The Devil is in the Details: Why There is More to Agreements Than Liability Caps and Indemnities

While parties - with justification - tend to focus on those “big ticket” terms with which we are all very familiar (e.g. indemnities, liability caps, and termination rights), the success or failure of a project frequently hinges on lower profile provisions: that is, on provisions that dictate how the contract operates to address day-to-day issues, not the bet-the-company litigation. Drawing from experience over the past decade, this article explores practical strategies to address common key issues which are critical to operations but which have traditionally had a lower profile: namely, that (1.) align with the project methodology (e.g. waterfall vs. agile); (2.) emerge operational problems early; (3.) escalate problems in a timely manner; (4.) incentivize the vendor to achieve positive dispute outcomes; (5.) ensure customer has reasonable time to dispute issues; (6.) start the contractual limitation period only after sufficient dispute details have been provided; (7.) require automatic escalation for repeating problems; (8.) prevent incentives from disrupting the resource allocation of the vendor; and (9.) incorporate a structured penalty mechanism, so to avoid the problem of penalties that, in practice, are too big to use.