Everything you wanted to know about contracts but were afraid to - - PowerPoint PPT Presentation

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

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