Separate Agreements for Software Purchase, Implementation

By on December 1, 2015

Eduardo Ramos and Eric Ray, Holland & Knight LLP

If a business buys specialized software and pays an expert to adapt and set it up, there are two separate contracts involved, with two very different warranties. It’s crucial to keep the two contracts separate. Usually the company that installs and implement the software is not the same company that developed it, and each owes different obligations to the customer.

When a business buys software, typically by way of a license, the most it can get if the software fails is the cost of the license. But if the party that customizes, installs and implements the software fails in its obligations, the business can sue for damages, which in some cases could be thousands, even millions of dollars.

When negotiating an implementation agreement, the customer should never agree to limit its remedies. In case of failure, in addition to the significant cost of new software, a customer will spend thousands, and in some cases millions of dollars more implementing new software. These costs and any potential damages need to be considered when negotiating the agreement.

One very important fact to keep in mind is that the right to recover costs and damages can be wiped out if the implementation agreement incorporates the terms of the license agreement, or is attached as an exhibit or schedule to the license agreement.

In that case a court may decide that the terms of the license agreement limit the liability of the implementer.

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