Everything you wanted to know about contracts but were afraid to ask 13 September 2012 Adrian Sim, Associate
Agenda 1. Introduction / Background 2. Takeaways A. Refresher of the key elements of a contract, and how they arise practically B. De-mystifying commonly used legal jargon B. De-mystifying commonly used legal jargon D. Key issues and negotiating positions i. Arguments and counter-arguments on key issues ii. Standard supplier positions iii. Industry standard positions 3. Ask away
Initial Considerations Pre-contract 1. Value of the deal v business critical? 2. Competitive procurement? 3. Products, Services, Solution? 4. All leading to the main question: form of contract to use? 5. Your terms or mine?
Key Elements of a Contract 1. Offer 2. Acceptance • Counter-offers and the “Battle of the Forms” 3. Intention to create legal relations • • LOIs, MOUs, HOTs LOIs, MOUs, HOTs • Side letters and sufficient certainty ( Barbudev v Eurocom ) 4. Consideration 5. What if negotiations never end? • Finding a contract… somewhere (RTS Flexible Systems v Mueller)
What Does This Mean? 1. Preliminary question of jurisdiction • What’s the governing law? 2. Commonly used phrases • “Best endeavours” / “(all) reasonable endeavours” • • “Good faith” “Good faith” • “Indirect or consequential loss” • “Paid or payable”
Arguments And Industry Norms: Early Issues 1. Do you have a Playbook? • Company/Group Standard Positions 2. Contracting party • ISP: Agree to gross up, and suppliers will assist you in re- couping the tax credit. couping the tax credit. 3. Intra-group assignments / change of control • ISP: Generally permitted (and no termination for CoC) unless new entity is a competitor, is not of equivalent financial standing or (in the case of the supplier) does not have the technical ability to perform
Arguments And Industry Norms: The Big Issues 1. Liability caps and exclusions • ISP: Exclusion of indirect/consequential and all financial losses and loss of data and reputation. LoL = 100%-125% of annual charges. 2. Indemnities (IPR, confidentiality, TUPE) • ISP: Third party IPR infringement claims only covering amounts awarded by a court (or agreed in a settlement); and TUPE 3. Termination rights • ISP: Supplier may terminate for material breach. 4. IPR ownership and minimum licence conditions • ISP: Industry and build-specific, but definitely moving away from “I pay, I own”. 5. Delays and Relief • ISP: Relief from liability and an extension of time with costs dealt with through Change Control.
Arguments And Industry Norms: Financial 1. Payment terms • Set-off: within v between contracts, and between Affiliates • ISP: Set off only within a contract, but potentially between contracts with the same entity. 2. MFN • • ISP: Rarely given these days. ISP: Rarely given these days. 3. Guarantees • ISP: Very hard to get on-demand, but you can get performance and liability guarantees 4. Benchmarking • ISP: No automatic adjustment to charges 5. Insurance • ISP: Broker’s letter, not actual policy, and customer not noted.
Arguments And Industry Norms: Compliance 1. Compliance with law • ISP: Supplier to comply with laws that apply to it as a service provider. 2. Data protection • ISP: Standard restrictions accepted with agreement to enter into Model Clauses. 3. Bribery Act • ISP: Suppliers are willing to agree to abide by the Bribery Act and not do anything to put the customer in breach. 4. Audit rights • ISP: Once per year, at the customer’s cost (unless a material discrepancy or breach discovered) but no access to shared services areas.
Arguments And Industry Norms: Boilerplate 1. Governing law 2. Entire agreement clauses • ISP: Pre-contractual documents are excluded, and inclusion of a non- reliance clause. 3. Dispute resolution (mediation, arbitration) • ISP: Consensual mediation, but not binding arbitration.
Q&A
Thank you for your attention Bristows 100 Victoria Embankment London EC4Y 0DH London EC4Y 0DH T +44(0)20 7400 8000 F +44(0)20 7400 8050 adrian.sim@bristows.com www.bristows.com [Insert Doc No: ]
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