Giga warns users to check software liability clauses

Analysts have warned companies to pay close attention to limits of liability clauses in software contracts to prevent suppliers...

Analysts have warned companies to pay close attention to limits of liability clauses in software contracts to prevent suppliers leaving them "out in the cold".

Giga Information Group said users should make sure they have recourse if suppliers' software code does not perform as anticipated, causes significant damage to the company or affects the business' ability to attract and retain customers.

"Some suppliers will attempt to write contract clauses that leave customers out in the cold in terms of their ability to protect their investments in software and services," said Jost Hopperman, an analyst at Giga.

"Not only are contract clauses key to outlining liability and damages, but customers should also keep detailed documentation outlining each and every major interaction with their suppliers that may affect their legal position going forward."

Documentation should include copies of test results, specifications, application performance benchmarks, user sign-offs, project plans with original milestones and target dates.

Warranty is also a vital issue when discussing software contracts. "The length of the warranty period is, at least in part, a function of the software price, which the user company ultimately pays for," he said.

"An extraordinarily long warranty period at no additional cost is more an indicator of a software company with a weak market position than a reason for rejoicing."

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