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Contract drafting for an engagement
From: "Craig Wright" <cwright () bdosyd com au>
Date: Wed, 17 May 2006 16:03:50 +1000

There has been a bit floating about in regards to contracts for testing
and liability. First before you even start - ensure that your
Professional Indemnity [PI] insurance is current.

Point 1, get a good draftsman! This is a specialist lawyer who creates
contracts for a living. In law there are specialisations. A good draft
will save heaps of time in court and save money in the long run - esp.
if anything goes wrong.

If you must at least help in drafting a contract (or formulating a
template) here is some rather general advice. Take it as you will and
this will not replace several years in law school so again pay someone.
Get it in the form of a DEED!

1. Use plain language contracts.
2. Define ownership rights (both legal and equitable) in the process and
3. Include an Intellectual Property [hereafter IP] assignment clause.
4. Define a technology license for the IP.
5. Set the locality and process for disputes. Have a mediator or
arbitrator as a first line of negotiation
6. Setup pre-contract terms. See below (1)
7. Avoid any lack of clarity - spell things out in detail and agree to
all changes in writing.
8. Identify all contract terms (write them down - even the oral ones);
a. Express written terms
b. Express oral terms
c. Implied terms.
9. Make all terms clear - clear terms have one and ONLY one
10. A clear term is clear in context
11. Express terms, conditions and warranties clearly. Define them
12. Include an ability to change the agreement if necessary (even costs)
13. detail site preparation, installation and testing
14. define expectations, documents reports etc
15. PAYMENT. How, when and under what recourse can this be withheld
16. personnel, records reporting and audit provisions
17. confidentiality
18. ownership and risk
19. systems warranties (from both sides)
20. IP rights warranty, indemnity and infringement
21. Escrow of reports/data/findings in some cases
22. delays and liquidated damages
23. indemnity and insurance
24. exclusion and limitation of liability
25. force majeure
26. dispute resolution (inc. alternative dispute resolution)
27. suspension of services
28. Term of the contract
29. termination
30. what happens after termination
31. subcontracting
32. notice
33. assignment
34. severance
35. waiver
36. further action
37. choice of jurisdiction and law
38. entire agreement clause

Define thew minimum service levels in the contract. If you look as if
you are trying to supply a valid service, the court is less likely to be
hostile to your claim.

Use the contract as a risk management tool. Clearly express risk sharing
and distribution. Discuss the risks openly with the client.

Do not make false or misleading statements or terms in the contract.
This will make it more likely that the court will rule against you.

To contradict popular belief, there is NO such thing as an international
license, worldwide license or another such thing.

Looks complex, it is. Again... pay for a good legal draftsman! If you
are not a lawyer, do not try to be one.


Example pre-contract clause,

1       Pre-contract Conduct
Each party acknowledges that:
        (a)     if negotiations do not result in a contract signed by
each of them, it is not entitles to any compensation from any other
party for any reason connected with the negotiations or their
termination (except compensation for any claim, if any, that by law may
not be excluded); and
        (b)     if it wishes to be paid for any services or damages
supplied to or against another party before a contract is signed by each
party, it must obtain that other parties written consent to that supply
and payment.

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those States and Territories of Australia where such legislation exists.

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