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Details matter

June 3, 2014

For those who are having big thoughts, big ideas, the details often seem irritating and irrelevant. But in the world of contracts, it is the details that often spell the difference between success and failure.

This was illustrated in a presentation today at an IACCM meeting in San Diego. Professor Nancy Kim, from the California Western School of Law, presented on the effects of electronic contracts on negotiated terms. She was making the point that many organizations enter into long and exhaustive negotiations to establish their trading terms, but they may ignore the way that suppliers then contract for subsequent supply of software or service through various forms of electronic acceptance that could add or amend terms in a substantial way.

Suppliers have sought to cut costs and raise compliance through the adoption of web-based contracts. Electronic ordering is accompanied by the need for the user to click ‘I agree’. Professor Kim explained the various legal decisions that have defined the acceptability of this approach, but went on to explore the implications in a b2b environment, where the parties may already have a negotiated master agreement 0r contract terms. In that case, could the actions of a user who clicks ‘I agree’ override the negotiated terms?

The answer, according to Professor Kim, is potentially yes. So if you do not want your carefully negotiated terms (and more importantly, the assets or principles they may be protecting) to be at risk, there are several things a buyer should consider:

– coordinate internally to develop contract provisions that invalidate clickwrap modifications

– address the possibility that a third party integrator may be involved and consider their impact on issues such as authority to contract and related indemnity coverage

– recognize that your approach for software may not be applicable for services (in the US especially, aspects of UCC may not apply)

One area for attention is the Entirety of Agreement clause, where you may wish to specify that a negotiated and signed agreement will always prevail over an electronic agreement.

Of course, if you are a supplier of goods and services, the opposite of this advice may be true; you need to check carefully whether key electronic terms – either current or future – may have been excluded as a result of some past negotiated agreement with a customer.





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