A badly drafted IT services contract can present significant risks to your business. At Stephens Scown, we act for both IT suppliers and customers in respect of IT contract disputes.
In this article, we discuss 5 common issues which we would recommend that you review prior to entering into an IT services contract.
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Termination provisions
A common pitfall is not checking the length of the contract or understanding how the contract can be terminated. We frequently find that businesses will enter into multi year IT contracts with limited (or no) ability to terminate the contract during the term.
Even if there are termination provisions, they tend to involve onerous notice requirements. For example, a termination notice will need to be served within a specific period (which may only be two weeks!) and by a specific method.
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Contractual provisions if something goes wrong
In our experience, IT contracts will not allow you to end the contract or seek damages simply because you are unhappy with the service. You will often need to follow a specific procedure which is set out in the contract.
This normally involves notifying the IT provider about the issue you have experienced and giving them a specified time period in which to resolve the issue. It is only if the provider fails to remedy the issue within that time period can you claim damages or take steps to terminate.
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Ensuring key terms are included within the agreement
Sometimes assurances will be made by both sides which the other party may assume they can rely upon. However, if these assurances are not set out in the written contract it can be difficult (if not impossible) to enforce these terms.
We would always recommend that a scope of work/ any deliverables are specifically set out in the contract so that there is a clear understanding of the expectations of each party.
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Limitations on use
The contract may only allow for a specific number of licences and then seek to charge additional fees if the pre-agreed usage is exceeded. The additional charges can be expensive and you do not want to end up in a situation where you are arguing over unexpected charges.
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Intellectual property clauses
Often the customer will be required to delete specific software or return equipment when the contract ends so, as a customer, it is important that you are entitled to retain any data that you may need for tax of regulatory purposes.
This article was written by Laura Stanley and Richard Slater who specialise in complex IT contract/ services disputes. They are also work in conjunction with our Intellectual Property and Data Protection team who have a wealth of experience drafting IT based contracts. If you have any queries arising from this article or require assistance, please do not hesitate to contact us on 01392 210 700.