Risk Allocation and Remedies

George Kimball and Mark W. Heaphy

Chapter 12 in Outsourcing Agreements, 2025, pp 333-381 from Edward Elgar Publishing

Abstract: The chapter reviews crucial negotiable provisions that allocate risks, such as representations and warranties concerning service quality, social responsibility and improprieties, as well as suppliers’ disclaimers of implied warranties and warranties concerning business outcomes. It then discusses indemnification, including mutual indemnification against such claims concerning infringements, employment, confidentiality, and violations of law. Form contracts for standard services offer fewer, limited, non-negotiable representations, warranties, and indemnities. The chapter finishes with a discussion of complex provisions to limit liability by: (i) excluding recovery of consequential damages and such business losses as lost profits and revenues; (ii) imposing ceilings upon recovery of damages, often with (iii) larger ceilings for information security, privacy and other claims concerning personal data. Limits may not apply to intentional wrongdoing, selected indemnities; unjustified abandonment of performance; and customers’ payment obligations. Privacy and data security claims are commonly subject to a larger limitation, depending upon such practical considerations as risk. Form contracts for standard offerings follow similar patterns, without special provision for privacy claims. Many contracts permit customers to withhold disputed charges. Most contracts permit customers to terminate for material breach or without cause, for their convenience (after notice and payment of agreed termination charges). Suppliers’ termination rights are commonly limited rights to terminate only for nonpayment of invoices. Some contracts permit customers to terminate for other reasons, including insolvency, adverse regulatory or tax changes, or changes in the supplier's ownership.

Keywords: Outsourcing; Business Process Outsourcing; BPO; Information Technology Outsourcing; ITO; Warranties; Indemnification; Termination; Termination for convenience (or “convenience termation”); Limitations of liability; Liability limits; Data breach; Data incident; Privacy claim (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035316984
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