Test Your Procurement Skills: Reps and Warranties and Disclaimers, Oh My!
Here's an actual disclaimer provision added by a supplier, which immediately followed a representation and warranties section containing, e.g., a warranty against infringement. I felt all warm and fuzzy when I saw the opening clause in the disclaimer ("Other than as expressly provided for herein..."), believing that my express reps and warranties in the prior section weren't disclaimed and were still valid. So—specifically in reference to my express reps and warranties—should I feel warm and fuzzy or should I feel cold and prickly?
15. Disclaimer of Warranty. OTHER THAN AS EXPRESSLY PROVIDED FOR HEREIN, SUPPLIER AND ITS LICENSORS MAKE NO REPRESENTATION, WARRANTY, OR GUARANTY AS TO THE RELIABILITY, TIMELINESS, QUALITY, SUITABILITY, TRUTH, AVAILABILITY, ACCURACY OR COMPLETENESS OF THE SOFTWARE. SUPPLIER AND ITS LICENSORS DO NOT REPRESENT OR WARRANT THAT (A) THE USE OF THE SOFTWARE WILL BE SECURE, UNINTERRUPTED OR ERROR FREE, OR (B) THE SOFTWARE OR THE SERVERS THAT MAKE THE SERVICES AVAILABLE ARE FREE OF VIRUSES OR OTHER HARMFUL COMPONENTS. ALL CONDITIONS, REPRESENTATIONS, AND WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW BY SUPPLIER AND ITS LICENSORS. THE SOFTWARE HEREUNDER IS BEING DELIVERED OVER THE INTERNET, AND ACCORDINGLY, IS SUBJECT TO LIMITATIONS, DELAYS, AND OTHER PROBLEMS INHERENT IN THE USE OF THE INTERNET AND ELECTRONIC COMMUNICATIONS. SUPPLIER IS NOT RESPONSIBLE FOR ANY DELAYS, DELIVERY FAILURES, VIRUSES, HACKER INTRUSIONS OR OTHER DAMAGE RESULTING FROM SUCH PROBLEMS.
Posted by Stephen Guth at 6/4/2010 10:42 AM 
Categories: Terms and Conditions Negotiations
Tags: Training
Categories: Terms and Conditions Negotiations
Tags: Training
I'd tell the vendor to go take a flying leap!
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Well, your problem is this sentence:
"ALL CONDITIONS, REPRESENTATIONS, AND WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW BY SUPPLIER AND ITS LICENSORS."
What the right hand giveth, the left hand taketh away.
So, to directly answer your question: cold and prickly.
Oh, and as a footnote, I also don't like a disclaimer on "truth".
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Jeff,
You're right on!
Stephen
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It's quite common to see disclaimers of implied warranties, but disclaimers of express warranties?
It's almost insulting that someone would have the gall to include something like that.
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I agree!
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There is an awful lot to dislike in this provision, and the language belies the suitability, reliability, and usefulness of what looks like a "SaaS" (software as a service) agreement. As I am sure you are already well aware, in a SaaS solution, the functionality is hosted on the vendor's servers, and therefore the security and availability of the servers, the proper installation, configuration, and maintenance of the SaaS and the servers, and the proper functioning of the system all depend entirely upon the vendor. This provision potentially provides the vendor a complete pass on responsibility and liability.
I would expect that there is an SLA in the agreement. If so, what does the SLA cover, and what are the SLA metrics? I am confident that the sales people made lots of promises about the reliability and robustness of their solution. They should live up to those express warranties. I would also expect and require that the vendor host the SaaS in a hardened data center environment where redundancy for power, Internet access, fail-over servers, etc. exists. Moreover, the vendor systems must be hardened against intrusion and infection by viruses and malware.
In light of this language, have you addressed the issue of continued data availability by requiring the vendor to provide periodic backups (daily or weekly) of your data in an open standard format, either directly to you or a designated data escrow agent? If they cannot guarantee the security of their system (whether through hacking or viruses) or availability across the Internet (excluding access issues beyond their reasonable control), and they disclaim all damages associated therewith, they are really creating a tremendous liability issue for you – especially if there is a data breach. I wonder what the limitation of liability and indemnification provisions state.
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Hi Charles,
Excellent feedback and information!
Best,
Stephen
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Definitely "cold & prickly"; although not unusual at all. The "other than as set forth herein" usually provides some measure of comfort, to the extent that you have good issue circumvention guarantees, a lengthy warranty period, and payments for software and some services dependant on acceptance of typical SDLC deliverables. I really don’t like the last sentence and always include a clause that expressly warrants no disabling code, or other "trojan horse" devices.
I could read this as customer hosted software or SaaS as previously noted, but if it is SaaS, this language would be in such stark contrast with my SLA's for Uptime, Performance, and Functional affirmations as to potentially render them impotent and unenforceable. If software, some states consider software delivered electronically to be "intangible" and therefore not subject to sales taxes. Buyers should review their State's DOR guidelines for applicability.
I really liked your prior article on keeping the lawyer away from your deal. Although I didn’t share it word for word (don’t know them that well yet), we are (thankfully) working our deals largely in this manner. We are quite fortunate in that our legal resources are astute, pragmatic, and without pretense or formality. Keep up the good work.
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