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IT contracts: Why the back end is important

Tim Gole | July 11, 2013
There are some risks around technology service agreements in places you might not expect to find them.

I attended a presentation the other day where the speaker was exploring the very topical issue of the likely fortunes for the Australian economy following the collapse of the mining boom.

Being more optimistic than most, he was describing in reassuring tones some of the natural competitive advantages that Australia possesses, when compared to our competitors in the region. I was mildly surprised to hear our rule of law included in that list.

It's surprising because as a lawyer working on technology contracts, I have never really had cause to doubt whether the commitments I capture in a contract are enforceable (they are).

Quite rightly, however, the speaker made the point that for many countries around the world, including some of our regional trading partners, this is not necessarily a given.

I'm conscious that many project managers responsible for managing an IT vendor prefer to leave the contract in the bottom drawer. Even as a lawyer, I acknowledge there is a time and place for this style of relationship management (although I don't think it should be the normal mode of operating).

But for those who choose to manage to a contract, or who pull the contract out in moments of frustration or desperation, I have a prediction.

When a disagreement arises in the delivery of IT services, the dispute will almost always relate to the part of the contract referred to as the "back end" -- the contract schedules.

In the technology context, this is the part of the contract that describes the goods or services being provided, the service level mechanics, the pricing, and the governance.

As you can see, while they may be at the back of the contract, they are not just the minor details. They describe the essence of what is being provided, when, and for how much.

The contract schedules are not the natural hunting ground for most lawyers. Rather, the attention of a lawyer is almost invariably fixed on the "front end" of the agreement.

This is the part of the contract that contains the agreed terms and conditions (you know, the "legalese").

While provisions dealing with liability, indemnities and insurance are fundamental, and need to reflect an appropriate allocation of risk, a failure by either you or your lawyers to focus on the details in the contract schedules can be a wasted opportunity and end up costing you serious money.

Here's an example how this may occur. While a service description ought to describe what the vendor is responsible for providing, vendors often include detailed assumptions upon which those obligations are dependent.

These often completely excuse the vendor from the obligation to perform, or require the customer to pay the vendor additional fees. Often, there is very little governance around such assumptions.


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