The Importance of Experienced Technology Counsel in any Service Agreement

You should seek appropriate legal counsel and advice before you buy or sell Professional Services, aka Consulting Service (for the purpose of this article jointly referred to as "Services"). It sounds easy enough to claim I know this consultants and I want him to do these 3 tasks. But anytime that you seek to offer to buy or sell Services it can trigger a broad range of issues, issues that may put you in violation of the law, or breach of contract, if you neglect to ask.

First, does the consultant in question have the right to freely contract with you?

                - he could be subject to a non-compete clause with a former employer;

                - he may not even be legally in the country; or be on a watch list(Denied Persons List; FBI watch list, Excluded parties List etc).

Second, is the consultant ready, willing and able to start the project in a timely manner; do they adequate resources to finish it in the time expected, and what are your rights and remedies if that does not happen.

Third, you need to control a Service engagement typically that is done through a combination of Project Management; and control over the purse strings.

                Project Management 

                1.) each party assigns a project manager to represent them in all matters on that project; except for financial PO approval;

                2.) the contract should call for weekly status meetings followed by formal written status reports: what was done on the project last week; what is expected to be done this week; any resource scheduling that needs to happen; tracking open items (like acceptance tests, or open   Change Order Requests);

                3.) Customer signed daily time sheets for T&M engagements

                Purse Strings

                1.) Payment upon completion of acceptance testing, linked to Milestone Deliverables;

                2.) Not to exceed payment commitment, with a duty for the Consultant to advise you in your    status Report that you have exceeded 75% of the PO authorized;

                3.) fixed price projects

The Service deliverable should be warranted to function properly for a certain period of time, and absent that include an appropriate remedy to correct the defective Service.

In addition to these items you have classical legal terms that deserve your attention in the Agreement such as:

- IP Infringement indemnification; just in case a 3rd party claims that the Service provided infringes upon their IP and files an action against you;

- a limitation of liability to limit the worst case amount of money at risk, this would typically exclude damages for certain claims like personal injury, breach of confidentiality, as well as the IP Indemnity.

- does your consultant have basic insurance, will they provide you with a certificate of insurance; how long should that extend after the project is completed and what is the risk to your organization without certain coverage, like errors and omissions etc.

If you or your customer have a compliance program that extends to this project you will need to ensure that you have appropriate coverage in your Services Agreement, or will be in breach.

The fact is, your goal may seem simple and straight forward but you would be well advised to seek expedited legal counsel in order to avoid unexpected surprises.

About the Author:

John P. O'Brien - Technology Attorney