Remedies (Pro-Customer)

Explaining Remedies

This pro-customer services clause provides for injunctive relief in addition to damages. Depending on the relative bargaining power of the parties, you, the customer can expect the service provider to seek:

  • Removal of this provision.
  • A limitation of its applicability to certain clauses (for example, confidentiality).
  • An explicit requirement for the posting of a bond, if an injunction is sought.

Step-In Rights

The second paragraph of this clause gives you the ability to take action, short of termination, if the service provider fails to provide satisfactory services in a timely manner. It includes the right to:

  • Suspend the service provider’s performance.
  • Have the services performed by an alternative provider or the customer itself.
  • Have the work supervised by a customer representative.
  • Withhold payment and set off damages suffered against amounts otherwise due to the service provider.

Liquidated Damages

The third paragraph of this clause provides for liquidated damages as the exclusive remedy for violations of the service provider's confidentiality obligations because actual damages from confidentiality breaches are difficult to determine. Again, a service provider with bargaining power is likely to seek:

  • Removal of the clause.
  • A reduction in the amount of damages.
  • A limitation on the meaning of what may constitute a “use” or “disclosure.”

A liquidated damages clause must be drafted carefully. If a court determines that it is punitive rather than compensatory, the provision will likely be unenforceable. For more information about liquidated damages, contact us.

Cumulative Remedies

The fifth paragraph of this clause seeks to ensure that the rights and remedies set out in the agreement, except for those with respect to the service provider's confidentiality obligations for which the exclusive remedy of liquidated damages is provided, are in addition to any rights provided by law or equity and not in substitution for them. The extent to which express terms preclude implied terms without a cumulative remedies clause is unclear and may vary among jurisdictions. Without the clause, there may be a presumption (that may be supported by the entire agreement language) that all the terms intended to govern the parties’ relationship are in the agreement itself and that, in doing so, rights and remedies provided by law that are not specified in the agreement are intentionally displaced. Where the customer wishes to preserve the rights and remedies available to it under law and equity, it should, therefore, include this clause.

Sample Clause

Remedies.

If the Service Provider violates any provision of this Agreement, the Customer shall, in addition to any damages to which it is entitled, be entitled to immediate injunctive relief against the Service Provider prohibiting further actions inconsistent with the Service Provider’s obligations under this Agreement.

In the event Service Provider fails to satisfactorily perform any of the Services on a timely basis, the Customer shall have the right, without prejudice to any other rights or remedies it may have under this Agreement or any applicable Statement of Work, to take one or more of the following steps:

 

(a)  Suspend Service Provider’s right and obligation to complete its performance of the Services until such time as the Service Provider is able to demonstrate to the Customer’s reasonable satisfaction that it can satisfactorily meet its obligations under this Agreement;

(b)  Itself provide and/or engage a replacement service provider to provide any or all of the delayed or unsatisfactory Services;

(c)  Assign one or more of its representatives to supervise and work with the Service Provider to correct and mitigate the effects of the Service Provider’s breach;

(d)  Withhold payment of any amounts otherwise due to the Service Provider in a sufficient amount to set off against any damages caused to the Customer as a consequence of the Service Provider’s breach.

Because the damages the Customer would sustain on a breach by Service Provider of the Confidentiality provisions set forth in the confidentiality clause of this Agreement are not readily ascertainable, for each unauthorized use or disclosure of the Customer’s Confidential Information, Service Provider will be liable to, and shall pay the Customer the sum of [AMOUNT] as liquidated damages (the “Liquidated Damages”). The Parties intend that the Liquidated Damages constitute compensation and not a penalty. The Parties acknowledge that the Liquidated Damages are a reasonable estimate of the anticipated or actual harm that might arise from a Service Provider breach of the confidentiality clause. The Service Provider’s payment of the Liquidated Damages is its sole liability and entire obligation and the Customer’s exclusive remedy for any Service Provider breach of the confidentiality clause.

 

To the extent a Party is required to seek enforcement of this Agreement or otherwise defend against an unsuccessful claim of breach, the unsuccessful Party shall be liable for all attorney’s fees and costs incurred by the successful party to enforce the provisions of this Agreement.

Except for a breach of the confidentiality clause, all rights and remedies provided in this Agreement are cumulative and not exclusive, and the exercise by either Party of any right or remedy does not preclude the exercise of any other rights or remedies that may now or subsequently be available at law, in equity, by statute, in any other agreement between the Parties, or otherwise. Despite the previous sentence, the Parties intend that the Service Provider’s exclusive remedy for Customer’s payment breach shall be its right to damages equal to its earned but unpaid fees.