Software and service contracts come with many potential risks,
and businesses should be mindful when initiating a new contract or
a renewal. It's considered a best business practice to
negotiate the terms in a software or service contract before
agreeing to the initial terms a vendor provides in the contract.
There are many contract provisions that can be negotiated, but the
major risk provisions found in most contracts are the following:
(1) Limitation of Liability, (2) Indemnification, and (3) Warranty.
These contract provisions must be considered in conjunction with
one another because they cannot be effectively negotiated without
determining how they affect each other.
Limitation of Liability ranks as one of the top contract
provisions negotiated in a software contract. The limitation of
liability limits each party's liability for breach of contract
or list of damages for all sorts of harm. A software
publisher's liability is usually limited to the amount of
