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RLI PROFESSIONAL SERVICES GROUP
PROFESSIONAL LEARNING EVENT
PSGLE 121
Contract Clauses:
An In-Depth Study of
Key Contract Provisions
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International Copyright laws. Reproduction,
distribution, display and use of the
presentation without written permission of the
speaker is prohibited.
© RLI Professional Services Group
You’ve secured the client and now it’s time to negotiate the contract. Successfully negotiating a fair contract is vital to the success of every business that
provides professional services, but often times
understanding what those provisions mean and how they impact your business may not be so easy. This course will provide an in-depth look at various key contract clauses, including drafting tips, that every
professional services firm needs to understand.
Course Description
Learning Objectives
Participants will explore 5 key contract provisions and how they impact your business:
Standard of Care
Limitation of Liability
Indemnification
Confidentiality Payment Terms
Disclaimer
All provisions in this presentation are furnished solely for educational purposes.
Nothing herein is intended as legal advice, nor as a
means of establishing an attorney-client relationship.
Laws and regulations may vary considerably by jurisdiction. Accordingly, you are advised to
consult a knowledgeable attorney before making any contractual modifications.
― A Wise Lawyer
What Should Any Contract Do?
Unambiguously describe what you are agreeing to do
Specify when you will do it
Identify your client’s obligations
Identify the expense and payment terms
What Is Unique About Professional Services Contracts?
Professionals with ‘common law’ duties
to your client
You are generally insured for your
failure to perform your services in
accordance with the ‘common law
standard of care’
If you agree to meet a higher standard or assume liability by
contract you wouldn’t otherwise have had
you may be uninsured!
Standard of Care
Standard Of Care
Ethical or legal duty of a professional to exercise the level of care, diligence,
and skill prescribed in the code of practice of his or her profession, or as
other professionals in the same discipline would in the same or similar circumstances.
--The Business Dictionary
How is the Standard of Care Determined?
Common Law
AgreementConduct
Superlatives and Extremes
Very innovative and precise
State of the art
Superior
MAXIMIZEWORLD CLASS
More Superlatives and Extremes…
Promises
Assure
Ensure
Insure
Attest
Represent
Guarantee
Will
Shall
Manage
Approve
Advise SufficientOversee
Suitable
Administer
Control
Adequate
Unclear Or Misused Words
Supervise
Scope of Services
The Consultant will provide and perform services as reasonably requested within the scope of services outlined in Exhibit A. The Consultant will perform all services:
• in a reasonably timely manner;
• in accordance with applicable laws and regulations; and
• with professional skill and judgment.
No warranty or guarantee either express or implied is made or intended by this Agreement.
Limitation of Liability
Limitation of Liability
Limitation of
Liability
Capped to a Dollar
Amount
Exclude Consequential
Damages
Exceptions
Your Fee
Available Insurance Proceeds
Limitation Of Liability – Standard Provision
To the fullest extent permitted by law, the total liability, in the aggregate, of CONSULTANT and CONSULTANT’s officers, directors, employees, agents, and subconsultants to Client and anyone claiming by, through or under Client, for any and all injuries, claims, losses, expenses, or damages whatsoever arising out of or in any way related to CONSULTANT’s services, the Project or this Agreement, from any cause or causes whatsoever, including but not limited to, negligence, strict liability, breach of contract, or breach of warranty shall not exceed the total compensation under this Agreement.
18
Consequential Damages Waiver – Standard Provision
Neither the Client nor the CONSULTANT shall be liable to the other or shall make any claim for any incidental, indirect or consequential damages arising out of, or connected in any way to the Project or this Agreement. This mutual waiver includes, but is not limited to, damages related to loss of use, loss of profits, loss of income, loss of reputation, unrealized savings or diminution of property value and shall apply to any cause of action including negligence, strict liability, breach of contract and breach of warranty.
19
Indemnification
Indemnification Provisions
Review it carefully
It should not be the only
provision you review
Limit to the liability of the
client for damages
resulting from your firm’s negligence
Should not obligate you to
defend the client before any
determination of liability
Sample Indemnification Provision
The Consultant shall indemnify and hold harmless the Client, its officers and employees from and against damages, liabilities, losses,
costs, and expenses, but only to the extent caused by the negligent acts, errors or
omissions of the Consultant, or of those for whom the Consultant is legally liable, which
arise out of the Consultant’s performance of its professional services under this agreement.
Confidentiality
Confidentiality
• A promise that limits access or places restrictions on certain types of information
Confidentiality
• Rights and duties created by statute, regulation, or common law
Privacy
• Physical and technical actions to assure Confidentiality or Privacy
Security
Guarding Confidentiality
Failures can lead to…
An excuse to terminate you.
Strict and expensive enforcement.
Substantial administrative burdens.
Denying you a complete set of project records.
Guarding Confidentiality
Narrow definition of “Confidential Information”
Try to require the confidential documents
must be identified in writing.
Exclude information you already have or that is
already in public domain.
Exclude information required to be disclosed by court or government
official, to prevent harm, or to perfect a claim.
Make certain that administrative burdens are manageable and do
not restrict project performance.
Include subconsultants.Confirm you may retain
a complete set of project information.
Try for mutuality.
Confidentiality
The Consultant acknowledges that its employees, subcontractors and agents may be exposed to certain information, materials, and property, including but not limited to financial information and client lists, related to Client and its activities that Client may consider to be confidential or proprietary (“Confidential Information”). The Consultant shall respect and maintain the confidentiality of the Client’s Confidential Information and the Consultant, its employees, subcontractors, and agents shall not use or divulge, or cause to be used or divulged, Client’s Confidential Information or proprietary property without the express authorization of Client. This provision shall survive the completion or termination of this Agreement.
Privacy
Individual first name or initial + last name plus the following:
User IDs, passwords, mother’s maiden name, answers to other security questions
Government identification number (driver’s license, SSN)
Financial account numbers and security codes
Employee identification number
Biometric data: fingerprints
Medical Information/Personal Health Information(PHI)
Personally Identifiable Information(PII)
Laws protect “personal information”
Frequent Allegations of a Privacy Breach
Failure to protect customer information/privacy
Reduction in value of claimants’PII
Failure to notify/timely notify
Cost to reissue cards/open new accounts
Cost of fraudulent purchases
Cost to inspect and repair computing devices
Redress—
credit monitoring
identity theft insurance
Regulatory Actions—fines and penalties
Payment Terms
Payment Provisions
Is the fee adequate for the services?
Is the fee adequate
based upon the
schedule?
Is the fee adequate in relationship
to the business terms?
Are there provisions that
allow for changes to fee
based on additional services?
Payment Provisions
Is there a clearly defined
process of invoicing and
payment?
Does the contract
clearly define when you
are going to be paid?
Is your payment
contingent upon receipt of money by your client?
Does the contract clearly
define the process by
which you have to go through in
order to get paid?
Payment Tips
• Keep close tabs on payments;
• Follow up promptly and regularly regarding payments that are overdue and outstanding;
• Do not let outstanding invoices linger without attempting to receive payment; and
• The longer an invoice is outstanding, the harder it is going to be to get paid.
Interest Provisions
Include a provision that provides the right to charge interest on overdue outstanding balances. Why?
Because interest provisions are:
• Not a controversial term to incorporate into your contract;
• A deterrent to letting outstanding invoices linger and encourages timely payment; and
• An effective trigger to induce payment of overdue invoices.
Sample Payment and Interest Terms
Invoice Language
Invoices are sent monthly for services performed during the previous month. Payment is due upon receipt. A late charge will be added 30 days after the invoice date at 1.5% per month.
Attorneys’ Fees
Include a provision to provide recovery of costs, including attorneys’ fees, to collect unpaid invoices.
Sample Attorneys’ Fees Terms
Collection of Fees and Expenses
If it is necessary to enforce collection on any amount past due under this Agreement, the Consultant shall be reimbursed for all legal and other reasonable costs related thereto, including attorneys’ fees, court costs, expert witness fees, professional and administrative time at regular hourly rates and other collection costs.
Negotiation Tips
Negotiation Tips: Client Obligations
Pay you for services
performed
Give you all information you need about the
project
Designate someone as a representative
Negotiation Tips: Contract Review Summary Letter To
Client
• Clear, concise identification of the provision(s) at issue
• Reasonable wording for modification that takes into consideration your client’s interest as well as your own
• Prepared in a manner that takes into consideration what is in the best interest of the project
Contract Language Resources
• Attorneys
• Brokers
• Insurance Companies• http://www.rlipsg.com/pdf/webinar-PSGLE102.pdf
This concludes the Professional Services Group
Learning Event
Marie Bernier, Senior Risk Management
Consultant, Specialty Products Client Solutions
