TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

The terms “reseller” and “distributor” are often used interchangeably to describe entities that purchase goods or services from a manufacturer and then distribute or resell such goods or services to retailers and consumers. However, there are some key differences between a distributor and a reseller and important issues to consider in agreements with resellers and distributors.

You signed a long-term deal. It would be embarrassing if, in a few years after signing, the pricing is significantly higher or your service levels are significantly lower than market. Benchmarking provisions are intended to provide a mechanism for ensuring that your pricing and/or service levels are within market (taking into consideration the unique factors applicable to your deal). Set out below are some of the key components of a meaningful benchmarking provision.

Open Banking is an initiative mandated by the UK’s Competition and Markets Authority (CMA) in 2017. It is intended to facilitate better competition in the banking sector by mandating protocols that facilitate the secure sharing of customer-related data of the nine largest banks in the United Kingdom (CMA9) with third-party providers (TPPs).

Open Banking is developed and delivered in the United Kingdom by the Open Banking Implementation Entity (OBIE). The OBIE was established by the CMA and is funded by the CMA9. The CMA’s UK Retail Banking Market Investigation Order 2017 (Order), which applies only to the CMA9, requires the CMA9 to provide their customers with the ability to access and share their account data on an ongoing basis with TPPs through the use of specified application programme interfaces (APIs). This compliments the reforms under the EU’s Second Payment Directive (as transposed in the United Kingdom primarily by the Payment Services Regulations 2017), which requires all payment account providers to permit open access to payment accounts for authorized TPPs, but which does not specify the means of access or prescribe the scope of access in any detail.

In this contract corner, we consider the concepts of “good faith” in commercial contracts under English law.

The General Position Under English Law

The notion of good faith is a complex and evolving concept under English law, and it has important implications for those drafting commercial contracts. In contrast to many other civil (e.g., France and Germany) and common (e.g., United States and Australia) law jurisdictions, there is no general doctrine of good faith either in negotiating or in performing a contract. Instead, parties are free to pursue their own self-interests, so long as they do not act in breach of contract. However, the notion of good faith can still impact commercial contracts in three main ways:

We have all heard the horror stories: system implementation deals costing 300% more than the original budget, go-live dates for development projects being way past the scheduled dates, and deliverables that do not meet the customer’s expectations. These are the stories that keep us lawyers up at night. So what can we do in the contract to incent timely, on-budget performance by the vendor? First, there is no substitute for a detailed and well-thought-out requirements document, which provides the roadmap that shapes the design, build, and deployment. Then, while there is no magic bullet, there are numerous contractual mechanisms to be considered that are designed to provide guideposts and checkpoints to enable success.

Set out below are 10 contractual mechanisms for providing meaningful performance commitments and consequences if the commitments are not met. Maybe you will not need to invoke these mechanisms, but having firm rules may help drive good behavior (you know the old adage, “good fences make good neighbors”). As is always the case, the appropriate mechanisms to be used are deal specific, and not all deals or relationships require the full spectrum of contractual commitments set out below (but some do!).

Please join us for a dynamic webinar on hot issues impacting the structuring and negotiation of ecommerce contracts in 2020. Donald G. Shelkey and Eric Pennesi of our Technology, Outsourcing and Commercial Transactions practice will present and lead discussions on topics including:

  • Privacy and Security
  • Deals We Expect to See: An Integration Infection!
  • 2020 Market Positions

The webinar will take place on Wednesday, December 11, 2019, from 12:00–1:00 pm (Eastern Time). Register here.  

The Clearing House (the oldest banking association and payments company in the United States) recently released a model agreement as a voluntary starting point to facilitate data sharing between financial institutions and fintech companies.

The model agreement is intended to provide a standardized foundation that speeds up data access agreement negotiations; as the Clearing House notes, “[L]egal agreements between banks and fintechs have sometimes taken 12 months or more to be developed and finalized and have become a significant bottleneck to API adoption.” Additionally, the model agreement is designed to reflect the Consumer Financial Protection Bureau’s consumer protection principles on data sharing and aggregation, providing confidence to the contracting parties that the terms address key regulatory issues.

As mentioned in our recent blog post, Morgan Lewis, led by technology, outsourcing and commercial transactions partner Mike Pierides, hosted a roundtable on aviation technology contracts and issues on November 14 at the PSS2019: Retail Excellence conference. The roundtable included representatives from airlines, airline industry professionals, and technology suppliers.

The roundtable discussion focused on how industry stakeholders manage their passenger service systems (PSS). During the feedback session, Mike noted that his roundtable group’s discussion inevitably centered on the challenges that airlines and suppliers face with this process, and talked about some upfront problems that can occur when entering into a PSS relationship. Namely, the RFP process typically places significant weight on obtaining the lowest price at the expense of both the quality and the scope of that particular PSS relationship, which causes tension among an airline’s procurement, legal, and other departments.

Companies that use app-based technology platforms to connect consumers directly with service providers have faced an important question of whether the individuals providing the services are contractors or employees. California recently passed legislation that requires companies to treat contract workers that perform core company functions as employees.

A recent Delaware court ruling found an agreement to be unenforceable despite being executed by each of the parties via “orphan” signature pages because there was insufficient evidence that the parties had a meeting of the minds as to which version of the contract they were signing. While the facts of this case could be characterized as a “perfect storm” of circumstances to invalidate the commonly accepted practice, it is worth noting the court’s findings for any takeaways that could help you avoid being blindsided by the invalidation of a contract.