California Bar Journal
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Ten tips for negotiating contracts
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Dana ShultzWhereas mid-size and large firms started their Y2K upgrades some time ago, many small firms have procrastinated. For those who are just now looking for the right products and services, the following contracting tips will keep you from stumbling as you rush toward Y2K readiness.

1. Assume that anything is negotiable.

Don't sign a standard-form agreement just because a vendor puts it in front of your nose. Unless you are limiting your purchase to commodity hardware and software, any provision is potentially subject to negotiation.

2. Read definitions carefully.

Terms will often have meanings different from their everyday usage. Pay attention!

3. Be prepared to fight over warranties.

Generally, vendors want to warrant as little as possible; your best interest lies in the opposite direction. The struggle will be intense.

4. Expect limitations on liability.

Almost invariably, vendors limit their entire liability to the total contract amount and exclude consequential damages. Don't expect any flexibility here.

5. Respect the vendor's methodology.

Contracts for sophisticated projects usually incorporate the vendor's implementation methodology. Unless that methodology short-circuits acceptance testing (see below), you should assume that the vendor knows what it is doing and accept that methodology.

6. Look out for jurisdiction, venue and choice-of-law provisions.

If the vendor does not reside nearby, there probably will be a paragraph stating that any suit must be filed in the vendor's city. This, of course, puts the customer at a distinct disadvantage. If you point out the obvious unfairness of this provision, you may be able to remove it.

7. Negotiate thorough acceptance tests.

Vendors often make the final payment due when, or within a certain time after, they have provided all products and services. This is not good enough! The contract should specify detailed tests to ensure that all products are operating properly and that the vendor has provided all services. Make the final payment contingent on successfully completing all the acceptance tests.

8. Run the acceptance tests.

A client recently had one of the smoothest network upgrades I have ever seen. Nevertheless, acceptance testing revealed that internet firewall and anti-virus software configurations were incorrect. For another client, testing showed that PCs had less main memory than had been specified. No matter how well things are going, run the tests!

9. Only buy the maintenance and support services you really need.

Today, with low prices and lengthy manufacturer warranties, maintenance contracts should be limited to central components (e.g., servers) for which you need quick response times. In addition, you should contract for telephone support from providers of specialized, mission-critical software (e.g., billing and accounting).

10. Hope the vendor has a good lawyer.

The most frustrating negotiations I ever had resulted from vendor attorneys who did not know what they were doing.

In one instance, the standard-form contract was so illogical and poorly worded that I had to rewrite most of it.

In another, a corporate lawyer who knew nothing about technology contracting represented the vendor; her limited understanding and irrelevant objections annoyed everyone.

Waiting so long may have reduced your options, but there still are opportunities to make any deal less one-sided. Look carefully before you sign!

Dana Shultz is an Oakland-based lawyer, certified management consultant, speaker and coach specializing in office technology. He may be reached by e-mail at and on the web at