Quick Tip #4: Common traps of interrelated clauses: Multiple layers of traps across several contact documents
This is the third of three common traps of interrelated clauses. If you’d like to know why we’re talking about these see Quick Tip #1.
If you are having to contend with contract materials that are structured into several different documents, we often see similar clauses with similar rights across those different documents. This means that if you manage to remove an unacceptable provision in one place, you’re still at risk of being caught by a similar term in another document. We see this a lot in major software vendor contracts. The key to avoiding this is to ensure that at least one member of the team (typically the lawyer) has an overarching view across all the documents.
It’s becoming increasingly common, for example in SaaS agreements, to insert hyperlinks to different sets of terms and conditions. This is clearly a useful mechanism for SaaS providers when having to enter into contracts with hundreds of customers, however, from the customer’s perspective presents the following risks:
The supplier can make unilateral changes to terms that add risk that the customer has not signed up to in the reviewed contract terms.
There may be interrelated or contradictory terms between the reviewed contract terms and the terms residing behind the links so that if you agree an amendment to the term in one place you may still be caught by the contradictory term in the link.
Approaches that address these risks include:
set all relevant terms in the contract itself to ensure sufficient contractual certainty for both parties; or
if it is not practically possible to set out the terms and if a hyperlink is necessary then either:
state that the terms in the link as at the date of signature apply to the contract, thus avoiding a unilateral right to change these terms post contract signature; or
if a supplier insists on having the freedom to change the terms, ensure that supplier is required to notify the customer ahead of any change and afford the customer the right to terminate the contract if the customer considers the change to be detrimental.