Template: Application Service Provider (ASP) Agreement

This agreement, dated as of [indicate the date], is by [indicate the name and legal address of the party], thereinafter the ‘Client’, and by [indicate the name and legal address of the party], thereinafter the ‘Supplier’ and, together with Client, the ‘Parties’.

Whereas:

1. Supplier has developed certain proprietary computer software program(s) [to describe in an attached Annex] (collectively, as the same may be supplemented, modified, updated or enhanced from time to time, the ‘Application’), which are hosted on servers and made available to Supplier customers by means of the Internet (collectively, the ‘Service’), and Supplier desires to provide the Service to Client, subject to all the terms and conditions hereof;
2.  Client is willing to use the Service provided by Supplier.

Now, therefore, Client and Supplier hereby agree as follow:

 

1. Access

Supplier grants to Client a non-exclusive, non-assignable and non-transferable right during the Term, as hereinafter defined, to allow access to, and use of, the Service only by the authorised users [to be specified in an attached Annex], in accordance with all of the terms and conditions set forth therein. The Application will be made available to Client in executable object code form only. [Parties should consider, inter alia, whether access is restricted to a certain number of users (e.g. only a few authorised employees of the client) and if the access will be protected by a password.]

 

Or, in alternative

Supplier (i) grants to Client a limited, non-transferable, non-exclusive license, in object code only, to use the Service solely to support Client’s normal course of business, provided, however, that Client may not use the Service in a resale capacity, or process and/or analyse third party data in a commercial service bureau environment or on any hardware other than [those set forth in an attached annex or in a service schedule], and (ii) retain all right, title, and interest in and to any hardware, software applications and other technology and materials supplied by Supplier. [This clause is more comprehensive that the previous one, although it may be advisable to draft short and precise provisions that focus only on one key point.]

 

2. Client Requirements

Client represents and warrants that it shall:

1. ensure that all of its users comply with all of the terms and conditions hereof;
2. not permit any person or entity, other than the users, to use or gain access to the Application or the Service and shall provide reasonable security devices to protect against unauthorised usage of or access thereto;
3. not rent, lease, sublicense, distribute, transfer, copy or modify the Service or the Application or any component thereof;
4. [only use the Service for its internal business use and not in the operation of a service bureau or for the benefit of any other person or entity;]
5. not translate, decompile, or create or attempt to create, by reverse engineering or otherwise, the source code from the object code made available hereunder [clause to be adapted according to the needs of the parties];
6. not adapt the Service or Application in any way or use it to create a derivative work;
7. not remove, obscure, or alter Supplier’s proprietary notices, trademarks, or other proprietary rights notices affixed or contained in the Service or Application;
8. not use the Service or the Application in any manner, or in connection with any content, data, hardware, software or other materials provided by or on behalf of Client or any user (collectively, Client Materials) that (a) infringes upon or violates any patent, copyright, trade secret, trademark, or other intellectual property right of any third party; (b) constitutes a defamation, libel, invasion of privacy, or violation of any right of publicity or other third-party right or is threatening, harassing or malicious [adapt this part of the clause according to the cultural and legal framework of the country in which the agreement is entered into]; (c) violates any applicable international, national or local law, rule, legislation, regulation, ordinance;
9. not use the Service or the Application for any illegal or offensive purpose;
10. ensure that all Client Materials are free from viruses, worms, Trojan horses and other malicious codes.

Or, in alternative

1. Client will not alter, or permit a third party to alter, any part of the Application.
2. Client will not copy, or permit a third party to copy, the Application.
3. Client will not reverse engineer, decompile, dissemble or otherwise attempt to derive source code from the Application or the Service.
4. Client will not license, sell, transfer, lease or disclose the Service or the Application.

3. Fees

In consideration of Supplier’s provision of the Service hereunder, Client shall pay the fees [to be set forth in an attached Annex; parties should agree on the structure of the fee, e.g. fix or variable. Other than that, it is necessary to provide for the case in which the client is not solvent.] All amounts payable by Client hereunder shall be paid in immediately available funds [parties can set a different payment method] in euros and are not refundable. Client shall reimburse Supplier for any out-of-pocket expense incurred at Client’s request, whether in connection with Additional Work, as hereinafter defined, or otherwise, including, without limitation, telephone, travel and insurance charges.

Other than that, Client will pay or reimburse Supplier for all sales, use, transfer, privilege, exercise or other taxes, whether international, national or local, however designated, which are levied or imposed by reason of the services contemplated hereby; excluding, however, income and franchise taxes on profits which may be levied against Supplier.

 

4. Operating Environment

The Parties acknowledge that successful implementation and use of the Service depends upon the Client’s provision of appropriate hardware and software [to be specifically indicated in an attached annex] or such other hardware or software as Supplier may reasonably recommend from time to time (collectively, the Operating Environment). Client shall be responsible for providing the Operating Environment at its own expenses [or, in alternative: Supplier will provide Client with the Operating Environment at Client’s expenses].

 

5. Service Standards

Supplier shall use commercially reasonable efforts to cause the Service to be accessible to Client, as specified herein, 24 hours a day, seven days a week [or differently], except for scheduled maintenance and required repairs, and except for any interruption due to causes beyond the reasonable control of, or not reasonably foreseeable by, Supplier, but not limited to, any Force Majeure Event as hereinafter defined. In the event of any interruption or failure of the Service, other than as permitted in accordance with this Article 5, Client shall promptly notify Supplier thereof, and Client’s sole and exclusively remedy and Supplier’s sole and exclusive liability therefore shall be to receive a credit against future fees [at a rate to be discussed. In alternative, parties can state that: Client will be entitled to full damages due to the interruption or failure of the Service.]

Or, in alternative

 

Subjects to the terms and conditions of this Agreement, Supplier shall use its commercially reasonable efforts to provide the Service for twenty-four hours a day, seven days a week through the term of this Agreement. User agrees that from time to time the Service may be inaccessible or inoperable for various reasons, including periodic maintenance procedures or upgrades (thereinafter, ‘Scheduled Downtime’), service malfunctions, and causes beyond the control of Supplier or which are not reasonably foreseeable by Supplier including the interruption or failure of telecommunications or digital transmission links, hostile network attacks or network congestions or other failures (collectively ‘Downtime’). Supplier shall provide at least 48 hours notice to Client in the event of any Scheduled Downtime. Supplier shall use commercially reasonable efforts to minimise any disruption, inaccessibility and/or inoperability of the Service in connection with Downtime, whether scheduled or not. In the event that Supplier discovers or is notified by Client of the existence of non-Scheduled Downtime, Supplier will take all actions reasonably necessary to determine the source of the problem. If the source of the problem is outside of the control of Supplier, then Supplier will use commercially reasonable efforts to notify the party/parties responsible to resolve such problem as soon as possible. If the source of the problem is within the control of Supplier, Supplier will use best efforts to resolve the problem within [specify] hours of determining its source. [In case this clause is adopted, the provision on ‘Force Majeure’ (see below) will be drafted and limited in scope accordingly or simply skipped.]

6. Service Standards Remedies

If Downtime, as set forth in this Agreement, is (i) due to a problem within the control of Supplier, (ii) non-Scheduled Downtime, (iii) lasts for a period of at least [specify] consecutive minutes, and (iv) is not resolved within [specify] hours of determining its source, then Client, upon written request to Supplier shall be entitled to a pro rata reduction in fees, as set forth in this Agreement, for such Downtime (thereinafter, the ‘Service Credit’). One Service Credit shall be equal [specify, in percentage] of the recurring monthly fee for the Application experiencing Downtime for each 24 hour period. The maximum number of Service Credits to be issued by Supplier for any single calendar month shall not exceed [specify] Service Credits. In order to receive Service Credit(s), Client must notify Supplier in writing within [specify] days from the date in which Client acquired the right to receive Service Credit(s). Service Credit(s) will be reflected in Supplier invoice in the month following the Downtime, unless the Service Credit(s) are due in the final month of the term, in which case the monetary value of the Service Credit(s) will be refunded.

 

7. Proprietary Rights

As between Client and Supplier, the Application and the Service are and shall remain the sole and exclusive property of Supplier, including all applicable rights to patents, copyrights, trademarks, trade secrets or other proprietary or intellectual property rights inherent therein or appurtenant thereto. All rights not expressly granted to Client herein are reserved to Supplier. Conversely, as between Client and Supplier, the Client Material are and shall remain the sole and exclusive property of Client, including all applicable rights to patents, copyrights, trademarks, trade secrets or other proprietary or intellectual property rights inherent therein or appurtenant thereto.

 

8. Support

Supplier shall provide Client with telephone number and e-mail address to enable communication with a service representative during Supplier’s normal business hours [or on 24/7 basis] to assist Client in identifying, verifying and resolving problems with the Service and the Application.

 

9. Additional Work

From time to time, Client may request changes to or customisation of the Service or the Application and/or additional services (the ‘Additional Work’) to be provided by Supplier subject to the terms and conditions hereof. Client shall submit all requests for Additional Work to Supplier in writing (‘Work Order’). Upon receipt of the Work Order, Supplier shall, within [seven] working days, submit to Client for its written acceptance a proposal for undertaking the applicable tasks, a price quote setting forth the fees applicable to the Work Order (which may, in the case of a modification of the Service, include an adjustment of the Fees charged) and a timetable for performance of the tasks. If Client accepts Supplier’s proposal to undertake the work specified in the Work Order pursuant thereto, then the Work Order, as supplemented or modified by Supplier’s proposal, shall, upon execution by both of the Parties, amend and become a part of this Agreement, and Supplier shall proceed to implement such changes or Additional Work in accordance therewith. All modifications or customisations of the Service or the Application and any other deliverable provided by Supplier in connection with any Additional Work shall be deemed a part of the Service hereunder and shall, as between the Parties, be the exclusive property of Supplier. 

 

10. Confidentiality

Customer shall not sell, transfer, publish, disclose, display or otherwise make available any portion of the executable code of the Application to others. Client agrees to secure and protect the Application and the Service in a manner consistent with the maintenance of Supplier’s rights therein and to take appropriate action by instruction or agreement with its users to satisfy its obligations hereunder. Client shall use its best efforts to assist Supplier in identifying and preventing any authorised access, use, copying or disclosure of the Application or the Service, or any component thereof, or any of the algorithms or logic contained therein. Without limitation of the foregoing, Client shall advise Supplier immediately in the event Client learns or has reason to believe that any person to whom Client has given access to the Service has violated or intends to violate the confidentiality of the executable code of the Application or the proprietary rights of Supplier, and Client will, at Client’s expense, cooperate with Supplier in seeking injunctive or other equitable relief in the name of Client and Supplier against any such person. Client agrees to maintain the confidentiality of the executable code of the Application using at least as great a degree of care as Client uses to maintain the confidentiality of Client’s own confidential information (and in no event less than a reasonable degree of care).

Client acknowledges that the disclosure of any aspect of the executable code of the Application, including the documentation or any other confidential information referred to herein, or any information which ought to remain confidential, will immediately give rise to continuing irreparable injury to Supplier inadequately compensable in damages at law, and Supplier is entitled to seek and obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing confidentiality undertakings, in addition to any other legal remedies which may be available. In addition, Supplier may immediately terminate this Agreement, including all license rights granted herein, in the event Client breaches any of its confidentiality obligations regarding the Application or the Service.

Furthermore, Supplier agrees that it shall not disclose to any third party or use any information proprietary to Client including information concerning the Client and the users, trade secrets, methods, processes or procedures or any other confidential information of the other party which it learns during the course of its performance of the Service, except for purposes related to Supplier’s rendering of the Service to Client under this Agreement or as required by law, regulation, or order of a court or regulatory agency or other authority having jurisdiction thereover. In addition, Client may immediately terminate this Agreement in the event Supplier breaches any of its confidentiality obligations set forth herein. Notwithstanding the foregoing, the confidentiality obligations set forth in this Article will not apply to any information which the recipient party can establish to have: (i) become publicly available without breach of this Agreement; (ii) been independently developed by the recipient party outside the scope of this Agreement and without reference to the confidential information received under this Agreement; or (iii) been rightfully obtained by the recipient party from third parties which are not obligated to protect its confidentiality.

 

11. Supplier Indemnity

Supplier shall indemnify, defend, and hold harmless Client and its affiliates and the directors, officers, employees and agents of the foregoing with respect to any claim, demand, cause of action, debt or liability, including reasonable attorney’s fees, to the extent that it is based upon any third party claim (an ‘Infringement Claim’) that the Service infringes any copyright, patent, trademark, trade secret or other intellectual property right of any third party; provided, however, that Supplier shall have no obligation pursuant to the foregoing indemnification provision to the extent that any claim is based on or related to (i) any use of the Service or Application in violation of this Agreement, (ii) any use of the Service or Application in conjunction with any third party product, data, hardware or software not provided by Supplier, or (iii) any Client Material. If Client’s use of the Service is enjoined by reason of an Infringement Claim, Supplier’s sole obligation shall be to either (a) procure the right for Client to continue using the Service, (b) replace or modify the components of the Service subject to the Infringement Claim with non-infringing components of substantially equivalent functionality, or (c) if neither (a) or (b) are available on a commercially reasonable basis, refund to Client a pro-rata portion, if any, of the Fees paid by Client for access to the Service, at which time this Agreement shall terminate. [Additional provision: The foregoing states the entire liability of Supplier with respect to any Infringement Claim, and Client hereby expressly waives any other such liabilities.]

 

12. Client Indemnity

Client shall indemnify, defend, and hold harmless Supplier and its affiliates and directors, officers, employees and agents of the foregoing with respect to any claim, demand, cause of action, debt or liability, including reasonable attorney’s fees, to the extent that it is based upon any third party claim that, if true, would constitute a breach of any of the Client’s representations, warranties, obligations, covenants or agreements hereunder. [Please be aware to use the most appropriate terminology according to the applicable national law.]

 

13. Indemnification Procedures

A party seeking indemnification hereunder (an ‘Indemnified Party’) shall give the party from whom indemnification is sought (the ‘Indemnifying Party’) reasonably prompt notice of the relevant claim; provided, however, that failure to provide such notice shall not relieve the Indemnifying Party from its liability or obligation hereunder [the parties can set forth: except to the extent of any material prejudice directly resulting from such failure].

 

14. Limited Warranty

Supplier warrants that the Service will substantially conform in all material respects to the current documentation provided by Supplier in connection with the Service, without limitation, any updates thereof (the ‘Documentation’) and the design, functionality and performance specifications [to be set forth in an attached annex] when used in the Operating Environment in accordance with the Documentation and all of the terms and conditions hereof. In the event that the Service fails to perform in accordance with this warranty, Client shall promptly inform Supplier of such fact and, [the parties can set forth: as Client’s sole and exclusive remedy] Supplier shall either: (i) repair or replace the Service to correct any defects in performance without any additional charge to Client, or (ii) in the event that such repair or replacement cannot be done within a reasonable time, terminate the Agreement and provide Client, [the parties can set forth: as Client’s sole remedy], with a pro-rata refund of the Fees paid to Supplier hereunder with respect to such calendar year. [The parties can agree on a disclaimer pursuant to which the supplier does not make any warranty that the application and the service will meet client’s requirements. We would therefore suggest to state that the supplier’s liability is limited to the functionality of the application and the service, as specified in the agreement.]

In the event Supplier shall be liable to Client for any matter arising out of or in any way relating to this Agreement, whether based on an action or claim in contract, tort [non-contractual liability in civil law jurisdictions], or otherwise [select the right terminology according to the law applicable to the contract], then the amount of damages recoverable against Supplier shall not exceed the amount paid by Client to Supplier in the prior twelve months period for the specific service which is the subject of the action or claim. Supplier shall not be held liable for indirect, special, consequential or punitive damages of any party, including third parties. Further, no cause of action which accrued more than two years prior to the filing of a suit alleging such cause of action may be asserted against Supplier. [This clause, often used in agreements regulated by the provisions of common law countries, has to be drafted in the light of the bargaining power of the parties. In civil law countries, for instance, the law states that the infringer of a contractual obligation has to pay direct and indirect damages (lucrum cessans), so that it is necessary to take into account this element.] 

 

15. Force Majeure

Except for Client’s obligations to pay Supplier hereunder, neither Party shall be liable to the other Party for any failure or delay in performance caused by reasons beyond its reasonable control, including, but not limited to, restrictions of law, regulations, orders or other governmental directives, labour disputes, strikes, third-party mechanical or other equipment breakdowns, fire, explosions, fibre optic cable cuts, interruption or failure of telecommunication or digital transmission links, Internet failures or delays, storms or other similar events that are not rationally foreseeable by the Parties.

 

16. Term

The term of this Agreement shall commence on the date on which Supplier first makes the Service available to Client and shall continue until the date immediately preceding the first [or further] anniversary thereof (the ‘Initial Term’). Unless either party gives the other at least [indicate] months prior written notice that it has elected not to extent the term of this Agreement beyond the date in which the Agreement will end, the term of this Agreement will be automatically extended for successive periods of [one] year each. [Please be aware that the parties can agree on a different, non-automatic, modality of renewal. We nevertheless believe that an automatic extension is the most practical way for both client and supplier].

 

17. Termination

In the event that either party hereto materially or repeatedly defaults in the performance of any of its duties or obligations hereunder (except for a default in payments to Supplier) and does not substantially cure such default within [specify, e.g. thirty] days after being given written notice specifying the default, or, with respect to those defaults which cannot reasonably be cured within [specify, e.g. 30] days, if the defaulting party fails to proceed promptly after being given such notice to commence curing the default and thereafter to proceed to cure the same, then the party not in default may, by giving written notice thereof to the defaulting party, terminate this Agreement as of a date specified in such notice of termination. [Please be aware that the applicable national legal framework can provide for particular rules, but the clause we provided the reader with can be generally applied in every jurisdiction.]

In the event that Client defaults in the payment, when due, of any amount due to Supplier hereunder and does not cure such default within [specify] days of the date of the invoice, then Supplier may, by giving written notice to Client, terminate this Agreement as of a date specified in such notice of termination. [The parties should negotiate whether or not including the right for one party to terminate the agreement in case the other party enters into  bankruptcy, or similar, proceedings.] Upon the termination of this Agreement for any reason, Supplier will provide Client with such termination assistance, at Supplier’s standard rates, as may be reasonably requested by Client. [This clause will be drafted according to the needs and the contracting power of the parties.]

 

18. Survival

All provisions of this Agreement relating to proprietary rights, confidentiality, and disclaimer of warranty and limitation of liability shall survive the expiration or termination thereof.

 

19. Complete Understanding

This Agreement, including all annexes attached hereto, constitutes the final, complete and exclusive agreement between the Parties with respect to the subject matter hereof, and supersedes any prior proposals, understandings and all other oral and written agreements between the Parties relating to the subject matter hereof.

 

20. Severability

If any provision of this Agreement is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is illegal, unenforceable or void.

 

21. Waiver

No delay or omission by either party hereto to exercise any right or power hereunder shall impair such right or power or be construed to be a waiver thereof.

 

22. Change in Control of Client

If a change in control occurs with respect to Client, Supplier agrees to continue to provide Services under this Agreement; provided that (i) Supplier’s obligation to provide Services shall be limited to the entities comprising the Customer prior to such change in control and (ii) Supplier’s obligation to provide Services shall be limited in any and all circumstances to the number of accounts and items processed in the [specify]-month period prior to such change in control occurring plus [specify] percent.

 

23. Assignment

Client may not assign, by operation of law or otherwise, including, without limitation, by means of outsourcing, this Agreement, in whole or in part, without the prior written consent of the Supplier, which consent shall not be unreasonably withheld. Supplier may assign this Agreement and/or subcontract some or all of its obligations hereunder. [The parties can agree on a non-assignment clause for the supplier too.]

 

24. Notices

Wherever under this Agreement one party is required or permitted to give notice to the other, such notice shall be deemed given when delivered in hand, or when mailed by registered or certified mail, return receipt requested, to the [indicate the subject, e.g. CEO] of the party receiving the notice.

 

25. Relationship of Parties

Supplier, in furnishing services to Client hereunder, is acting only as independent contractor. Supplier does not undertake by this Agreement or otherwise to perform any obligation of Client, whether regulatory or contractual, or to assume any responsibility for Client’s business or operations.

 

26. Governing Law

This Agreement shall be interpreted in the light of and governed by the laws of [indicate the country].

 

27. Competent Court

All disputes between the parties arising from or relating to this Agreement shall be brought before the Law Court of [indicate the city/country].

Or, in alternative

 

27. Arbitration

All disputes between the parties arising from or relating to this Agreement shall be settled by final and binding arbitration in accordance with and subject to [indicate the applicable arbitration rules of the competent arbitration chamber] in effect at such time by a panel of [specify the number] arbitrators selected in accordance with those rules. [Optional provision: Judgement upon the award rendered in any such arbitration may be entered in any court of competent jurisdiction, or application may be made to such court for a judicial acceptance of the award and enforcement, as the laws of such jurisdiction may require or allow.]

 

Or, in alternative

 

27. Dispute Resolution

In the event of any dispute between the parties hereto arising from or relating to this Agreement, then, upon the written request of either party, each of the parties will appoint a designated representative to endeavour to resolve such dispute. The designated representatives will negotiate in good faith to resolve the dispute. Except for those disputes where injunctive relief may be an appropriate remedy, no formal proceedings relating to such dispute may be commenced until the designated representatives conclude in good faith that amicable resolution through continued negotiation of the matter in issue does not appear likely.

[Names of the parties, date and place, signatures]