EVENT REPORT: IT Contracts 101 for the Trainee Lawyers group

In January, the SCL Trainee Lawyers Group was delighted to welcome Alison Berryman, partner and Head of Technology and Commercial Law at Waterfront Solicitors LLP, to kick off the 2021 agenda of events for the group. Almost 100 junior lawyers, trainees, and law students joined us virtually to listen to Alison’s insightful presentation. Whilst we initially had plans to host an in-person event the pandemic shifted this online and we all took to zoom to listen to Alison’s insightful presentation. 

To start the event, we were lucky enough to listen to Alison’s deep knowledge and experience in her (self-confessed) whistle-stop tour through key clauses in an ‘IT Contracts – 101’. That talk was followed by a practical exercise: the attendees present separated into breakout rooms and applied Alison’s tips and tricks to critique a sample skeleton IT contract for the development of a mobile app. The practical exercise generated lively and interesting discussions around how to draft clauses that suit a client’s operational and technical needs, and the changes that arise when switching from a supplier focus to a customer focused agreement. The example clauses can be downloaded here. 

So below we have tried to summarise the key legal and commercial insights we gained from the session: 

Product definition – Delivery methodology and acceptance 

Alison highlighted how important it is to think carefully about what service or product is being supplied or provided. With the advent of cloud-based software, tech contracts where no IP is being transferred or delivered have become normal. The intangible nature of the service means it is vital to understand what successful delivery and its methodology looks like for the client and express what ‘success’ means clearly in the contract. 

A distinction was drawn between contracts that use an ‘agile’ clause, where delivery is based on an iterative ongoing basis as agreed between the parties, and a ‘waterfall’ clause, where it is decided upfront. This ties into the question of when delivery is deemed accepted, a crucial issue from the perspective of controlling costs and for warranty periods. Clause A in the practical exercise provided a key takeaway on this issue in that parties should work collaboratively to decide when the product is considered accepted in order to provide certainty. This is especially the case where the supplier is only being paid on acceptance. Clause C then focused on IP rights. The correct approach will depend on the individual project and its circumstances. Alison noted that it may be a helpful starting point to distinguish between a supplier’s existing rights and newly created works, again circling back to the underlying importance of focusing on what ‘success’ for the client looks like.

Warranties and Indemnities 

Warranties and indemnities are a cornerstone to many commercial contracts and context is key in how they are defined in tech contracts. For example, these terms will vary depending on whether the contract is B2C or B2B. Therefore, a client focused approach is essential.

The warranties clause in the sample contract attendees reviewed, showcased that technical specification could play a key role when it comes to negotiating the exclusion of implied warranties. Alison noted that it may be appropriate to carve out the implied warranties and have an absolute warranty that the product complies with the technical specifications. This should ensure the product is fit for purpose and of satisfactory quality.

Liabilities 

Alison shared that limitation of liability is a negotiation point in almost every single contract she is involved in and her advice to clients is that there is no right or wrong limit to liability, noting that it is an exercise similar to negotiating a price. There are now some typical ways of drafting liabilities, with a supplier’s usual position being that they will not want to accept any more liability than their reward. Legal restraints must also be acknowledged, as a complete exclusion of liability removing all remedies is unlikely to be enforced by a court in England and Wales. Critiquing clause E of the sample contract provided a helpful tip in seeking to avoid relying solely on insurance when considering the limit. A limitation of liability clause is about the balance of risk between the parties. An appropriate limit will depend on a combination of factors, such as the value of the contract.

Boilerplate clauses

As familiar as we all are with standard boilerplate clauses, Alison raised an important reminder to always double check the suitability of their content. In the past year, force majeure clauses have been the subject of increased scrutiny in terms of whether they cover the unexpected events arising from the coronavirus pandemic. Additionally, it is often standard to require that a contract can only be varied in writing and signed by both parties. As contracts and communications move increasingly towards digital media, it is worth considering whether such a clause suits the parties’ needs. 

Closing thoughts 

What was clear from Alison’s guidance was that lawyers cannot afford to rely solely on their existing legal knowledge when it comes to tech contracts. The rapidly evolving nature of the industry means a client centred and bespoke approach to negotiation is crucial, with the underlying principle always being to focus on what ‘success’ looks like for your client.

The SCL Trainee Lawyers Group extends a warm thank you to Alison for her expertise and guidance in helping the event run smoothly and successfully. The event was chaired by SCL Trainee Lawyers Group members Alex Hum, Patricia Oon and Chloe Redshaw.

Faith Edmunds, DLA Piper is a Trainee Solicitor based in the London office of DLA Piper. 

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