Staying on Top of Online Service Provider Terms and Conditions

If your business uses an online subscription service, software, or other product platform, you likely have consented to another company’s terms and conditions or a Master Service Agreement (MSA). These are standard contracts that govern the relationship between you and the platform you’re using. 

When you sign up, you typically have to click some language explaining you agree to these terms and conditions, but buried among the company’s legal terms and conditions, there may be some very important details that every business owner should understand. These contracts are not always negotiable, with “take-it-or-leave-it” terms (called a contract of adhesion), although some can be negotiable if you’re working with a product representative or entering into a larger contract (don’t be afraid to ask!). No matter what, ensuring that your business clearly understands these terms and conditions of the business relationship will help to mitigate problems down the road. 

Below, we will touch on some basic, but important, provisions that you will likely encounter when reviewing an MSA. 

1. TERM

The term of an agreement defines how long the agreement will last. This could be a fixed length of time, or the term could renew every month or another fixed time period, end based upon 30 or 60 days’ notice.

Why does it matter? Defining the term gives both parties clarity on the commitment period of their obligations. This section is important to understand so that you are not locked into a contract for longer than intended and are aware of any advance notice required.

2. TERMINATION

The termination section describes under what circumstances the agreement may end. It is important to note that there may be specific sections, such as intellectual property, that survive the termination of the agreement. The default termination of an agreement would be at the end of the term, however, it could be terminated earlier upon breach by either party.

Why does it matter? If you believed your commitment was month-to-month, but in reality your agreement locked you in for a full year, your termination may not occur early without penalties. You are legally obligated to continue to pay for the full year, which could affect your budgeting.

CONTRACT TIP: Pay close attention to the term of your contract and to specific discounts or deals for ‘paying up front’ or committing to longer term agreements. These can end up being more expensive than the month-to-month option in the long run if you’re stuck in a longer-term contract.

3. FEES & PAYMENT

The fees and payment provision may include a payment schedule as well as information about the potential for an increased fee. This section may also cover fees for licenses (users, or provided services/goods), if the number is applicable to the total payment owed.  

Why does it matter? Typically, a company would need to provide a specified amount of days of notice if their fees would be increasing. This protects you as a business from immediate, unexpected costs. It is also important to pay attention to the specifics for a difference in payment due if you decrease or do not utilize all of the licenses. You may be locked into a specified amount, whether or not you are utilizing them all or not.

4. INTELLECTUAL PROPERTY 

In your services agreement, the Intellectual property section will address the ownership of the materials/content/information stored in the software or service. Typically, the MSA will indicate that their company owns all rights to their product and technology, but your business would own any of the product or materials generated by utilizing their service. 

Why does it matter? The above scenario may not always be the case. It is important to read through this provision of the agreement and determine the rights to anything inputted into the software, so that you can be certain that you will still own the rights to anything generated.

5. FORCE MAJEURE

Force Majeure is a legal term that refers to an event out of either party’s control, which makes performance impossible under the agreement. This could include natural disasters, government regulations, and more. 

Why does it matter? This provision is often standard in all agreements and is very important to protect both parties in the case of an unexpected event. Additionally, this may be somewhere that your business could request additional terms. For example, if your business is dependent upon government or nonprofit funding, you may be able to negotiate with the service provider to include terms that your agreement is contingent upon such funding. 

In conclusion, it is vital for your business to understand what terms are most important to pay attention to in an MSA. Without these understandings, it could end up costing you time and money down the road. If you are still unsure of the impact of these terms and want further clarification, reach out to an attorney to discuss. 

DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation and considerations with an attorney.