D.C. Toedt over at On Technology Contracts posted a recent article about keeping track of Insurance Certificates. He relays a great story about the importance of asking for them, but more importantly, being able to produce them when needed.
This is such a simple thing to do when you have a good Contract Management System. It’s merely another document you’d upload and track. Heck, Novatus Contracts even allows you to create event notifications for certificate renewals. Need to remember to ask that it’s expiring? No problem – the system will automatically send the alert to the vendor (you can get cc’d if you wish) asking for a new one. It’ll even take it one step further. If you don’t “close out” the event after a certain date (such as when you receive the new certificate), you can re-route the alert to you (or whomever is in charge of managing that vendor) for handling.
Of course, this is also available for any other supporting documents you want to include or for any other trackable metrics (milestone due dates, payment dates, etc).
But you have to have a system that can handle it. What would you rather have: the mild expense of a good contract management system? Or the exhorbitant expense of an unexpected and uncovered personal injury claim? Yeah, I thought so. Tell Novatus I sent you or request information here.
Eric Goldman on “Amending this Agreement whenever we want” (the Harris v. Blockbuster case from earlier this year). Dead on, as usual, so I’ll repeat his mantra here: “STOP PUTTING CLAUSES INTO YOUR CONTRACTS THAT SAY YOU CAN AMEND THE CONTRACT AT ANY TIME IN YOUR SOLE DISCRETION BY POSTING THE REIVSED TERMS TO THE WEBSITE.”
Sherry Gordon (no relation) over at Spend Matters wrote yesterday on the topic of suppliers charging customers for the privilege of auditing. No, we’re not talking about just covering the costs of the audit itself, we’re talking about a surcharge on top of the auditing costs – a fee to the supplier for the burden of auditing. Ms. Gordon’s article was focused around a survey in the biotech/pharma industry which provided some interesting (but barely statistically significant) insights into auditing and whether customers would entertain the thought of paying a surcharge.
Once again, however, a lot of this issue can come down to a well-worded contract that spells out the costs, frequency and burden of the audit. My template language typically says that the party requesting the audit has to pay for it (unless a major discrepancy is found – especially around license usage), and that the audit has to be performed after prior written notice (usually more than 10-15 business days in advance) and at a time that’s mutually convenient. I suppose the “mutually convenient” language could allow for some wiggle room – some of the survey respondents said that they had received push back to audits in the form of delays, with suppliers saying that all slots for the year had been taken. But generally speaking, this overall language should prevent the supplier from charging you for the privilege.
Another interesting wrinkle noted by Ms. Gordon’s other referenced article is the practice of a supplier offering an existing audit up at a cost to the other party. Actually, this is probably not such a bad idea – again, as long as you discuss the practice beforehand and work out a few points for clarification. These points would include the cost of the purchased audit, the name/quality level of the auditing firm, and responsibility for failures of audited processes/procedures/etc because the selected auditor wasn’t as good as hoped. In other words, paying a fee to have access to an audit already completed isn’t a bad idea. It saves time and should be EXTREMELY cost effective (ie: I would ask them how many customers they have that will get the audit report – ‘x’ … and then offer them 1/x of the actual cost of the audit). But my real concern is that they would use Joe’s Auditing Shack to perform the audit – and that the quality wouldn’t even be worth the 1/x cost.
Oh, and just in case you were wondering… I would still want to know what any customer was going to do with an audit finding. In many more cases than I would like, it ends up being treated like source code escrow or annual financial reports – an insurance policy that has no actual value and isn’t even reviewed by anyone on the requesting side.
This is perfect and absolutely wonderful. Too bad they’re not tracking more.
If you’ve ever talked with me for more than a few minutes, you’ll discover that I’m a huge Disney geek. I love the movies, of course… but the Parks are my favorite. I’d live at Disney World if I could… and apparently, I’m not the only one. While doing an online early checkin today, here is an excerpt of the terms I got back from the Disney Company:
Neither I nor any member of my party occupying any resort accommodation have/has any intention of making, and will never make, this resort accommodation a legal domicile or principal dwelling. My/our legal domicile is and shall forever be outside the Walt Disney World Resort.
Ever wonder why you spend the bulk of your time inserting contract language for this warranty or that limitation of liability… only to get to the end of the agreement and then disclaim a few large bodies of law, such as the UCC or UCITA? If you’ve not had the pleasure of attending law school, do you know what the UCC really is – how it came to be the guiding force behind commercial transactions? Would you be shocked to learn that UCITA is deemed by some states to be so awful that they’ve enacted so-called “bomb shelter” legislation so as to prevent its application within its borders?
I won’t bore you on the whole history of the UCC, or UCITA for that matter. What you need to know is the basics. These two bodies of law are “models” – written by extremely gifted legal professionals and designed to “harmonize” behavior between the states. This is important because where Federal law doesn’t tread, each state can act independently. When commercial transactions are involved, Federal law perks up and starts to notice, as the Commerce Clause of the US Constitution tries to keep commerce flowing between and among states. The Commerce Clause is the reason why UPS or FedEx can ship from one end of the country to the other… and why you don’t have UPS-Indiana competing with a UPS-Illinois. But states don’t like the Federal government leveraging the Commerce Clause on them – so they try to work out basic rules that can apply to transactions uniformily. Hence the “U” in each of the above two models. It stands for “Uniform” – with the intent that each state (perhaps with slight modification) will enact a form of the model laws so as to create a smooth playing field when dealing with issues that involve more than one state.
Commerce isn’t the only playing field of course (criminal law, for example, is another area where folks attempt harmonization). But it’s a biggie. And commercial transactions involving software have somehow seemed to be confounding for quite some time. As better explained here, the UCC was modified in the 90’s to try to include software (the UCC was originally written for hard goods). That really didn’t work out so well, and they tried again with UCITA. For a variety of reasons (most notably, the feeling by buyers that UCITA was severly biased towards software publishers), lobbying efforts were successful in blocking the passage of UCITA in almost every state – and, as noted previously, several states even passed laws which prohibited UCITA’s application in their state. It was seen as one of the largest failures of its kind.
But the American Law Institute doesn’t seem to know how to call it quits. They’re trying again with the release of the Principles of the Law of Software Contracts. As I understand it, Principles are less than models (ie: no “U”). However, I’m just not sure that they’re even needed now. Software licensee’s and licensor’s have been chomping at the contractual issues now for almost 40 years. I don’t believe that the Principles are necessary – and by the time they’d even gain traction, some new software licensing model will invariably come out and introduce some wrinkle not previously covered by the existing Principles.
So while I applaud the ALI for working on this effort, I just don’t know that it’s worth their time. Because remember, even if these Principles are followed by someone, they don’t have to be (they’re not designed to be enacted into law, merely serve as guideposts). But even if they WERE law, they can be completely disclaimed. Which means that panicky articles like this are also not really true.
Oh boy. This is gonna’ be really interesting. If auditors are held liable for their audits (method and/or results), the rules of the game are about to change.
I completely agree with David Dobrin. It’s hard to convince people to do it, of course. But read his logic. 1/200th. I think that is about the right threshold – it might even be a little low (my life insurance policy is about 1/500th… my car is about 1/166th – but doesn’t take personal injury into account… my home is about 1/1600th).
Hmmm… the more I think about this, the more I think it would be really easy to convince my clients of this. Anyone have a counter argument?