Please advise in  maintainance contract of automotive system.

Posted on 2014-02-09
Last Modified: 2014-02-11
I am signing a maintenance contract with one of my existing customers. I wrote up 3 points in the contract, the customer wants to change to the below :

My Points in the contract:
4.1      (Mycompany) may terminate this Agreement, if the customer fails to meet its obligations as per this agreement, or fails to pay the due amounts within the agreed periods in this Agreement.

5.1      (Mycompany) will in no event be liable for lost profits, lost savings or other consequential damage even if DIS has been advised of the possibility of such damage, or for any claim against the customer by any other party. (Mycompany) is relieved of responsibility for all loss of funds contained in, dispensed by or associated with an application systems module.

5.2       Service provided under this agreement does not assure uninterrupted operations of the application systems modules.

Customer wants to change the points to :
4- Withdraw / termination
4.1- Either party may terminate this agreement, if one of the party fails to meet its obligations as per this agreement. (Mycompany) has the right to terminate this agreement if the customer fails to pay the due amounts within the agreed periods in this agreement.
5.Disclaimer and Limitation of Liability
5.1  Cancel this item.
5.2  Cancel this item.
Please advise
Question by:Ihab
  • 2
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Assisted Solution

by:Dan Craciun
Dan Craciun earned 333 total points
ID: 39845058
4.1 is normal. Any party of the agreement has the right to terminate the agreement if the other party does not fulfill its obligations.

On 5.1 and 5.2: you put in your contract that you only want to get paid and if anything happens it's not your fault. Your client disagrees.
So you will have to rephrase those points and renegotiate with your client. Maybe limited liability in specific cases etc.

PS: if a contractor tried to get me to sign a contract where it said he's not liable for any damages, including those caused by him, I would search for another contractor.

LVL 95

Accepted Solution

Lee W, MVP earned 167 total points
ID: 39845082
Experts here are (most likely) not attorneys.  If we happen to be, then odds are, not attorneys in your locale.  Asking us for legal advise is unwise at best.

That said, in my NON-LEGAL EXPERT OPINION, 4.1 is fine to change.

NO WAY do I sign something that says I'm liable for lost profits or any other loss to the client.  You have E&O insurance, right?  That covers you for gross negligence.  Anything else is a risk.  PERIOD.  You are not responsible for applying a recommended or "critical" windows patch that causes their computer to fail - in your PROFESSIONAL OPINION, you do what you have to to keep their systems running reliably... BUT the only way I'd come REMOTELY CLOSE to accepting something like that is if I were in TOTAL CONTROL of the computers.  No software used is not explicitly approved by me, no users have access to anything except what is ABSOLUTELY REQUIRED to do their job.

Look at the Windows licensing agreement - Microsoft is NOT RESPONSIBLE for lost profits because Windows fails to work.  And you should not be responsible for doing reasonable and typical actions that are intended to ensure the computers operate well.  

I don't know if you're entering into this agreement as an MSP, but part of the point of an MSP contract is that you get paid a FLAT monthly fee to ensure the computers are working well... the more time they aren't the more time you spend at the client.  If your flat fee is $1000 and you can keep their systems running smooth for 1 hour a month, then you're making $1000 an hour.  Would you rather make $10 per hour and work there 100 hours a week because you do a poor job?  It's in both your best interests to do a quality job.  

Now, go speak to a lawyer about these questions.
LVL 24

Expert Comment

ID: 39845287
Now, go speak to a lawyer about these questions. ~Lee W, MVP.

An obvious course of action you must take ASAP.
LVL 34

Assisted Solution

by:Dan Craciun
Dan Craciun earned 333 total points
ID: 39845525
I totally agree with the lawyer part.

But, for the sake of argument:
- Microsoft (or any software maker) sells a product and it has no control over how it will be used, so it can't be held responsible for loss of profit
- a MSP sells a service and gets payed while the service functions.
I don't know in the rest of the world, but in Europe if your ISP/cable provider does not deliver it's service to the client for a period of time, for whatever reason, it has no right to invoice that time.
The same with the MSP: if something happens with the service, for whatever reason, it's his job to solve the problem in a finite amount of time (depending on the contract, I've seen 4 to 24 hours for software interruptions and 3-7 days for hardware malfunctions). If he can't, he can't demand payment for the time when the service is not functioning and the client can terminate the contract for failure to provide the service.

That being said, the MSP's responsibility should be limited to the amount in the contract. Meaning that if the client pays 1000$/month, the MSP cannot be held liable for more than $1000 for that month.


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