Knowledge Series Part 2 of 3
Part 2 – Contracts with Customers – Key points to consider
- Scope of Work and Fees: In most cases, disputes arise as expectations were not correctly set in the beginning, and both parties have a different expectation from the arrangement. It is important that both parties are aligned from the beginning on the scope of work. Scope of Work along with exclusions should be clearly set out to avoid disputes. The Service Fee and payment structure along with payment due dates should be set out in the agreement. Obligation of tax payments and consequences of non-payment of Service Fees should be captured.
- Redressal of Complaints: The main reason for non-payment of fees is usually dissatisfaction in the services. In the event of dispute over non-payment of fees, the quality of services becomes subjective to the point of view of each party. An agreement should set out a complaint redressal mechanism with appropriate timelines to remedy any deficiency notified in writing by the customer. The Agreement should provide for a review period during which a customer should be required to notify any defects, post which the goods/ services should be deemed to be approved and accepted.
- Representations: It is important that every agreement sets out the basic representations and warranties in relation to the corporate status of each party, adequacy of infrastructure and financial capability to perform obligations under the agreement, adequate authorization to execute the agreement, binding effect of the agreement and absence of litigation, insolvency proceedings and any other restrictions from entering into and performing the obligations under the agreement.
- Usage of Intellectual Property: Parties should be clear on their rights to use the other party’s name and logo in its marketing activities. The Agreement should clearly set out if parties are permitted to use each other name or logo and the manner in which such usage is permitted. The Agreement should also set out an obligation to stop use of all intellectual property and return of such intellectual property upon termination of the agreement.
- Confidentiality: Details such as price list, marketing plans, business plans, internal policies and agreements are important assets of a Company, disclosure of such information can cause great loss to a Company. Accordingly, every Agreement should clearly identify confidential information and also set out restrictions on disclosure of such confidential information or use of such information for personal benefit. Procedure of return of confidential information at the termination of the agreement must be set out.
- Termination: Manner of termination should be clearly set out in every agreement to avoid disputes. The agreement should set out the notice period, the acts and formalities to to be completed by the parties at the time of termination of the agreement such as return of confidential information and intellectual property. The agreement should set out that termination of the agreement would not prejudice the company’s right to receive payments for services/goods already provided by it prior to termination.
You can read Part 1 of this Knowledge Series – Contracts with Employees here.
You can read Part 3 of this Knowledge Series – Contracts with Service Providers here.
For more information about Contracts with Customers you may write to us at:
solutions@bridgeheadlaw.com.
– Karan Narvekar | Partner
Views expressed are personal to the authors and do not constitute as legal advice.
