RFP Responses Included in SaaS Contracts. WHAT?

 

The simple answer is no, don't do it. Ok, let me explain.

Background: Where is this whole idea even coming from in the SaaS law or software law regime? Many customers are counseled or taught (BTW, there are lots of companies teaching your customers how to negotiate and buy from you) to send out long RFPs that ask for the world (lots of detailed questions about your solution . . . more information than they probably need), and then when it comes to the contract stage they too often demand that your whole RFP response should become part of the final contract. Well, I think that is a really bad idea, and here are 3 reasons why.

1) RFP Responses = Marketing Material. These responses were not written or intended to be inserted into contracts. If you really think about it, when you wrote the response you had your marketing hat on; you were telling them how great your product was. But were you thinking you were writing the contract? Probably not. Marketing material has a purpose, and that purpose is not contractual (it is more about education and inspiration).

2) Contracts  = Rights, Duties, Etc. ≠Marketing Material. If you said in your RFP response that "…this software is the best software that does x…" should that become part of the contract? Absolutely not. Have you ever heard of the legal term 'puffery'?  Well it is a legal term that describes those vague and optimistic terms that should not be legally actionable, and should not be relied on (i.e. they are general marketing terms and not contractual terms). So, if these type of words from your RFP response become part of the contract, then I think you are begging for a lawsuit.

3) Good Luck Trying to Book the Revenue. Most of the accounting rules around revenue recognition look for consistency and predictability, and if you start including all these different and varied RFP responses in your contracts, then I think you are probably killing that consistency and predictability. Are you selling a custom solution or a general solution that everyone really gets the same thing? If it is the former then I understand the request to address some of the RFP responses in the contract (re-written in another form), but most SaaS companies (at least most of the ones I have worked with) are providing the latter . . . a general solution in which everyone gets the same thing.

So long story short, try super hard not to include your RFP response into your customer contract, as 1) that was not the purpose you wrote it for, and 2) you are probably looking at some revenue recognition problems if you do (i.e. not a good thing). Think about this folks, as this is coming up more and more, and quite frankly I think it is somewhat of an RFP trick (that I don't want you to fall for). This is SaaS Law you need to be aware of.

Resources

Puffery as a Defense to a Lawsuit.

Another Puffery Article.

Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.

 

Can an IM Conversation Change a Written Contract?

The answer is, yes.

A very recent case ruled that the parties conversation on only IM changed the contract, even though there was nothing actually signed to reflect the change (as a software licensing lawyer, I am always looking for cases like this for you). Does this sound like a crazy result? Actually not, so let's run through the actual IM conversation, the legal logic, and what you can learn from this case.

1) Here is the Conversation (that changed the volume commitment under the contract).

That is it. 'Awesome' was interpreted as yes I agree to 'No Limi't on volume.

2) Here is the Legal Logic.

The court essentially said that the parties went through an 'offer and acceptance process' and changed the volume commitment. Where is the signed document you say? Well, there is none, but there is an offer (by typing 'NO LIMIT') and an acceptance (by typing 'awesome').

3) Here is What You Should Remember.

The courts in the US are now starting to get more and more comfortable with contracting via electronic means (email or IM), so don't assume anymore that you have to have a written signed document to change a contract. How do you avoid entering into contract (offer and acceptance) via email or IM?

1. Don't commit to things in a email/IM, and use more non-commital language (i.e. "that is interesting," "let me talk to my boss," "let me think about it," or "not sure … let me get back to you" VS.  "yes I agree," or "we have a deal"), and
2. Clarify in any email/IM trail that you still need a written contract to formalize the deal, and that there is no contract/agreement until then. Intent always matters, so if you do not intend to be bound then say that.

So hopefully you are getting the message that things are a changin, and so be super careful about how you communicate via email/IM regarding commitments.  Courts are starting to look at these electronic communications and have already construed them as a contract (at least if they look like a 'legal offer' and 'legal acceptance.')

Resources.

Offer and Acceptance Basics

The Law School Summary: Offer and Acceptance

The Actual Court Order and Conclusions of Law.

Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.