Imagine this scenario: A few months ago, your company signed a contract with a developer to build a critical technology solution—it is a cloud-based platform outfitted with artificial intelligence capabilities that will become an essential element of your business operations. But now the project has hit a wall. Deadlines have been missed, the performance of the new software is underwhelming, and no one is sure who owns the data being generated. When you look back at the agreement, you see that the gaps are glaring.
Situations such as this are happening more frequently in today’s digital-driven economy. The agreements around technology projects are fundamental tools for protecting businesses, managing risks, and ensuring successful relationships with vendors, customers and partners. Whether you are an attorney drafting the terms, a business owner negotiating them, or a technology professional executing the work, understanding these agreements is essential to getting it right.
This article kicks off a series in which we will break down the most important elements commonly found in technology contracts. From managing scope and performance expectations to dealing with data privacy, intellectual property, and emerging trends such as AI, this series will help you better understand and navigate the complexities of these agreements.
Why Technology Contracts Are Unique and Critical
Technology contracts stand apart from other types of business arrangements because they must address the constantly shifting nature of technology itself. The pace of innovation is rapid, and traditional contract terms often fail to keep up with new developments. Look at a typical software license from the 1990s and you will see references to backup storage tapes and Y2K problems. An agreement negotiated today may discuss generative artificial intelligence and information stored on a blockchain.
These contracts must also account for complex legal and technical challenges. Issues such as data ownership, service performance, warranties, and liability need careful attention to ensure clarity. In addition, businesses must grapple with an evolving regulatory environment. Laws such as the California Consumer Privacy Act (“CCPA”) and the European Union’s General Data Protection Regulation (“GDPR”) have reshaped how businesses handle data, and other states such as Virginia, Colorado, and Utah have introduced their own legislation to address privacy and security. Failure to address these obligations in a contract can lead to operational disruptions, disputes, or costly penalties. A clear, well-drafted agreement reduces uncertainty and keeps all parties aligned, even as the technology and regulatory landscape continue to change.
What You Will Learn in This Series
Over the next several articles – which we will roll out monthly in 2025, we will focus on the critical elements of technology contracts. Each topic will provide you with tools and knowledge needed to navigate these agreements more competently. Here is a quick preview of what is to come:
1. Key Terms in Technology Contracts: A guide to essential definitions and concepts.
2. Defining Scope: How to avoid “scope creep,” project ambiguity and other common issues arising in statements of work.
3. Service Level Agreements (SLAs): Setting performance expectations and accountability.
4. Intellectual Property Ownership: Addressing who owns the work and how it can be used.
5. Data Privacy and Security: Navigating legal obligations and compliance.
6. Indemnification and Liability: Allocating risks and protecting your business.
7. Warranties and Disclaimers: Ensuring deliverables meet expectations.
8. Termination and Exit Strategies: Preparing for an end that does not disrupt your business.
9. Dispute Resolution: Strategies for managing conflicts efficiently.
10. Open Source Software Risks: How to comply with open-source licenses.
11. Common “Boilerplate” Provisions: That sea of language toward the end of the contract can have consequences.
12. Emerging Trends in Technology Contracts: How innovations such as AI, SaaS, and blockchain are changing the landscape.
This series will seek to provide actionable insights and clear explanations, whether you are drafting, negotiating, or revising these contracts.
At the core of every successful technology agreement is a shared understanding of expectations, obligations, and risks. When drafted carefully, these agreements provide clarity, manage performance, reduce risk, and protect against uncertainties. We have organized this series to help you identify potential pitfalls, negotiate terms that align with your goals, and plan for the unexpected. As technology continues to evolve, your contracts must adapt to address the challenges and opportunities that come with it.
What’s Next?
In the next article, we will start with the key terms and concepts that every attorney, business owner, and technology professional needs to understand when working with technology contracts. By the end of this series, we hope you will have a better knowledge about how to think about these sorts of agreements, helping you more effectively protect your company’s or your client’s interests.
Technology is complex, but your contracts do not have to be. Let’s get started!
