Faegre Baker Daniels partner Brian Clifford authored the following article for the Control System Integrators Association in February 2015.
When an agreement expires or is terminated, that’s the end of it, right? Don’t the terms “expire” and “terminate” mean exactly that?
Not so fast — you know the lawyers couldn’t make anything that easy. Most control system integration agreements have provisions that either expressly or impliedly survive the “end” of the contract term. In order to know which obligations you will need to be mindful of after completing the project or ending the service term, you will need to consult the document. But here are a few important terms that often bind the parties long after the other requirements of the contract have been fulfilled:
Warranties: Of course, you probably expected that the contract’s warranty terms will continue for some period of time after your work is completed. But the “warranty period” stated in your agreement may not set this time period. Implied warranties may extend through the last day of the applicable statute of limitation or statute of repose. (Implied warranties were discussed in my November 2012 legal update, and I included details on these claim periods controlled by law in the July 2013 update.)
Insurance and Indemnity: Many automation agreements include an obligation for you to name your client as an additional insured on your insurance coverages. For “completed operations” or “products” coverage on your commercial general liability policy, you may be required to maintain the client’s additional insured status for several years after the “end” of the agreement. Similarly, your indemnification obligations may not expire at the end of the contract term, even if your client terminates the agreement. You may also be required to continue to purchase certain insurance coverages — especially design liability insurance — even though the contract has otherwise been “closed-out.”
Confidentiality: If you have received proprietary information of your client, you may be obligated to return it or destroy it at the conclusion of the contract term. However, the information may also be protected from disclosure long after your work is finished.
Dispute Resolution: If you have been performing your services at your client’s facility, you may have thought that you would never need to return there after the end of contract term. However, check the agreement’s dispute resolution procedures. These terms will often mandate that you come back to the project site location to resolve any claims related to your completed work.
It is not exactly a zombie apocalypse – but be wary of these “undead” contract terms.