Carey on Service Provider Agreements


To draft better contracts with service providers, attention must be paid to the boilerplate language. This is the routine language regarding non-key provisions of the contract that is often used repeatedly. In this Commentary, Professor James L. Carey discusses service provider contracts and examines four areas where a company can better protect itself and its assets through the use of well-drafted boilerplate. He writes:
 
     First, of course, a service contract must cover the basics -- the services to be performed, payment terms, termination language, and dispute provisions to name a few. Once these more pressing, business priorities are addressed, you should spend some time reviewing the boilerplate to make certain it makes sense in the current context. It is amazing how often inconsistent language can creep into a contract through the boilerplate. These inconsistencies then sit, like a land mine, waiting to detonate when exposed. Next, consider how your client can be better protected through thoughtful provisions addressing the service-provider relationship.   
 
     . . . .
 
     A service provider may acquire valuable and confidential information that could be useful in acquiring your client’s customers or potential customers for themselves or someone else. Anytime someone is better able to understand a company’s inner workings, you need assurances that they will not unfairly compete. While these provisions are fairly common in employment agreements, they are sometimes over-looked in other supply situations. Raw material suppliers may have, or may become privy to, vital information that they should not use to take customers from your client.
 
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     There are public policy reasons that keep non-competition provisions narrow because increasing competition is generally considered good public policy. However, the public policy breaks the other way when protecting the trade secrets and other confidential information produced by your clients. Regardless of the other provisions of your contract, you should make sure that the confidentially provisions are broad and long lasting. While non-competition provisions often speak in months (six to twenty-four months from the termination of the agreement, for instance), confidentiality provisions should be for years. For instance, confidentiality provisions spanning one to ten years (or more!) following the end of the contract are often obtainable from service providers and defensible in court.
 

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