Thursday, February 10, 2011
Negotiation - Thoughts on Negotiating Survival Provisions
In negotiating a “survival” provision the parties determine what obligations of the contract will continue to be in effect after the expiration or termination of the contract. The reason why Buyer’s need Survival provisions are:
1. There will be obligations of that are intended to be performed after the termination or expiration of the Agreement. A good example of this is any warranty obligations against defects in material and workmanship on products or services that were purchased during the term of the Agreement that are intended to run for a specific period. Many other warranties would also need to survive. Another example is the parties could agree to a specific term that the Parties agree to hold the other party’s confidential information as confidential for a specific term.
2. Many claims are not limited to the contract term. They are limited by the individual Statute of Limitations for the specific cause of action. For example under New York law there are different statute of limitation periods for the types of claims that may be brought.
· Contracts - Six (6) years.
· Personal Injury and Injury to Personal Property– Three (3) years
· Medical Malpractice – thirty (30) months or one year from discovery of a foreign object in the body or when it should have been discovered.
· Other types of malpractice – three (3) years
· Libel, defamation or slander – one (1) year
· Product liability – three (3) years
· Fraud – six (6) years.
As a Buyer if you could still be liable for an action cause by the Supplier, why would you let
the Supplier be excused from being responsible to you for those actions and their
responsibility to you? Including the applicable terms in the description of what will survive
makes sure they will continue to be responsible until those statute of limitations expire.
High on your list terms that need to survive would be warranties or defects provisions, indemnifications, and terms that address enforceability issues such as applicable laws, order of precedence, limitations of liability, and any confidentiality terms. High on the Supplier’s list is your obligation of payment.
Buyer contract templates will usually have a list of specific sections that are required to survive the termination of expiration of the agreement. If you have added any additional terms that contemplate performance after the agreement ends or that may need enforcement in the future, make sure those are added.
I’ve had Suppliers that wanted to have nothing survive simply because they wanted all potential liability to end. This is an area where you can make it clear that what you are asking for is reasonable. The commitments they make in the contract are of no value to you if when you need them they aren’t there. It would make it equivalent to selling the good or service to you “as is” with no warranties, indemnifications etc. and the value of that is substantially less.