Technology Customers and Vendors – Manage Deliverables while Dealing with the Impact of COVID-19
March 23, 2020
Technology customers and their vendors are under enormous stress to ensure contract performance with limited staff and systems. Your management and legal personnel, however, should be very busy and focused on managing deliverables and reducing risks. This can and should be done remotely, while protecting your people with social distancing.
See below for valuable actions you should be taking:
- Prioritize. Rank threats to your business based on proximity, probability and amount of harm. Then, customize your preventive and mitigation methods based on your situation. See a step by step guide on how to do this HERE.
- Security. First, ensure no preventable harms occur during these chaotic times by maintaining and increasing security to prevent internal and external threats that take advantage of the situation.
- Communications Up and Down. Talk early and often with your contract and legal counterparts to ensure you are in synch. Expressly ask for direction to either continue or stop work, or to delay deliverables. Ensure you are giving clear guidance to your personnel and your subcontractors. Now is the time for effective communications.
- Records and Process. Read your contracts, task orders and delivery orders for specific due dates. Keep good records to show diligence, compliance, disputes and costs incurred. Much of your future rights, remedies and recoverables will depend on how much you can prove. Anectdotal evidence/verbal records will not be sufficient. File formal notice and claims in strict accordance with the requirements.
For Customers in Particular
- Sweeps Clause. Review your Sweeps Clause to understand the scope of your vendor responsibilities. This should include, at a minimum, all tasks, products and services incidental to express requirements.
- Service Levels (SLAs). Check the exceptions to the SLA requirements to ensure only authorized degradations and outages are excluded from calculations.
- Indemnities. Invoke indemnities for vendor breaches that are not otherwise excused. This should mean that the vendor should step in and defend third party claims arising from covered risks.
- Warranties. Exercise warranties to require your vendor to promptly repair or replace any faulty product or service. This is easier and more efficient than paying these costs yourself and trying obtain reimbursement after the fact.
- Exceptions and Liability Caps. Understand any exceptions to liability caps so that you can pursue consequential damages. Direct and third party damages may be allowed so that you can get coverage for your customers and other suppliers.
For Vendors in Particular:
- Savings Clause. Review your Savings Clause to understand when you are excused from responsibilities for things your customer should have completed. In particular, this should include the failure to provide essential information, direction or decisions.
- Service Levels (SLAs). Check the exceptions to the SLA requirements and invoke authorized degradations and outages so that they are excluded from calculations.
- Insurance. Contact your insurance agent and get an initial summary of your coverage. Contact your legal personnel if you think your insurance is not stepping up to make payments.
- Force Majeure. Understand any Force Majeure excuse that you may have for Governmental acts or other catastrophic or unforeseeable events. This probably does not prevent a breach claim or potential termination, but it can excuse the breach and prevent liability.
- Exceptions and Liability Caps. Analyze any liability caps to confirm the boundaries of what is in and out of scope of liabilities, such as third party consequentials and any financial limits.
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Technology Transactions Group.