An API Terms of Service & Developer Agreement governs developer access to an organization‚ APIs, data, and platform. This playbook details provisions around usage rights, rate limits, data handling, and security compliance.
Why This Matters: Without clear liability caps and indemnities, parties can face unlimited exposure and costly litigation from third-party claims.
Negotiation strategy
If you're the API Provider:
Ensure liability caps are clearly defined and align with the company's risk management policies. Advocate for mutual indemnification to cover third-party claims.
If you're the Developer:
Negotiate for reasonable liability caps that reflect the scope of work. Ensure indemnification obligations are mutual and do not extend beyond third-party claims.
Essential elements
1
Liability Cap
Limits potential damages.
2
Mutual Indemnification
Covers third-party claims.
3
Exclusion of Liability
Defines liability exceptions.
Action framework
ACCEPT
Propose edits when liability caps are unreasonably high or indemnification is not mutual.
EDIT
Reject clauses that impose unlimited liability or one-sided indemnification.
ADD
Add clauses for missing liability caps or mutual indemnification.
PRO TIP
Always align liability caps with your company's risk tolerance and industry standards.
Example clauses
FAVORABLE
Balanced Indemnification Clause
"Each party shall indemnify the other against third-party claims arising from its own negligence or willful misconduct. Liability is capped at [amount]."
NEUTRAL
Standard Liability Clause
"Indemnification shall be mutual, with liability capped at [amount], except for breaches of confidentiality or data protection obligations."
UNFAVORABLE
One-Sided Indemnification
"The Contractor shall indemnify the Company for all claims, with no cap on liability."
Fallbacks
High-Risk Projects
In high-risk projects, consider higher liability caps and more comprehensive indemnification to account for increased potential damages.
International Contracts
For international contracts, ensure clauses comply with jurisdiction-specific liability laws and adjust indemnification accordingly.
Data Protection Agreements
In data protection agreements, include specific indemnities for data breaches and ensure liability caps reflect potential regulatory fines.
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