Technology Contracts -

Major Clauses-
1 Schedule & 2 Delivery,
Milestone Acceptance &
Rejection

3 Warranty 4 Indemnity

5 Limitation of 6 Term &

Liability Termination
 What is the one
common intent of
all of these
clauses?

CLARIFICATION
 Schedule & Milestone - The “When?”- Scenario

Scenario: ABC Software Development Company ("Developer") and XYZ Client ("Client") have entered into a
software development agreement to create a customized e-commerce platform for the Client's online retail
business. The project is expected to be completed within six months.

The client wants to ensure that the progress of the project remains on track, hence, they want to facilitate a
payment schedule linked to the milestone progress by the Developer.

In this scenario, a "Schedule and Milestones" clause would be essential to ensure that both parties have a clear
understanding of the project timeline and the key milestones to be achieved. The clause would outline the
following:
 Schedule & Milestone - The “When?”
What does this clause help you with?
1. Removing Uncertainty with regards to deadlines. One of
the essential reason to put a Schedule clause would be
to fix a deadline on which a party would be obliged to
complete the work/project, otherwise would be held
liable.
2. Will provide measurability for assessing
completion/compliance
3. Without a Schedule & Milestone clause, the Developer
would not have any motivation to complete the work on
time (since it wouldn’t be time-bound).
4. Payments can be linked to milestones
5. Will have a direct bearing on breaches and termination
6. “Time is of the essence” contracts
 Delivery, Acceptance & Rejection - The “How” -
Scenario
Scenario: 1
Beta or Testing Phase: The software development agreement includes a beta testing or trial period to evaluate the software's
functionality, performance and user experience.

Purpose: The clause outlines the process for delivering the beta version of the software to the client, including the criteria for
acceptance or rejection based on the testing results and feedback provided by the client.

Scenario: 2
Change Requests or Modifications: During the course of development, the client may request changes or modifications to the
software's features, functionalities, or design.

Purpose: The clause specifies the procedure for delivering the modified or updated software to the client after incorporating the
requested changes, allowing the client to review and accept the changes before implementation.
 Delivery, Acceptance & Rejection - The “How”
(connecting the when)?
Scenario: The parties haven’t laid down or clarified each other on delivery of the
good/product, as to when will the party delivery the product (deadline), at which
location, etc.

Result: Utter chaos

Why is this clause important?

The Acceptance & Rejection clause gives you the authority to accept or reject the
delivered software/services under certain conditions.
● What condition should the software be in?
● Time and place of delivery- In case of on-premise delivery
● Quality
● Time-bound delivery
● It can be rejected on grounds of Technical Specifications.
 Warranty - A tale of broken promises- Scenario
Phoenix Web Service (PWS) is a cloud service provider and provides cloud services to different developers to develop their
own softwares on the infrastructure built by PWS.

Bingeflix (customer) is looking to develop their own online streaming website using PWS’s infrastructure and they have
entered into an agreement for the same.

Situation 1 : The SaaS provider guarantees that their platform will perform as described and meet the performance
specifications outlined in the agreement.

The "Warranty" clause would ensure that the SaaS provider warrants the performance and functionality of their SaaS
platform, providing the customer with assurance that the software will operate reliably and perform the intended functions.

Situation 2: The SaaS platform needs to integrate with the customer's existing systems, databases, or third-party applications.

The clause would require the SaaS provider to warrant that their platform is compatible with the customer's specified systems
or applications, ensuring that the SaaS platform can effectively integrate and work seamlessly within the customer's
technology environment.
 Warranty - A tale of broken promises
A warranty guarantees that something is true or will happen.

A stipulation - provides that if the guaranteed fact doesn’t turn out true, the
promisor will be on the hook for some remedy.

About anything, by anyone

A warranty can cover any topic, and it can come from either the customer or
the vendor, though you’ll see vendor warranties more often. Warranty is a
promise that something will be true in the future.

Types of warranties-
1. Warranty of function; -that software will work
2. IP/Ownership warranty; - I have IP!
3. Professional Services Quality warranty- quality of staff members
Note: This list is not exhaustive.

Warranties shift legal risk

Disclaimer of Warranties - which is about disclaiming warranties rather than

guaranteeing them.
 Indemnity - “Hand over the bill” clause- Scenario
Phoenix Web Service (PWS) is a cloud service provider and provides cloud services to different developers to develop their own
softwares on the infrastructure built by PWS. Bingeflix (customer) is looking to develop their own online streaming website using
PWS’s infrastructure and they have entered into an agreement for the same.

Issue 1-
Data Breach or Security Incidents: The SaaS agreement involves the processing, storage or transmission of the customer's data, and
there is a risk of a data breach or security incident occurring.

This would require the SaaS provider to indemnify the customer for any losses, damages, or liabilities resulting from a data breach or
security incident caused by the SaaS provider’s negligence, inadequate security measures, or unauthorized access to customer data.
Data Breach Indemnities can be mutual as well.
 Mutual Indemnities - Two way risk

Each party promises to protect the other against the same type of claim.
● Example: Data breach indemnity - Each party promises to provide protection against
claims related to data breaches that party caused, or breaches it’s accused of causing.
● In an IP indemnity, each promises to provide protection against infringement claims
related to technology or content that party provided.
 Limitation of Liability - More on passing the cheque-
Scenario
Situation 1: A software development project involves the creation of a financial management system, and there
is a risk that errors or defects in the software could result in huge financial losses for the client.

The "Limitation of Liability" clause would establish a cap on the developer's liability for any financial losses
incurred by the client due to software errors or defects, limiting the developer's financial responsibility to a
predetermined amount.

Situation 2: The software development project requires integration with third-party software or systems, and
there is a risk that the integration may result in third-party claims or legal disputes.

The clause would limit the developer's liability for any third-party claims, damages, or legal costs arising from
the integration of third-party software or systems, protecting the developer from excessive financial liability.
 Term & Termination

Termination clauses address four issues.

1. First, when, if ever, will the contract expire? What is its term or
duration?
2. Second, when can a party terminate for cause?
3. Third, when, if ever, can a party terminate for convenience: for any
reason or no reason?
4. Fourth, what happens after termination?

The term is the period during which the contract operates: its duration.

Term clauses often let the agreement renew over and over. If the term does
renew automatically, the clause will give one party or both the right to refuse
the next renewal.

A term clause may also address the duration of certain rights and obligations.
 Term & Termination
The usual cause for termination is breach of contract. Most clauses clarify that the breach must be
material.

That means a minor breach, like delivering software a day late, won’t authorize termination.
Often, termination for breach clauses require advance notice—30 days is common—and an
opportunity to cure.

Also, some contracts allow immediate termination, without an opportunity to cure, for
particularly important deadlines, usually through terms saying “time is of the essence” for that
particular performance.

Termination for convenience is an escape hatch.

It lets a party get out for any reason or no reason at all. If you’re afraid the contract might
become burdensome—including because of some business change you can’t predict—consider a
termination for convenience clause.
 Effects of Termination

Termination triggers certain clauses. They go into effect the moment the contract
terminates. Termination can trigger a variety of obligations. For instance, in some
contracts, each party should promise to return the other’s property upon
termination or shortly after.

Certain rights and obligations “survive” termination, though they’re not triggered
by termination, they are also called “Survival clause”.
 Payment Mechanisms- Scenario
Getbetter (client) is a sports training academy who have approached Makeitfast solutions (developer) to make a website and
a mobile application for the users of Getbetter so that they can make bookings, have a personal dashboard etc. on the app
and the website as well.

Situation 1- The software development project is structured as a fixed fee arrangement, where the client pays a predetermined
amount for the entire project.

The "Payment Mechanism" clause would specify the payment terms and schedule for the fixed fee, including any milestones or
deliverables upon which payments are based. It would outline the total amount, due dates, and payment methods for the
agreed-upon fixed fee.

Situation 2- The software development project requires ongoing support or maintenance services beyond the initial
development phase.

The clause would outline the payment terms for a retainer arrangement, specifying the retainer fee amount, duration, and the
scope of services covered by the retainer. It would also describe any limitations or conditions for the use of retainer hours or
services.
 Payment Mechanisms
● In a software development agreement, payments can be
made based on achieving different milestones.

● There may be a stricter clause stating that ownership of the

software will only be transferred to the client once full
payment is received. If payment is not made, the vendor is
not obligated to transfer ownership of the software.

● In an outsourcing agreement, the payment structure can

vary. It can be a fixed fee, payment per transaction, or based
on the number of resources dedicated by the service
provider.

● The chosen payment model depends on the business's needs

and the type of service provided. In some cases, a
profit-sharing approach may be used if the outsourced
process is crucial for the customer's overall business success.
Great Job!! Seems like
you’ve got the hang of
it :D

Thank You!!