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 jargonB. 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 0DHLondon 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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