Sharpened clause

WE’RE ALREADY FAMILIAR with software maintenance agreements that are designed only to maintain the software company’s revenues, but this week we get to see one that can also maintain the agreement itself.

The newest installment in our chronicles of maintenance madness comes from an IT manager we’ll call Mr. Reading. Mr. Reading’s company had for some time been using the ListServ list management product from L-Soft, but the project they were using it for was about to wrap up. So when they recently received an invoice from L-Soft to extend a maintenance agreement that was due to expire in 30 days, Mr. Reading and his staff decided not to pay, and let the maintenance run out.

Several months after the expiration date for the old maintenance agreement, L-Soft sales called to ask why they had not yet paid for another year. “The project director told them that we wouldn’t be renewing, and she assumed that was the end of it,” Mr. Reading says. “The next thing we know, L-Soft informs us that we’re in arrears for the next year’s maintenance fee, and they’re going to turn it over to collections if we don’t pay up.”

When Mr. Reading called L-Soft to try to clear things up, officials informed him of some things he and his project director hadn’t known about the maintenance contract she’d signed the previous year. “The contract is worded to make sure L-Soft still makes money, even on a product you’re no longer using,” he says. “Ninety days’ advance notice are required to cancel … [otherwise] the contract renews automatically for a full year. Even if we had responded to that first invoice, they told me it was already too late to cancel at that point because it was less than 90 days from the automatic renewal.”

On reading the contract closely, it was clear that was indeed what it said. Both Mr. Reading and his project director had read the contract before she’d signed it, but they had missed it. This wasn’t completely surprising, since not only was it in your typical thick legalese, but the automatic renewal provision and 90-day notice requirement were in separate sections. Without studying how those two sections worked together, they could seem rather innocuous and might be missed in a quick scan by a nonlawyer.

In discussing the situation with L-Soft, Mr. Reading offered to split the difference, paying half the annual fee to cover the three months that had passed since the expiration of the old contract and the 90-day notice period. L-Soft rejected that compromise, however. Eventually he decided that it wasn’t worth fighting over a few thousand dollars and paid the full annual fee.

He was not a happy camper, though. While Mr. Reading wished he’d run the maintenance contract past the lawyers in his company’s contracts department, he’d like to think that shouldn’t be necessary for every maintenance agreement his department has to approve. “We frequently sign stuff around here even though we technically are supposed to refer it all to the contracting officers,” he wrote. “If we had to negotiate every single software or maintenance contract, we would grind to a halt waiting for a 9-to-5 lawyer to negotiate every little detail.”

Mr. Reading doubts he would have been overly concerned even if he had spotted what L-Soft’s contract was really saying. “If I had seen that, I would have discounted it anyway, figuring we could cancel when we needed to cancel and only end up paying for the part we used,” he says. “Heck, what vendor is going to want to tick off a customer over cancelling maintenance and lose the potential of future business? Guess we will spend more time, or waste more time, laboring over specific terms since we have now been burned.”

L-Soft took a hard line when I described Mr. Reading’s experience to them. “If he signed a contract, he needs to abide by his contract,” said Gabriela Linares, vice president of marketing at L-Soft. “We ask for 90 days’ notice because that is what we feel is adequate time to terminate our services. If he had a problem with any of the clauses in our contract, he should have contacted us. Many of our customers come back with their lawyers and ask to remove particular clauses in our contracts. That is a process of negotiation, and we are open to discuss those issues.”

A contract is a contract, in other words. Last week I talked about how it’s impossible for any of us (even lawyers) to read all the sneakwrap agreements that we’re bombarded with on a daily basis(see ” Sneakwrapping a virus “). But this was a real contract between two businesses, and we all know that we are responsible for understanding what such a contract says before we sign on the dotted line. Right?

Yes, indeed, and Mr. Reading’s experience provides a hard object lesson as to why that’s particularly true for IT customers when dealing with today’s software industry. Not only do their contracts have to be read, they have to be read by someone with the time and legal knowledge to spot the tricks and surprises lurking in the fine print. It’s too bad some software companies think this is a good way to increase revenues, but I guess hard times lead to hard practices. They’re mustering their lawyers, so you’re going to have to as well. And while you’re about it, you’d better see if they can read some sneakwrap agreements too. That’s particularly true with L-Soft. As a Maryland-based company, UCITA Uniform Computer Information Transaction Act) governs their clickwraps and shrinkwraps as well as their real contracts.)

L-Soft is perfectly within its rights to choose to do business this way. And Mr. Reading and I are perfectly within our rights to tell you that’s how L-Soft chooses to do business. What you choose to do with that information is up to you.