Recently, a client using a form agreement we had drafted told me that a Big, Important Customer had wanted to make changes to the agreement. It was “just boilerplate” – not financial – so the client made the changes without conferring with counsel.
The Customer’s legal department said that they wanted the client, an entertainment service provider, to be liable for consequential or incidental damages and to not limit liability to the amount paid under the contract – “but only” for gross negligence or willful misconduct. Sounds overly technical, and maybe harmless, right?
But this left the eager service provider exposed in several ways in the event of an accident:
- It invites a lawsuit so a judge or jury can determine whether the accident resulted from “gross negligence” rather than mere negligence;
- Insurance does not provide coverage for acts of gross negligence or willful misconduct; and
- The sky’s the limit, so a relatively small job could lead to tremendous liability.
What’s to be done? On the one hand, with a Big Important Customer, there is no “deal breaker” hoop through which the service provider client won’t jump. We get that. Negotiating is often getting the best you can, and accepting some risks, but getting the deal signed.
On the other hand, you won’t know if any concession is fatal unless there’s a serious accident. A few dangerous additions or deletions can kill all the protections that we designed the contract to provide. Those changes might not be fair – or even necessary. I would have argued that the entertainment provider is responsible for — and shouldn’t be potentially liable for — the same risks as, say, the software provider, and the contract should be scaled back.
Cutting corners now can be expensive later. It may never be a problem, if everything goes well. But did I mention, the Customer’s legal department made revisions, and the client didn’t even call their own counsel?
Do you have forms that you rely upon? What changes can you make to them without undermining the protections that they give?
