Technology Contracts: Lawsuits Waiting to Happen

Got a technology contract to cover your latest deal, like an acquisition, merger or commercial transaction? It may not protect your interests the way you think it does.

By Mark Grossman
Mon, September 29, 2008

CIO — Got a technology contract to cover your latest deal, like an acquisition, merger or commercial transaction? It may not protect your interests the way you think it does. Horribly written contracts for tech and telecom deals cross my desk every day—they're a lawsuit waiting to happen. When a lawyer writes a contract, he should be writing a document that tells a story about the deal, albeit with a tilt toward his client. Often, what I see isn't a tilt—it's illiteracy. (Also read The Keys to Vendor Management for more on the basics to negotiation to ROI and SLAs.)

In the past, legal documents, whether private placement, merger and acquisition, or documenting a large commercial transaction, used a time-tested formula established by quality lawyers. The deal process was a sophisticated one, done using a mature contracting process. The lawyers involved even understood what it was they were doing.

The problem these days largely surrounds tech and telecom contracting. Usually, the first draft of the contract comes from the seller of the services. It might be services like managed network services, the development and maintenance of a website with Web 2.0 features, or for the customization of some software. While in many ways the Web 2.0 world is more sophisticated than the go-go dotcom 1990s, more often than not these deals still show the wisdom of the 20-minute-old dotcom driving the deal. (All that's missing are pimples on the documents.)

However, don't think this arises only when doing deals with smaller or startup companies. I once did a deal with IBM and I smiled when I read the master agreement because it was a well-written document crafted by some major New York law firm. It had the pro-IBM bias that I expected, but it's simple to negotiate it back toward the middle (as your vendor is kicking and complaining—and lying—that you're the most difficult customer they've ever had).

But then I read Exhibits A - F. Now I was reviewing the workmanship of six different writers from different departments with titles varying from paralegal, to contract specialist, to sales person. They did not collaborate before they added their piece to the agreement and the only things they seemed to share was that none had ever read the master agreement and they had no skill in legal writing.

More Articles on Legal Issues:
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How to Comply With E-Discovery Rules Before You're Hit With a Lawsuit

The Keys to Vendor Management

Outsourcing Contracts: Clause Control

10 Questions to Ask Before Signing a Leasing Contract

Negotiating Long-Term Contracts Requires Strategic and Tactical Thinking

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