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Contract Considerations
Introductory Have you identified all the relevant parties? Have you identified the transaction and its scope? For example, whether it is a purchase of good(s) or service(s)? Is this a one time agreement or framework for a bunch of different transactions? Logistics of the Agreement How will the parties go about initiating the transaction? Ex. If something is being purchased, how does the Buyer institute purchasing it? Do they fill out a purchase order? Send an email? What are the parameters of the transaction? What will it apply to? If changes need to be made is there a process? Delivery What are the terms of delivery? Where must delivery take place, how and by when? If goods are being purchased when does the title in them transfer? At what point is the buyer responsible for damaged or loss of the goods? How long does the Buyer have to accept what has been purchased? For complicated things (such as software being custom made) will there be multiple times where the software is tested and accepted? Or even a distinct test created to test and allow for acceptance? Where sales are international how are import/export issues addressed? Who is responsible for the export documentation? Do the parties want to adopt INCOterms, and if so, which one? Price/Payment/Taxes What amounts or costs will each party be responsible for? When will an invoice be issued? What is the metric for the price? Is it fixed or as quoted? Price plus any reimbursement costs up to a quoted amount? Can the price be adjusted, and if so, when and how? When is payment due? Are backups or documentation required to be submitted with all invoices? Will payment be tied to milestones? Will a certain amount be held back each payment? (Doing so does a number of things. Can give Buyers leverage if the ultimate product doesnt work and creates a pot to dip into if the seller fails to pay off all liens or taxes.) If the Buyer/Customer disputes a charge what will happen?
Erin McClarty Esq. 2012 All rights reserved

 What taxes will the Buyer reimburse to the Seller or be responsible for? To ensure the Seller isnt overcharging, will the Buyer be able to audit the Sellers books? If so, has the Seller addressed the parameters for proprietary or confidential information such as pricing formulas or trade secrets? Or does the Seller want a third party auditing? Warranties/Representations If certain functionalities or customizations were promised during a demo or in marketing materials are they replicated in the agreement? If manufacturer warranties are available, does the seller have an obligation to pass them on? What warranties are included? Is there a certain amount of time in which it is promised that what youre purchasing will work? If there is a warranty, are there instances in which you might void it? What happens if what your purchase breaks? Do you have to send it back? If so, at whose cost? Who is responsible for the time it takes to get it back to the Seller and then back to you? Are there warranty disclaimers? If so, do you understand what theyre saying? Confidentiality Is there information being exchanged that should be held confidential between the parties? Should the arrangement, transaction or contract itself be kept confidential? Does the confidentiality obligation apply with one party or both. How long is the obligation to hold something confidential? Dont want this to last infinitely. Are there certain types of information that shouldnt be kept confidential? For example, information that was already in the possession of a party, information that was received from someone outside the transaction, or information that must disclosed to authorities. Risk Allocation/Liability Indemnity. If there is property damage or someone is hurt who is responsible and how much are they responsible for? If the agreement states you wont be responsible for X, when does that kick in? At the time a claim is filed? Or after its been resolved? Notification; exclusions. If a claim is filed, does a party have an obligation to notify the other? Are there instances in which a party wont defend, or indemnify, another party against a claim? Limitation of liability. Have one of the parties limited its liability for damages that result from the agreement? Either using a monetary cap or rejecting liability for certain types claims? Exclusion of certain indirect or consequential damages. There are some types of damages that dont directly flow out of a breach of a contract. For example, where one party misses an order because the other delivers shoes late, or one party couldnt finish a job because the other partys equipment didnt work right. These arent necessary a direct result of a failure under the contract. That being the case, are the parties going to agree to be responsible for them? Or are they going to reject liability? Intellectual Property
Erin McClarty Esq. 2012 All rights reserved

 If intellectual property (trademarks, copyrights, patents, trade secrets) will be created during the transaction: How will the IP created before the transaction be treated? Will each party maintain the rights to IP it created, developed or owned beforehand? How will the IP created during the transaction be treated? Will the Seller keep it? Is the buyer asking that it all be assigned to them? Or will it be owned jointly? Note: Where ownership goes entirely to one or the other party, the party without ownership will probably want to discuss getting a license to us the IP to carry out its role under the Agreement where necessary. Term of the Agreement/Default by Parties Term of the Agreement. Does it end once the transaction is over? Can the agreement be renewed? If so when will the renewal take place? Will renewal be automatic or require the consent of both parties? Termination. Who can terminate the agreement? When can they terminate and how? Will parties be able to terminate out of convenience or only where there is a breach? What must the parties do if there is termination? And what are they responsible for? Breach. Aside from failure to pay or deliver on time, what other events will constitute as a breach (ex. illegal acts, bankruptcy, breach of confidentiality)? What happens if a party breaches? How do the parties go about notifying the other of the breach? How long does a party have to fix the breach, if allowed? If the breach is not corrected, and the agreement is terminated, are there items that should be returned or destroyed? How will payment be worked out? Where there is a breach because of circumstances outside the control of the parties will it be excused (i.e. not count as a breach)? If so, is there a Force Majuere clause detailing what circumstances will be excused, and what will happen if a Force Majeure event happens? Are there exceptions? Assignment and Other Miscellaneous (but important) Provisions Assignment. Is the agreement assignable? Is there an assignment clause? Notice Provision. If a party needs to terminate the agreement, or let the other party know about a breach, have the addresses of each party been provided in a Notice Provision? When will notices sent by mail or carrier be considered delivered to the other party? Entire Agreement Provision. Is there a provision stating that the agreement is confined to that in the contract? Governing Law Provision. What law governs the agreement? Is there language detailing how disputes are resolved (arbitration or litigation) and what geographical location it will take place. Will the governing law change depending on the claim (for example, where a party is threatening to disclose confidential information the other party)?

Erin McClarty Esq. 2012 All rights reserved

Dispute Resolution Provision. How will disputes under the agreement be resolved? Do the parties want to require managers come together before legal action is taken? Where legal action must be taken will the parties be able to go to court or must they arbitrate? Waiver Provision. The parties will reserve the right to enforce the agreement, even where they may not have enforced it in the past. If so, then is that stated in a Waiver or Non-Waiver provision? Severability Provision. In some states, where there is an illegal or unenforceable provision it can avoid an entire agreement. To avoid this, is there a severability provision allowing illegal provisions to be removed? Survival Provision. Depending what your role is in transaction, there may be certain provisions you want to survive the agreement even though it has ended. Some examples might be the confidentiality provisions (if there are any), payment, sections dealing with the risks assumed by each party and the liability, etc. There other provisions such as those addressing third party beneficiaries, whether multiple copies of the Agreement may be executed, how headings will be read and etc. that will depend on the parties and the transaction. Logistics Have you made sure youre familiar with the vendor, their credit history, past transactions? Is the scope of the agreement, and obligations of both parties, clear? Are all necessary attachments and exhibits referred to in the agreement attached? Has the pricing changed from when negotiations began? Are the prices purchase amounts, milestones and delivery dates still correct? Have you read and truly understood the entire agreement? Attachments and Exhibits Are the applicable delivery schedules, milestones, acceptance tests, etc. attached? Try not to attach marketing or sales materials. Particularly if they dont address customizations promised to you.

Erin McClarty Esq. 2012 All rights reserved