A perspective of standard form contracts in the data processing industry

Abstract

The data processing industry has been weaned on the standard form contracts of one dominant vendor and many derivative and close variants of clauses from those written agreements are now found in the standard form contracts of many vendors. As such, standard form contract clauses deriving largely from a single source may well control the rights and liabilities of wholesale numbers of buyers within this industry. In so doing, these contractual provisions act not as terms bargained for and assented to, but as a type of unchecked commercial legislation within the industry.The trend is for such standard form contracts to acquire the attributes of adhesion (preprinted forms presented on a take or leave it basis) producing an attitude of complacency in contracting among the management of buyer companies.Although courts are loath to rewrite contracts among business participants, there has been an increasing trend of judicial disapproval of unconscionable contracts. In non-class litigation, such judgments affect only one standard form contract while the objectionable clause may have far broader impact thereby leading one very respectable law journal to espouse legislative intervention to correct this marked imbalance.Management of vendee data processing companies should be encouraged and motivated to negotiate the terms of standard form contracts of adhesion to have those documents reflect the particular transaction affecting the business in their charge. Correspondingly, management of vendor data processing companies should be alert to the capacity of clauses in its standard form contracts to be oppressive or wreak surprise and of the circumstances under which these documents are presented to buyers either of which could bring about an untoward judicial result.With these thoughts in mind, there is a further discussion of the often misunderstood or overlooked limitation of liability clause, hell or high water clause, most favored nations clause, integration clause, and arbitration clause, many of which are found in most standard form contracts.