McCarthy Tétrault Advance™Building Capabilities for GrowthMcCarthy Tétrault LLP / mccarthy.ca / 12552613v2Representations,...
2Overview¬ Representations & Warranties¬ Express warranties/disclaimers¬ Quality¬ Intellectual Property¬ Indemnities¬ IP I...
Representations and WarrantiesPerformance and Quality(a) Meet specifications?(b) Comply with proposal?(c) Fit for specific...
4¬ Breach of contract claims based on representations made to customer before contracting forsoftware and services.¬ THE W...
5¬ “Assuming the truth of the allegations contained in Lincolns complaint — that Open Solutionsmade various affirmations, ...
6¬ Action claiming fraudulent inducement to enter into agreement for financial trading software.¬ 13. WARRANTY DISCLAIMER....
Representations and Warranties7Intellectual Property(a)Not infringe any intellectual property right?(b)Deliverables origin...
Components of an Indemnity1. Duties of the Indemnitor2. Scope of the Indemnity3. Exceptions4. Duties of the Indemnitee5. R...
Duties of the Indemnitor and Scope of the Indemnity – IPIndemnity Examples9¬ Example 1: To indemnify, defend and hold harm...
Duties of the Indemnitor and Scope of the Indemnity – IPIndemnity Examples10¬ Example 2: To defend claims in Canada and pa...
Exceptions – IP Indemnity Examples11¬ Example 1: IP developed according to client specifications, Inappropriate/Unauthoriz...
Exceptions – IP Indemnity Examples12¬ Example 2: Inappropriate/Unauthorized use.¬ …This obligation of Licensor shall not a...
Duties of the Indemnitee – IP Indemnity Examples13¬ Example 1: To provide timely notice in writing and to cooperate fully ...
Rights of the Indemnitor – IP Indemnity Examples14¬ Example 1: To rectify (procure a license), to modify, and to replace t...
15¬ Example 2: To modify, to rectify (procure a license), and to end the license andrefund fees.… If the Provider believes...
(Exclusive) Remedies – IP Indemnity Examples16¬ Example:¬ …THE PROVISIONS OF THIS SECTION __ STATE THE SOLE,EXCLUSIVE, AND...
17¬ Each party (the "Indemnifier") shall indemnify and hold harmless the other party, its respectivedirectors, officers, m...
18¬ “Elastic Path shall defend or settle any claim made or any suit or proceeding brought againstLicensee insofar as such ...
VANCOUVERSuite 1300, 777 Dunsmuir StreetP.O. Box 10424, Pacific CentreVancouver BC V7Y 1K2Tel: 604-643-7100Fax: 604-643-79...
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Sookman aston it can representations warranties and indemnities presentation

  1. 1. McCarthy Tétrault Advance™Building Capabilities for GrowthMcCarthy Tétrault LLP / mccarthy.ca / 12552613v2Representations, Warranties andIndemnities – A PrimerBarry B. SookmanPartner, McCarthy Tétrault LLPDirect Line: (416) 601-7949E-Mail: bsookman@mccarthy.caJune 18, 2013Helen T. Aston,Senior Legal Counsel, IBM Canada LimitedDirect Line: (416) 478-8902E-Mail: haston@ca.ibm.com
  2. 2. 2Overview¬ Representations & Warranties¬ Express warranties/disclaimers¬ Quality¬ Intellectual Property¬ Indemnities¬ IP Indemnity¬ Components¬ Examples¬ QA¬ Note: Neither the topics nor the precedents are endorsed by the speakers or their firms.McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  3. 3. Representations and WarrantiesPerformance and Quality(a) Meet specifications?(b) Comply with proposal?(c) Fit for specific purposes?(d) Performance, integration?(e) Disabling mechanism, harmful code or protection feature designed to prevent its use?(f) Comply with policies?(g) Security/privacy?(h) Repair or replace?(i) Meet timeframes and milestones?(j) Exclusive remedies?McCarthy Tétrault LLP / mccarthy.ca / 12552613v2 3
  4. 4. 4¬ Breach of contract claims based on representations made to customer before contracting forsoftware and services.¬ THE WARRANTY SET FORTH IN SECTION 8.1 OF THIS AGREEMENT IS A LIMITEDWARRANTY AND IT IS THE ONLY WARRANTY MADE BY OPEN SOLUTIONS. OPENSOLUTIONS EXPRESSLY DISCLAIMS, AND CLIENT HEREBY EXPRESSLY WAIVES,ALL OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED[.]¬ This Agreement is intended as the complete, final and exclusive statement of the terms of theagreement between the parties regarding the subject matter hereof and supersedes all otherprior or contemporaneous agreements or understandings, whether written or oral, betweenthem relating to the subject matter hereof. No amendment to, or modification of, thisAgreement shall be binding unless in writing and signed by a duly authorized representativeof both parties. Each party expressly acknowledges that there are no warranties,representations, covenants or understandings of any kind, manner or description whatsoeverby either party to the other except as expressly set forth in this Agreement.¬ See, LINCOLN SAVINGS BANK v. OPEN SOLUTIONS, INC.,2013 U.S.Dist. LEXIS 36260(ND Iowa March 13, 2013)McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  5. 5. 5¬ “Assuming the truth of the allegations contained in Lincolns complaint — that Open Solutionsmade various affirmations, promises, and descriptions regarding the product — the Courtnonetheless concludes, as a matter of law, that the representations cannot constitute the "basisof the bargain," as required by section 2-313. In other words, Lincolns statutory expresswarranty claim (Count III) fails not because an express warranty established pursuant tosection 2-313 was disclaimed, but instead because the representations did not constitute thebasis of the bargain and an express warranty under section 2-313 was never established. Asnoted by one commentator, "language that appears to be a disclaimer at first glance may beeffective to show that no warranty was ever made not because it is effective as a disclaimer,but because it shows that no warranty was ever contemplated." Hawkland, UniformCommercial Code Series, § 2-316:2.¬ The conspicuous and unambiguous language found in the written agreement makes it clearthat there are no warranties, express or implied, other than that found in the agreement itself.”¬ See, LINCOLN SAVINGS BANK v. OPEN SOLUTIONS, INC.,2013 U.S.Dist. LEXIS 36260 (NDIowa March 13, 2013)McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  6. 6. 6¬ Action claiming fraudulent inducement to enter into agreement for financial trading software.¬ 13. WARRANTY DISCLAIMER. THE LICENSED PRODUCT, THE TAL DATA AND THE TOWNSEND NETWORK AREPROVIDED "AS IS" AND WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANYWARRANTIES AS TO ACCURACY, FUNCTIONALITY, PERFORMANCE OR MERCHANTABILITY. TOWNSEND AND THESOURCES EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUTLIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANYWARRANTIES ARISING FROM TRADE USAGE, COURSE OF DEALING OR COURSE OF PERFORMANCE. TOWNSENDAND THE SOURCES MAKE NO REPRESENTATION, WARRANTY OR COVENANT CONCERNING THE ACCURACY,COMPLETENESS, SEQUENCE, TIMELINESS OR AVAILABILITY OF THE LICENSED PRODUCT, THE TOWNSENDNETWORK, THE TAL DATA OR ANY OTHER INFORMATION OR THE LIKELIHOOD OF PROFITABLE TRADING USINGTHE LICENSED PRODUCT, THE TOWNSEND NETWORK OR TAL DATA. LICENSEE ACCEPTS FULL RESPONSIBILITYFOR ANY INVESTMENT DECISIONS OR STOCK TRANSACTIONS MADE BY LICENSEE OR ITS AUTHORIZED USERSUSING THE LICENSED PRODUCT, THE TOWNSEND NETWORK OR TAL DATA. NO SALES PERSONNEL, EMPLOYEES,AGENTS OR REPRESENTATIVES OF TOWNSEND OR ANY THIRD PARTY ARE AUTHORIZED TO MAKE ANYREPRESENTATION, WARRANTY OR COVENANT ON BEHALF OF TOWNSEND. ACCORDINGLY, ADDITIONAL ORALSTATEMENTS DO NOT CONSTITUTE WARRANTIES AND SHOULD NOT BE RELIED UPON AND ARE NOT PART OFTHIS AGREEMENT. LICENSEE ACKNOWLEDGES THAT USE OF THE LICENSED PRODUCT, THE TOWNSENDNETWORK AND THE TAL DATA MAY FROM TIME TO TIME BE INTERRUPTED AND MAY NOT BE ERROR-FREE.LICENSEE EXPRESSLY AGREES THAT USE OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK, THE TALDATA OR ANY OTHER INFORMATION IS AT LICENSEES SOLE RISK AND THAT TOWNSEND AND THE SOURCESSHALL NOT BE RESPONSIBLE FOR ANY INTERRUPTION OF SERVICES, DELAYS OR ERRORS CAUSED BY ANYTRANSMISSION OR DELIVERY OF THE LICENSED PRODUCT, THE TOWNSEND NETWORK, TAL DATA OR ANY OTHERINFORMATION OR CAUSED BY ANY COMMUNICATIONS SERVICE PROVIDERS.¬ “Thus, any representations made about speed or accuracy of Townsends services outside of the four corners of the Contractcannot be used as a basis for a cause of action sounding in fraud.”¬ See, DINOSAUR SEC., LLC v. TOWNSEND ANALYTICS, LTD., 2012 NY Slip Op 31981 (NY.S.C.2012)McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  7. 7. Representations and Warranties7Intellectual Property(a)Not infringe any intellectual property right?(b)Deliverables original?(c) Notice of infringement?(d)No inconsistent grants/not violate other agreements?McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  8. 8. Components of an Indemnity1. Duties of the Indemnitor2. Scope of the Indemnity3. Exceptions4. Duties of the Indemnitee5. Rights of the Indemnitor6. (Exclusive) Remedies8McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  9. 9. Duties of the Indemnitor and Scope of the Indemnity – IPIndemnity Examples9¬ Example 1: To indemnify, defend and hold harmless against claims.¬ Supplier will indemnify, defend and hold Client harmless from and against any and allLosses suffered or incurred by it directly or indirectly arising from or in connection with orrelating to any Claim by a Third Party alleging that:(a) the Services, Supplier’s performance or the receipt by Client of the Services underthis Agreement;(b) any Supplier IP or Deliverable, or the use thereof by Supplier to provide theServices; or(c) the access to or use by the Client of any Service, Supplier IP or Deliverable aspermitted pursuant to this Agreement,infringes, violates or misappropriates any Intellectual Property Right of any Person.…McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  10. 10. Duties of the Indemnitor and Scope of the Indemnity – IPIndemnity Examples10¬ Example 2: To defend claims in Canada and pay damages finally awarded.¬ …Licensor shall defend Licensee against claims brought against Licensee inCanada by any third party alleging that Licensees Use of the Software, inaccordance with the terms and conditions of this Agreement, constitutes adirect infringement or misappropriation of a Canadian patent claim(s), copyrightor trade secret rights, and Licensor will pay damages finally awarded againstLicensee (or the amount of any settlement Licensor enters into) with respect tosuch claims…McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  11. 11. Exceptions – IP Indemnity Examples11¬ Example 1: IP developed according to client specifications, Inappropriate/Unauthorizeduse, or modification of IP contrary to Agreement.…The obligations of Supplier set out in the preceding Section will not apply to the extent that aClaim by a Third Party is:a) based on a portion of the Deliverables that was developed based on specificationsprovided by Client, if such Claim would not have arisen but for Supplier’scompliance with Client’s specifications;b) based on the unauthorized use by Client of the Deliverables in a manner notpermitted by this Agreement, if such Claim would not have arisen but for suchunauthorized use by Client; orc) based on the modification of the Deliverables by or on behalf of Client in amanner not permitted by this Agreement, if such Claim would not have arisen but forsuch modification.McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  12. 12. Exceptions – IP Indemnity Examples12¬ Example 2: Inappropriate/Unauthorized use.¬ …This obligation of Licensor shall not apply if the alleged infringementor misappropriation results from Use of the Software in conjunctionwith any other software, an apparatus other than a DesignatedUnit, failure to use an update provided by Licensor if suchinfringement or misappropriation could have been avoided by useof the update, or unlicensed activities…McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  13. 13. Duties of the Indemnitee – IP Indemnity Examples13¬ Example 1: To provide timely notice in writing and to cooperate fully in defense.¬ …This obligation of Licensor also shall not apply if Licensee fails to timely notify Licensor in writing of anysuch claim. Licensor is permitted to control fully the defense and any settlement of any such claim as long assuch settlement shall not include a financial obligation on Licensee. In the event Licensee declines Licensorsproffered defense, or otherwise fails to give full control of the defense to Licensors designated counsel, thenLicensee waives Licensors obligations under this Section __. Licensee shall cooperate fully in the defense ofsuch claim and may appear, at its own expense, through counsel reasonably acceptable to Licensor…¬ Example 2: To provide timely notice in writing within 30 days; To give sole control to indemnitor over defense,and to cooperate and assist fully in defense.¬ …the Provider will indemnify the Recipient against the claim if the Recipient does the following:¬ notifies the Provider promptly in writing, not later than 30 days after the Recipient receives notice of theclaim (or sooner is required by applicable law);¬ gives the Provider sole control of the defense and any settlement negotiations; and¬ gives the Provider the information, authority, and assistance the Provider needs to defend against orsettle the claim.McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  14. 14. Rights of the Indemnitor – IP Indemnity Examples14¬ Example 1: To rectify (procure a license), to modify, and to replace the infringing material withsubstitute material.…Without limiting the indemnity obligation in the preceding Section, if all or any part of any SupplierIP or Deliverable becomes, or in Supplier’s or Client’s reasonable opinion is likely to become, thesubject of a Claim described in the preceding Section, Supplier, at its own expense and withoutprejudice to the other rights Client may have under this Agreement, will promptly:(a) procure for itself and for Client to the extent required the right to use the allegedlyinfringing material as contemplated in this Agreement;(b) modify the allegedly infringing material to make it non-infringing, provided that any suchmodification will not affect the quality, performance or functionality of the Services under thisAgreement or the quality of the affected Supplier IP or Deliverable; or(c) replace the allegedly infringing material with a substitute of equal quality, performance andfunctionality….McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  15. 15. 15¬ Example 2: To modify, to rectify (procure a license), and to end the license andrefund fees.… If the Provider believes or it is determined that any of the Material may have violatedsomeone else’s intellectual property rights, the Provider may choose to either modifythe Material to be non-infringing (while substantially preserving its utility orfunctionality) or obtain a license to allow for continued use, or if these alternativesare not commercially reasonable, the Provider may end the license for, and requirereturn of, the applicable Material and refund any fees the Recipient may have paidfor it and any unused, prepaid technical support fees you have paid for thelicense. If you are the Provider and such return materially affects Companys ability tomeet its obligations under the relevant order, then Company may, at its option and upon30 days prior written notice, terminate the order...Rights of the Indemnitor – IP Indemnity ExamplesMcCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  16. 16. (Exclusive) Remedies – IP Indemnity Examples16¬ Example:¬ …THE PROVISIONS OF THIS SECTION __ STATE THE SOLE,EXCLUSIVE, AND ENTIRE LIABILITY OF LICENSOR AND ITSLICENSORS TO LICENSEE, AND IS LICENSEES SOLE REMEDY,WITH RESPECT TO THE INFRINGEMENT OR MISAPPROPRIATIONOF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS…McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  17. 17. 17¬ Each party (the "Indemnifier") shall indemnify and hold harmless the other party, its respectivedirectors, officers, members, employees and agents (the "Indemnified") from and against any and allLosses, insofar as such Losses (or actions in respect thereof) arise out of the negligence or willfulact or omission of the Indemnifier or any person the Indemnifier may legally indemnify and for whomthe Indemnifier is responsible by law or pursuant to this Agreement. …Should Indemnity obligation extend to other Losses?¬ Breach of Reps and Warranties?¬ Breach of Confidentiality, Privacy and Security obligations?Indemnities – Non-IP ExamplesMcCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  18. 18. 18¬ “Elastic Path shall defend or settle any claim made or any suit or proceeding brought againstLicensee insofar as such claim, suit or proceeding is based on an allegation that any of thesoftware supplied to Licensee pursuant to this Agreement infringes (directly or indirectly) anypatent [...] or other proprietary and intellectual property rights of any third party, provided thatLicensee shall notify Elastic Path in writing promptly after the claim, suit or proceeding is knownto Licensee and shall give Elastic Path information and such assistance as is reasonable in thecircumstances, at Elastic Path’s expense. Elastic Path shall have sole authority to defend orsettle the same at Elastic Path’s expense. Elastic Path shall indemnify and hold Licenseeharmless from and against any and all such claims and shall pay all damages and costs finallyawarded or settlement agreed to be paid in the settlement of such claim, suit or proceeding. Thisindemnity does not extend to any claim, suit or proceeding based upon any infringement oralleged infringement of copyright by the combination of the software in any manner with othercomponents not provided by Elastic Path to Licensee, to the extent such claim could have beenavoided but for such combination”.¬ Coastal Contacts Inc. v. Elastic Path Software Inc., 2013 BCSC 133McCarthy Tétrault LLP / mccarthy.ca / 12552613v2
  19. 19. VANCOUVERSuite 1300, 777 Dunsmuir StreetP.O. Box 10424, Pacific CentreVancouver BC V7Y 1K2Tel: 604-643-7100Fax: 604-643-7900Toll-Free: 1-877-244-7711CALGARYSuite 3300, 421 7th Avenue SWCalgary AB T2P 4K9Tel: 403-260-3500Fax: 403-260-3501Toll-Free: 1-877-244-7711TORONTOBox 48, Suite 5300Toronto Dominion Bank TowerToronto ON M5K 1E6Tel: 416-362-1812Fax: 416-868-0673Toll-Free: 1-877-244-7711MONTRÉALSuite 25001000 De La Gauchetière Street WestMontréal QC H3B 0A2Tel: 514-397-4100Fax: 514-875-6246Toll-Free: 1-877-244-7711QUÉBECLe Complexe St-Amable1150, rue de Claire-Fontaine, 7e étageQuébec QC G1R 5G4Tel: 418-521-3000Fax: 418-521-3099Toll-Free: 1-877-244-7711UNITED KINGDOM & EUROPE125 Old Broad Street, 26th FloorLondon EC2N 1ARUNITED KINGDOMTel: +44 (0)20 7786 5700Fax: +44 (0)20 7786 5702McCarthy Tétrault LLP / mccarthy.ca / 12552613v2

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