IT negotiating points

By Ed Foster, InfoWorld |  Business

How should corporate customers design their software procurement contracts to
protect? Here's a short list of the things experts I've talked to recommend:

1. Governing law

The first and most obvious step is to have the law of the contract governed by a
state that shows no sign of passing UCITA soon. But as it's hard to say where the
software lobby might next concentrate its efforts -- and its green stuff -- a better
alternative might be a "bombshelter" governing law provision. Similar to the
legislation enacted in Iowa, the contract should say that in the event UCITA is enacted
in your state, the governing law remains the one that existed when the contract was
signed.

Don't overestimate how much protection this will give you. If your state does enact
the software industry's law and you find yourself in a contract dispute with a local
software vendor, there is no way to guarantee the court won't use UCITA principles in
adjudicating it. In fact, we've seen court decisions (Hill vs. Gateway, Mortenson vs.
Timberline Software) that used UCITA-like logic while it was still being drafted, so
you can't base your defense solely on governing law.

2. Disavowal of remote disabling

The contract should explicitly state that electronic self help will not be used to
prevent your use of the software and that you may only be deprived of its use through a
court order. More importantly, the vendor should warrant that the software will contain
no undisclosed restrictive code or automatic restraints that are not specifically
authorized in the agreement. (For example, if the vendor wants to include a metering
system to enforce a 100-user limit in the license, the contract must affirm they have
the right to include that restrictive code.) Further, they should warrant they will not
introduce any restraints at a future date via modem, software update or any other means
without first obtaining your approval in writing. And no limitation of liability or
consequential damages should apply to a breach of these provisions.

3. Product capabilities

As UCITA makes it very difficult to reject a product even for glaring defects, you
should spell out in the greatest possible detail all the capabilities the delivered
version must provide. The vendor should warrant the software will perform substantially
as promised in all product descriptions, literature, documentation and correspondence
provided to you. If the vendor fails to meet any of its express warranties, you should
at your option have the right to reject the tendered product in total or in part and to
withhold payment until all requirements are met.

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