Key Points for New Economy Contracts

Introduction

One of the key elements of a successful working relationship with any e-business provider is creating a contract that defines the relationship and provides adequate protection for all involved.

Negotiating a contract with a technology provider for a computer system, or for software, should be a planning process as much as an exercise in defining legal rights and duties. Contract negotiations are a means to identify problem areas, assign responsibilities and develop a framework for ferreting out problems so they can be dealt with in an organized and reasoned manner.

While the rules of the old economy obviously still apply, the rapidly developing new economy undoubtedly introduces new issues to consider in forming contracts with technology providers. In the context of this rapidly developing environment, it is crucial to work with your attorneys, private partners and their attorneys to create a contract that will adequately address the legal issues that can emerge in this new environment.

The following are some guidelines and questions you should be addressing when putting together a contract with a technology provider.

Specific Guidelines

  • Objectives

Establish your institutional objectives and goals before entering contract negotiations. Try to determine to the greatest degree possible what you are looking for and how the technology company can provide this service. Explain the project to all parties, and develop an implementation plan. Try as hard as possible to determine what services the technology company is offering and how they differ from other companies and/or products.

Supply a project management framework, including the means to adjust responsibilities and schedules as obstacles arise and as new needs are revealed. How long do you want the contract to last? Have you considered a pilot program rather than a full-blown contract?

  • Warranties, Disclaimers and Indemnities

Try to consider any potential hazards such as order errors, server problems that may prevent or delay activity or breach of confidentiality.

Does the technology provider offer a help desk, customer support, on-site assistance and training? What are the hours of operation?

There is a current movement in the states to create a standard body of law dealing with computer information transactions. Are you buying both software and hardware? If you are buying both, has the equipment been installed and used before in the same configuration, with the same communications facilities and for the same throughput?

  • Intellectual Property

When working with technology companies, you will be giving them a lot of data about your business. You should be alert about who will ultimately hold the rights to the information you provide to these companies, and what is going to happen with the data.

  • Insurance, Security and Privacy

It is important to determine what types of insurance are going to govern your contract, especially as it relates to server problems and security. Security is inherently a balancing act between comprehensive protection and user convenience.

What type of security system is the technology provider using? Does the company have a security policy, and is it been properly employed? Is the provider addressing issues such as data protection, encryption, user authentication and digital signatures? Are the parties' privacy considerations being protected and addressed?

  • Infrastructure

Do you have the proper infrastructure in place for a new technology partner? What will be required in terms of cost and time to get your company up to speed to accommodate the new technology? Will the technology need to be integrated with your current resources or legacy system? What are the installation and implementation plans and schedules?

  • Small/Minority Business Considerations

Is your provider cognizant of and in compliance with the numerous small and minority business regulations that often are imposed on schools and other governmental institutions?

  • Jurisdiction/Governing Law

This is particularly important when dealing with Internet companies and large companies with presence in numerous locales.

Conclusion

This list is not exhaustive by any means. It is meant to be a guidepost for some issues that have particular importance in dealing with new economy partnerships.

In any type of partnership or contractual relationship it is important for both parties to understand where they are coming from and where they want to go when the contract is formed. In the rapidly developing new economy it is even more important to be cognizant of potential problems before a contract is executed. Many issues that will emerge in this new economy have never even been dreamed of at this point. Many times your contract negotiations will require a significant amount of foresight, but you should not be hesitant to ask some hard questions.

In any type of legal situation it is better for the terms and conditions to be spelled out in writing to the greatest degree possible before a problem develops.


  • This article was originally published on GigaLaw.com in January 2001