A Statement of Work defines the specific deliverables, timelines, and responsibilities under a broader master agreement. This playbook offers frameworks for drafting precise scopes, managing milestones, and mitigating disputes over performance.
Why This Matters: Uncapped or broadly defined liabilities can subject a party to disproportionate financial exposure. Properly structured indemnities and caps limit risk and preserve insurability.
Negotiation strategy
If you're the Customer:
Negotiate to include clear liability caps and ensure indemnification covers intellectual property and third-party claims. Aim to exclude liability for indirect damages.
If you're the Contractor:
Seek to limit liability exposure by negotiating reasonable caps and exclusions. Ensure indemnification obligations are mutual and balanced.
Essential elements
1
Limitation of Liability
Caps on financial exposure.
2
Indemnification
Protection against third-party claims.
3
Exclusions from Liability
Exceptions to liability limits.
Action framework
ACCEPT
Propose edits when liability caps are too high or indemnification is one-sided.
EDIT
Reject clauses that expose to unlimited liability or lack mutual indemnification.
ADD
Add clauses for intellectual property indemnification if absent.
PRO TIP
Always align liability caps with the contract's value and risk profile.
Example clauses
FAVORABLE
Balanced Liability Cap
"The total aggregate liability of each party under this Agreement shall not exceed the total amount paid or payable by the Reseller to the Company under this Agreement during the twelve (12) months preceding the event giving rise to the claim."
NEUTRAL
Standard Indemnification
"Each party agrees to indemnify, defend, and hold harmless the other party from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or related to any claim that the indemnifying party's intellectual property infringes any third-party intellectual property rights."
UNFAVORABLE
Unlimited Liability Exposure
"Neither party shall have any cap on liability, regardless of the nature of the claim."
Fallbacks
High-Risk Contracts
Contracts involving high-value transactions or sensitive data require additional protections or higher liability caps. Review with senior legal counsel to assess further indemnification for data breaches or regulatory fines.
Cross-Border Agreements
Consider jurisdictional differences in liability and indemnification laws. Ensure compliance with local regulations and adjust caps accordingly.
Technology Transactions
Focus on indemnification for intellectual property and data breaches. Liability caps should reflect potential technology-related risks.
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WEEK 1
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WEEK 2
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WEEK 3
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WEEK 4
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