Common use of Technology Transactions Clause in Contracts

Technology Transactions. respective rights to terminate the software license agreement. In particular, parties should avoid unexamined use of boilerplate termi- nation provisions. For example, it is likely not appropriate for a customer’s insolvency or bankruptcy to be a cause for termination. As long as the customer has paid and is continuing to pay for its license, its rights probably should continue. Similarly, in most cases a customer should not have the right to terminate a software license merely because the vendor is experiencing financial issues. If the customer has paid most or all of its fees up front, or if the software is mission-critical, the prudent customer will often seek to limit the vendor’s termination right—even for cause. In such a case, the customer may seek to limit vendor ’s right to terminate to circumstances where customer has failed to pay undisputed amounts for a significant period of time and after written notice. The vendor would, however, still have the right to contract damages for any customer breach of the agreement. In some circumstances, this may prove insufficient, and the vendor will insist on an additional right to terminate if customer is misusing the vendor’s IP or taking other continuing actions that have the potential to cause vendor harm. The parties should also include appropriate provisions describing the effects of any termination, such as return or destruction of the software and the return of customer’s data.