Technology Attorneys
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Key Points in a SaaS Agreement

Software as a Service (‘SaaS’) functions on a delivery model wherein a third-party provider hosts an application that is offered as a service.  This is to differentiate between ON PREMISE solutions which are fast disappearing.

SaaS offers its users a ton of benefits, but it is best optimized when the provision of the service is governed by an agreement between the provider and the customer.

SaaS agreements CAN be clickthrough agreements on a website but here, we are talking about a direct SaaS agreement that you contract with a vendor.

A SaaS agreement is essentially a legal document that defines the terms of the provision and delivery of software services to customers. Well-drafted SaaS agreements eliminate the incidence of disputes between both parties in the course of the contract. To ensure that a SaaS agreement captures the expectations of the parties involved, there are key points that it must cover. Read to find out what they are.

Key Points To Cover In a SaaS Agreement

The following points must be captured in any properly drafted SaaS agreement for the agreement to serve its purpose

  • Technical Specifications: The technical specifications of the service being provided must be clearly spelt out. These specifications define the functionalities of and the expectations for the SaaS service. It also provides a means for measuring the performance of the SaaS service. Defining the technical specifications prevents disputes between both parties and helps if the need for customization arises. 
  • Intellectual Property Rights: With SaaS, the key element of intellectual property rights is licensing because it specifies the way content is to be used in the course of the subscription period. Provisions must be made for revocation or modification of the licence if the subscription expires or is cancelled. Other issues like the ownership, storage, transmission and access of data should always be clearly defined, and depending on the sensitivity of customer data, it might also be appropriate to address storage. Responsibility for the protection of data created using the SaaS service should be clearly defined here.

It is also important to note that while the SaaS vendor will own their own IP, you must be able to retain your IP and easily move it off of their database.  Also, in more complex business requirements, this SaaS will connect with other internal softwares, those ‘connectors’ should belong to you, not the vendor.

  • Payment Clause: This is the aspect of the SaaS agreement that outlines the preferred payment methods for the SaaS subscription. Are you paying per user/seat, monthly, yearly and CAREFUL OF THE AUTORENEWAL contracts or contracts you can’t cancel.

You should be able to cancel, move your data, etc.  SaaS vendors should rely on the value prop of their software to keep customers.

  • Limitation of Liability and Disclaimers: Like with all business transactions, issues of liabilities and commercial risks are likely to occur in the course of the SaaS subscription. For example, issues like operating system incompatibility, breaching of terms and conditions and third-party hosting, intellectual property infringement, among others, can generate confusion and dispute when not handled properly. Liabilities and disclaimers should be specifically addressed so that in the worst-case scenario, liability is shared accordingly.  Assess YOUR risk, and ensure that the vendor doesn’t completely limit their liability.
  • User Obligations: This deals with the obligations of the end-user about the expectations around the use of the software. Safe storage of personal information and update of the product and the notification in the event of security breaches where and when necessary are some of the user obligations that must be spelt out.

Takeaway

SaaS is a critical element of your business, make sure that the contract you sign with your SaaS vendor fits your business needs. 

Technology Contracts

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Key Points of an Independent Contract Agreement

Independent contractor agreements have always been a part of the IT tapestry.  Still, over the years, Department of Labor has been scrutinizing these relationships more and more.  Being vigilant in these factors as well as other legal considerations, means you can still leverage this relationship to get on demand specialized expertise and skills.

Often, when companies engage the services of independent contractors, they are quick to review the work they need done, come to an understanding, and get started as soon as possible, resulting in an oral agreement. Given the quick turnaround, they want to ‘keep it simple’.  But, it is so important to create a written contract, formally known as an independent contractor’s agreement. Here are the major reasons your tech company needs this contract.  Like any relationship, it will get tested when things come to an end.

Prevent Scope Creep by Defining Project Details 

When engaging an independent contractor, especially for the first time, ensure that your written contract contains a well-detailed discussion of the work scope. Be sure to include a description of the work to be done, specific deliverables, key dates or deadlines, and what an acceptable final product should look like. Writing down these details will prevent missed deadlines and incomplete work. There should also be an agreed-upon process to follow in the event of unplanned changes that are outside the scope of work. Ensuring that there is a process for addressing scope creep can help tech companies to avoid difficult interactions, conversations, and disagreements as work progresses. 

The agreement should also comprise an agreed bill rate and payment terms such as how and when payment will be made to an independent contractor and how you get an invoice. Payment must be entwined with concrete deliverables and discuss any possible additional costs or expenses that may be accrued.  

Ensure Legal Protection for Your Company 

Perhaps the most important function of a written consulting agreement is that it provides legal protection for your organization and the independent contractor involved. No one wants to incur the financial burden of a lawsuit, so it is in your best interest to include legal protections in the contract. Discuss insurance requirements, and ensure that the contractor understands what they need to provide and who (if anyone) must be listed as an additional insured. 

You also want to put into writing guidelines around ownership of intellectual property and confidential information such as financial data, business plans, and trade secrets, if applicable to your business.

Develop Work Classification Status

One of the most dreaded risks of engaging independent contractors is misclassification. Thankfully, a written agreement is a good step for establishing an independent contractor’s status. To avoid misclassification, let your contract clearly state that you and the independent contractor agreed to an independent contractor relationship. Ideally, it shouldn’t be a personal contract but one with their company that is incorporated with an EIN.  It should also include a statement from the independent contractor acknowledging that they are not entitled to any benefits provided to your employees and that they are responsible for paying their own taxes. It might also prove helpful to secure files that can be used as proof of self-employment, such as a business or professional license, proof of insurance, or business cards.  If in doubt, it is always best to check your state’s department of labor requirements and your attorney.

Conclusion 

Independent contractors are invaluable because they allow organizations to ramp up their skill pool without the overhead. Thereby helping the company save time and resources. However, the relationship between clients and contractors can only be successful when a well-thought-out and a well-detailed written contract is put in place. 

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6 Known Boilerplate Clauses and Why They Matter

Boilerplate clause are often the most overlooked and neglected clauses on a legal document. However, these clauses are by no means irrelevant and equally as important as the legal document’s essential parts.  In fact, your next dispute might turn on these very clauses.

Depending on which side of the contract you are on and the wording of the clause, you may get hard done if you ignore the boilerplate clause. Here are six known boilerplate clauses that you should be aware of and why they are important.

  • Indemnification Clause: Indemnity clauses serve to manage the risks associated with a contract. They define the context of legal action against the indemnified party. This clause also covers lawsuits, actions, damages, demands, liabilities, losses, damages, and claims associated with a contract. In addition, it also covers legal action on extreme cases like injury and/or accidental death in the contract.
    • The most important thing here, is who is the one with the most exposure.  Mutual indemnification clauses don’t always make sense.
  • Jurisdiction Clause: This clause defines the most appropriate form of dispute resolution. For instance, a lawsuit must be filed or the substantive laws to be invoked in the case of a contract breach.  Generally, the one presenting the contract will choose their location for the jurisdiction.  You CAN negotiate.  How about first to file chooses jurisdiction or maybe neutral ground or even just arbitration. 
  • Arbitration Clause: Arbitration clause provides the framework for resolving legal disputes and offers an alternative to taking issues court in the event of legal disputes. Arbitration clauses are of great significance because they make the arbitration of legal matters easier when properly drafted.  What you need to look out for, is it mandatory?  Who pays for the arbitrator, how many arbitrators and WHO picks them?  Most arbitration institutions will have their own enforceable language, otherwise that arbitration clause you have in your contract might be UNENFORCEABLE.
  • Force Majeure Clause: The French words” force majeure” roughly translates to “superior force.” It is a type of boilerplate clause that defines what happens when a “force majeure” event like natural disasters, for instance, occurs. Force majeure clauses are important because they define instances when parties can be relieved of their responsibilities, obligations, and liabilities if the incidents covered by a force majeure clause occur.  This is the clause companies turned to when the pandemic began, and to some surprise, maybe the pandemic did NOT excuse performance because it wasn’t included.  Isn’t it time to update your contracts?
  • Confidentiality Clause: Also known as non-disclosure agreements (NDAs), this clause states that certain information shared under the contract are not discussed with parties outside the contract. Breaching this clause (consciously or not) comes with consequences that are often financial as well as equitable. These can carry very heavy consequences, and in some instances should!
  • Choice Of Law Clause: Also known as the Governing Law clause, this boilerplate clause defines the substantive laws that apply in the case of a contract breach. It is particularly important because the breach might occur in different geographic locations. A choice of law clause defines the laws to be used in such disputes to avoid uncertainty and possible delay in getting justice.  You can find instances where the Venue and Choice of Law are different.  While, in theory, this can work, once you get into a Court, the judge has some discretion.

Takeaways

While the meat of the contract is important, often I see disputes turn on the boilerplate clauses since they are often skimmed and glazed over.  Lawyers will read contracts like you read a book, tying pieces and plots together to form the whole picture.  Let us lay the foundations for you.

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Best Practices of a Contract with Your Web Developer

Now more than ever, we live in a world where digitization has made web and application development essential aspects of just about everything: education, business, health and even law, among other fields.

Due to this, owning a web presence is just as important, if not more, as owning a physical one. This is why a lot of web/applications are contracted out to developers in order to ensure that the enterprise keeps up with the trend of digitization.

Independent Contractor Agreements are often part and parcel of web/application development. Or, your developer may have their own agreement that they’d like you to sign.  Either way, this legal document aims to ensure that your expectations and those of the web/application developer are fully captured.  As well, as any future rights in your intellectual property.

To get a well-written contract, you need to understand the best practices associated with it. Read on to find out what they are.

Create Milestones

Avoid handing over all the requirements to the web/app developer and letting them go at their own pace. Create milestones for the total lifecycle of the project. It helps with tracking and modularity. You can get a bird’s eye view of the functional parts of your project so you can easily identify issues and possibilities in the course of the development process.

Creating milestones can also help you tie the milestones with payment.  At each milestone, there is a stop of sorts where you evaluate the progress.  If you are satisfied, payment is made and then off to the next phase!

Pay attention to security.

It would be best if you established a secure means of transferring information and a level of access control your sensitive data. Please pay attention to the security measures and protocols that the web/application developer uses and how they plan on managing your data. Ensure that they understand your security concerns, and they possess the capability to handle them.

Proper Scope and Documentation

Since you will be working with a third-party ensure that there is proper scope and documentation. This prevents misinformation that can derail the project. Documenting your scope also ensures that there is clarity and transparency in the discussions. It also provides a reference point during and after the web/application development process has been completed.

Proper documentation will also ensure that you have the flexibility to move to other vendors or add anything additional to your product without needing a lot of knowledge transfer.

By setting out clear goals and scope, you reduce the amount of discussions around what is included in the engagement and what would be considered out of scope for the project.

Outlining clear expectations between you and your developer.

Fix the Money Matters

 This is where you decide on the financial aspect of the contract. Be clear on what you are willing to pay for your expectations. Determine events that might trigger payments like milestones. Discuss the impact on out of scope requirements, or issues that crop up unexpectedly. 

These out of scope or change orders might come with an hourly rate or a decided fixed rate as you move through the project.

Establish Clear Communication Channels

This is essential because proper communication channels facilitate understanding between parties, eliminates delays and increases the chances of creating a great project. Clear communication channels also ensure that you are in the loop about the process and that you can actively participate at all stages in the process.

Generally, this is called a PMO or a project management office which can be critical in larger projects where points of escalation may be needed as well as frequent meetings between stakeholders. 

Make Sure You Own it!

Did you know, that intellectual property belongs to the person who CREATES it?  NOT the person who bought it.  It is a common misconception that if you bought something that you own it.

You need to make sure that the contract clearly states that any intellectual property is assigned to you. 

Here, wording can get tricky between ‘work made for hire’ (and this isn’t self-explanatory, even I look up the statute every now and again to refresh my memory) and an assignment.

Here is a tip:  if you are getting a low quote than what you thought, it is probably because you are not getting the intellectual property.

Which means, you will not be able to take it anywhere else, to anyone else or in simple terms, do what you want with your website or other project deliverables.

Takeaway

Outsourcing your web/application need is imperative because of the benefits attached. Understanding the best practices involved in the contracting of your web/application development will help you go about it the right way.

 

Rather than do it yourself, why not engage an attorney to help you negotiate the right terms of the agreement.

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Force Majeure Clauses

Bet you never read one until now…

               Force majeure clause.  It’s one of those boilerplate paragraphs that no one reads until, you know… now.  It’s one of the first things I was asked, as an attorney, about the pandemic and contractual obligations on a contract.

               A force majeure clause (“force majeure” is French for “superior force”) it is a contractual provision that excuses performance in the event of extraordinary, unforeseeable, and unavoidable circumstances which prevents one or both parties from meeting obligations defined in a contract. It serves to excuse parties from contractual duties due to forces beyond their control.   Generally, it accounts for natural disasters, social unrest, etc. 

               At the moment, there are arguments on the classification of COVID-19 as a force majeure event; however, this is difficult to define. What is important to note is that this novel virus has changed workplace dynamics globally. Travel bans, curfews, and quarantines have forced millions of employees all over the world to work remotely.

Force Majeure and COVID-19

               In the wake of COVID-19 many companies’ struggle to fulfill their contractual obligations because of supply chain management issues, lockdowns, the need to downsize workforces, and the embargo on travel or the movement of goods across the interstate or international borders. In extreme and unexpected circumstances like these, contractual force majeure clauses might be used to justify voiding contractual obligations, especially when such scenarios are overlooked in the drafting and negotiation process.

               Amidst the coronavirus pandemic, many employers are now faced with major disruptions to their business operations. Boardrooms are now forced to make difficult decisions that affect their employees: hiring, layoffs, furloughs, and compensation.

               Employers who do not have remote work models are currently being forced to create them. These flexible working policies, which include the use of technology, enable their employees to work from home efficiently. Health concerns in the face of the pandemic make this imperative.

               Several of the tough decisions taken by business management will implicate written employment contracts and collective bargaining agreements that contain “force majeure” clauses.

Force Majeure and Remote Work

               Lots of employee contracts do not make provisions for remote work. Yet this is a compulsory outcome in the wake of the coronavirus. What’s more interesting is the definition of what a force majeure event is at the moment.

               A lot of force majeure clauses are not expressly clear on terms like “pandemics,” “epidemics,” or “quarantines” as events that might trigger said clause. Yet in some quarters, a natural disaster may qualify as an “act of God” that is beyond the control of the party in question. The question then remains if COVID-19 can be defined as an “act of God.”  Interpreting the terms of the force majeure clause in this context is tricky and will have a lot of grey areas. For instance, justifying loss or using reasonable efforts to continue to execute the terms of a contract may include allowing employees to work from home or the facility to provide services remotely. In the event that the contract can be performed remotely, this option may prevent the force majeure clause from being activated

Conclusion

               A little foresight can help you through some tough scenarios.  Boilerplate clauses are not there for the sake of beefing up a contract.  While many do have standard language, they are just as important, if not more than any other term of a contract.  Make sure you review them properly. 

Contracts and the Art of Tea Leaves

Take a seat, show me your contract and I’ll tell you about yourself.  I may even be able to tell you your future.  Legal psychic?  Maybe or maybe I have read enough contracts in my career that there are indicators, tells, and if I couldn’t, then I wouldn’t be a great advisor.

 

I really do enjoy reading and drafting contracts.  To me, a contract is a story unfolding and every contract has a spirit.  Most recently, I created an agreement for a client and as I was drafting the contract, I was visited by the ghost of contracts past.  All the good and bad that have happened with every contract before this one shaped this contract.  (I’m looking at you evergreen clause that traps businesses in services they don’t want…)

 

At this point, I’ve lost some with this narrative, but those of you that stayed can appreciate that I have a personality just like my clients do.  It is my job, to reflect that personality and the culture of the company in every contract I touch.

 

Here are a few things I’ll look at when drafting a contract:

  1. First, is it the right contract? I know this goes without saying but some lawyers either don’t understand the deal or try to make a square fit in a round peg.  For instance, you don’t want a license agreement when you are really entering into a reseller agreement.  Also, sometimes you may have two different transactions with the same parties.  IT’S OK to have two separate contracts.  Why bind yourself to both when maybe only one transaction will actually be successful?
  2. How one sided is the contract? Is it all about the take and no give?  Fun fact, bigger companies tend to have more fair contracts than smaller companies.  I can read a long contract and have two comments and then read a 10 page contract that I completely mock up.  Why?  Big companies understand that it takes a lot of time to negotiate every point.  They want a mutually beneficial relationship and don’t look to make money on damages.
  3. Which brings us to the next point, liquidated damages. BE CAREFUL here.  They are often inflated and have no direct corollary to actual damages, and more than likely will not hold up in court.
  4. Boilerplate paragraphs aka ‘standard paragraphs’ which may, in title, be standard in contracts but their terms are anything but. Jurisdiction, venue, attorney’s fees, even assignment clauses.  A business dispute will absolutely turn on these so called standard paragraphs and I have gotten to many settlements because the standard paragraph overcomplicated the dispute.  (I will delve into more of these in later posts because jurisdiction is a fun one.)
  5. And of course, the substance of the deal to make sure it is reflected correctly and the right warranties, limitation of liabilities, IP rights, etc are memorialized. Also, that the contract has the right cash flow for the business holder because that is imperative for operations.

 

Every contract embodies the spirit of who you are as a company.  It is about leverage and negotiating power.  If you make your contract fair and concentrate on the art of the deal, you set the stage for a healthy business relationship; hopefully a long term one.

 

Don’t download your next contract from the internet, contact us today for contracts that showcase you and get you paid.