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Tips for avoiding technology contract negotiating failures

8/29/2011

A recent article from Lexology, with assistance from the Association of Corporate Counsel, presented several tips for avoiding failures during a contract negotiation process involving technology.

Before an agreement process, companies need to determine what technological elements they absolutely must have and then communicate them during negotiations. By failing to identify or communicate requirements, companies may receive services outside of their needs or shortcomings from their providers. Furthermore, terms of use need to be clear, as any ambiguous clauses or phrases may result in a similar result.

The article also expresses companies should pay attention to licensing terms. While providers would like to have businesses locked into an agreement for several years, companies may not want to stay with a provider for a prolonged period of time, especially if the outside party is not effective. Furthermore, as the article states, providers may begin issuing certain fees during these locked-in terms, which could be onerous.

Finally, the article advises companies to include out-clauses in the agreement in case a service provider is bought out or taken over by another business. While mergers and acquisitions are common in the business world, a new company's philosophy may change in the process, resulting in services not desired for the licensee.