to items that are trivial, this is probably not important unless the damages provision is cumulative and there could be multiple instances of an otherwise trivial claim (e.g. the per incident event may be only $3, but you sold 10,000 items and each represents a basis for claim).
It is the other aspect of nugatory - regarding invalidity - that is harder to assess, though in principle you are probably allowing for this since it is unlikely that you are entering into a damages clause for liabilities that are already deemed invalid.
Can you specify the jurisdiction? Liens fall under the area of secured credit, which may vary by jurisdiction.
I think you are asking if Company A can cover its risk of Company B imposing a lien on Company A's property even if Company A is "at fault" for not making a payment to Company B. Who would be the indemnifying party?
If you are suggesting that Company B would be the indemnifying party, then when you are really wanting is a covenant in the contract through which Company B voluntarily gives up its rights - implied in local law - to pursue a lien. If Company B violated this provision, Company B would owe damages for breach of the covenant. The challenge could be calculating the damages. Clearly Company A still would be required to pay the underlying debt.
Truly, I cannot imagine a situation where Company B would sign up for terms like this.
As a caveat to what I'm about to say, I need to state that it is imperative to seek appropriate legal advice in this regard and the below is not legal advice to anyone.
I think that it's risky to try enforcing one's own domestic law in a foreign court. For a start, in some places the courts may have to determine whether foreign law is permitted to be applied. Also, many people are familiar with the way US courts sometimes impose US law on foreign parties. Even if the court doesn't refuse to enforce the specified law, can you be certain that it will be done correctly? If the court does balk at enforcing law of a foreign jurisdiction, what benefit did one derive from the compromise? Note: I don't know how this scenario would play out in the Commonwealth.
The context you give goes directly to my own view of this situation. If the location of the services really is not in the remote foreign destination and/or the provision of services is governed extensively by laws and regulations in the source country, then in most cases the service provider has the best argument to impose the law of the source country and host any litigation there.
Thank you for your response. In your opinion, would the scenario be different if the delivery of the services were to take place in-country, i.e. within the jurisdiction of the Customer?
Many thanks again.
This is a frequent question: Where does the service actually occur? More often than not, some of the services could be understood to occur in the source country (e.g. remote technical support) when others (say, on site services provided by the local outpost of the company) would be deemed to occur in the destination country.
On-site services involving personnel are more likely to give rise to regulation by the laws of the country where it is actually provided. For example, a company from England that wanted to perform design and build services in, say, California, would face a number of legal and regulatory hurdles. State of California Contractor License? Abiding by relatively high risk labor laws and rules? Using preferred contractors such as Calfornia service-disabled veteran own businesses?
In a case where the services are composed of multiple major components, it might be helpful to break up the compoments into standalone contracts.
Thanks Edward, that's very helpful.
The products are designed in the HQ location (UK), but the Services deriving from the products are routinely delivered in the Customer's location.
I'm almost inclined to separate product & services, define the Services in an SOW and if presented with this particular challenge render the SOW under local law, but maintain the product under standard T&Cs subject to UK law. Any thoughts?
A very interesting discussion!
Your first entry and your suggested solution of having English law but under foreign jurisdiction is not uncommon as a solution. However, you may want to propose a third country as the seat for jurisdiction, depending on how reliable and competent the courts are in the customer's location.
Also, to what extent have you considered moving away from the courts and proposing ADR using the laws of England? Since you mention that litigation is extremely unlikely, it seems of little value to have this clause represent an obstacle and perhaps a compromise that uses an established ADR approach or body would address the customer's sense of fairness and concerns over cost.
The subsequent debate over services is also interesting and Edward has tackled a numbe rof the key questions. It is indeed interesting to know how those services and delivered - for example, by local staff or representatives or by your own UK based employees If the latter, have you addressed tax and other implications? The possible issues for the employee are significant, but as the contractor you may also face a range of tax and other liabilities.
Therefore the reasons for thinking about restructuring your agreements may have reasons that go beyond governing law.
• Hewlett-Packard Co.
I have worked with multi-national contracts in the IT industry on and off for a number of years and have often been involved in discussions around the relevant jurisdiction issue. The starting point for the conversation is often one of cost, not of the contract but of litigation. If the breach takes place in say Italy but the contract stiplulates English law then the cost for a supplier or customer based in Italy would be more than if it had been dealt with by the Italian courts since there could potentially be costs of translation, hiring an English/Welsh law firm, locating in house counsel in the UK for a long period of time, etc.
The next part of the conversation focuses on who is delivering the services and the location of the customer. If both the service provider and customer are located in the same country and the services are provided under a "Global" contract then it is possible to agree that the local jurisdiction of each supplier and customer apply. For example the Global contract might stipulate New York law but the local country agreement may stipulate say French law if the parties are also located in France.
The existence of a long chain of stable law is also a determining factor in certain circumstances. For example having contracts subject to the law of certain countries where precedent is still variable and the legal system is unknown means that it may be better to have a contract subject to English & Welsh law or French. An example might be where the provider and customer are located in Mali then French law may be acceptable to both parties.
You mention that your contract are predominantly public sector based. My experience with these types of contracts are as you say difficult since the UK Govt for example often includes requirements that suppliers comply with a long list of UK legislation from FOIA to Data Protection to Housing legislation. On top of this there is also the need to accept the Government's security policies and the UK Bribery Act. The minute that acceptance is made of non-English law jurisdiction then the applicability of these laws does not disappear but the interpretation and application of the laws against the contract may well change as overseas judges will not have the experience of dealing with these laws and may interpret them differently resulting in an unexpected outcome. You also run the risk of some elements of the laws being struck out if they are illegal under the laws of the other country.
As someone else has already said, I think that you need to treat each request by a customer for their local law to apply on their merits and seek legal advice as to the risks of agreeing to the change taking in to the account the specific risks of that particular jurisdiction (Sha'aria contract law is very different to English law).
• ESP Global Services
Interesting response from Tim, and ADR with Enlish law is how we have structured our International contracs for delivery of services globally. the use of ADR as an example, has meant our prospective subcontractors in the Middle East (Sharia law) who had balked at using English law exclusively, have increasingly accepted the additional compromise use of ADR.
The comment on California law was timely as I'm just about to start a review of a customer contract based on California law.....
Coming from the US perspective, this discussion raises a host of complications. Since the US enforces income tax on sales to the US more than some other countries do, a foreign-based company can expose itself to income tax liability. The tax issue is one that has not been raised. In Europe, privacy laws are among the higher risks for non-European countries entering that space. Thorny stuff.
Re: ADR, I agree that it is a helpful solution. Another aspect that should be considered is whether those UK regulations actually apply to the foreign sale. Assuming that they do, I would imagine that you have no choice but to keep them in the contract no matter which country's law will be used to interpret the contract commitments. That's an important point.
In all seriousness, there are countries whose courts I would not rely on for deciding how to peel a banana. If I were contracting for software development with a vendor based or primarily doing the work in China or India, I would insist on not resolving any disputes in the courts of either. Clogged judicial systems and political gyrations make both a risky proposition. I suppose that it's parly my bias talking when I see that I would prefer a well-established Common Law jurisdiction over a political unstable Civil system.
Thanks all; this is definitely moving towards a more balanced approach.
Tim, to respond to some of your observations: Services are provided mostly by external associates contracted specifically for the relevant project. We are conscious of the tax implications (both within the UK and in-country) associated with that model to the extent that the number of days each associate is engaged per year is quite limited. I do not think any associate would ever reach the 183-day limit in-country as our projects tend to be relatively short, but may have follow-ups later in the year.
Some (pre-)delivery is done by employed staff, but again that is quite limited in scope. It is not of such nature as to affect a UK-citizen's (tax) residency.
In terms of other liabilities, the immediate ones to come to my mind - bearing in my my background in recruitment - would be Immigration & Nationality; Insurance; Employment Status, and In-Country regulations (registration requirements and other local requirements). Public Sector is still relatively new territory to me, so are there any others that come to mind?
James, thank you for your helpful comments about contracting in the Public Sector. The interpretation of the requirements is a big concern. All in all it is looking increasingly likely that a restructuring of agreements for the international scene will be necessary, and that ADR will form part of it.
I have asked this elsewhere: is there any good and accessible information available on Sha'aria law?
• ESP Global Services
Worked with Clyde and Co in the Middle East for a number of years, and they have published numerous articles that may help.
There are of course other law firms in the region that may have accessible information available via the web.
• ESP Global Services
Interesting article on Arbitration in Saudi Arabia.
if you have had the misfortune to get into dispute in the region, this is a major step forward for KSA.
• Smith Assured
Again from the perspective of international IT contracts, I think the use of Arbitration has many advantages. In particular, if your dispute is heard in an English Court and the corespondent has no base in the UK, you will have the isuue of enforcing the judgement in the foreign court which would have jurisdiction over your opponent. This may not be straightforward. However, the New York convention means that many countries courts will enforce arbitartion awards without reopening the matter, and it is therefore much easier to enforce.
From what I've seen landing on my desk in recent days, arbitration is definitely a preferred option.
I've also ordered (and have just received) a book on Islamic Commercial law, prompted by some patterns that have begun to emerge.