Services agreement notes

Statements of work

It’s very typical for services agreements to call for the technical details of the services to be stated as a separate document. Such a document is conventionally referred to as a statement of work or SOW.

Sometimes the parties’ lawyers will not review a statement of work as carefully as they do the body of the contract. Even so, a SOW can easily contain significant, legally-binding obligations.

Discretionary language: It might be well for a services contract to state, for example, that “Services will be provided solely as set forth in any written statement(s) of work that may be signed by the parties in their discretion.” (Emphasis added.) The “discretion” language should negate any obligation for the customer to offer any particular amount of work to the provider, or vice versa.

FOOTNOTE: Cf. Business Sys. Eng’g v. IBM, No. 08-1081 (7th Cir. Nov. 10, 2008), in which the appeals court affirmed a summary judgment that an agreement between IBM and a subcontractor did not require IBM to provide the subcontractor with $3.6 million of work.

Customer’s rights in deliverables

There are circumstances in which a customer might legitimately want to own all rights in anything and everything a provider happens to create.

In my experience, though, very seldom do customers really need total ownership of deliverables. They tend to ask for it mainly by reflex, even though it often makes more sense for the provider to retain those rights.

Transfers of work-in-progress

A transfer of work in progress will usually happen only if the plug is being pulled on a project. In that situation, the relationship between Provider and Customer is likely to be less than fully amicable.

The customer may well want the provider to transfer work-in-progress directly to another provider.

Two crucial questions to be considered in any transfer are:

1. Exactly how much effort is Provider expected to put in, given that the work is being taken away; and
2. how, if at all, will Provider be compensated for that effort, given that the customer might be taking the work away for good reason.

It’s not unreasonable for a provider to want to be paid for any extra effort involved in a transfer of work in progress beyond a ‘reasonable’ amount of work.

Even if the provider is in breach, it may well be in the customer’s interest to hold its nose and give the provider a cash incentive to comply with its transfer obligations.

(As a practical matter, the provider may be motivated to cooperate without demanding payment, so as to try to avoid being sued by the customer.)