Outsourcing Contracts

Are you looking to delegate one or several functions of your business to an external provider? If so, you will want to be sure that the legal agreement you reach with the outsourcing supplier – known as an “outsourcing contract” – caters to your organisation’s needs.

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How can Cranbrook Legal assist me with outsourcing contracts?

Our team at Cranbrook Legal can help, advise, and guide you in relation to many different aspects of outsourcing contracts for your organisation.

You might initially approach us because you would like our commercial lawyer to review, draft, and even help negotiate a particular proposed agreement. This will enable you to be sure of your business’s interests being protected.

However, we can also essentially act as a legal advisor to your organisation throughout the entirety of the outsourcing process. This can include helping you identify critical aspects of an outsourcing contract to negotiate, in addition to pinpointing potential legal risks, so that your organisation can take steps to mitigate them.

What key provisions should be included in outsourcing contracts to ensure my business is protected?

When you are putting together an outsourcing agreement, making sure the contract includes the following provisions will help give your business the best possible protection:

  • The scope of services, setting out a precise description of the services the outsourcing vendor will be expected to provide
  • The service level agreement (SLA), defining the level of service to be provided – encompassing aspects like the expected quality, availability, and response times
  • Information on data security and confidentiality, making clear how the outsourcing vendor will handle confidential data
  • Details on the assignment and ownership of intellectual property rights
  • Liability clauses, including defined limits on the outsourcing vendor’s liability for negligence, errors, or breach of contract.
  • Termination clauses, making clear the conditions under which either party will be entitled to terminate the contract
  • Information on payment terms, addressing such aspects as fees, invoicing frequency, and payment methods
  • The dispute resolution process, providing a clear mechanism for resolving any disputes between the parties, such as mediation or arbitration.

How do I clearly define the scope of work and deliverables in the outsourcing contract?

There are various steps that you can take to make sure the scope of work and deliverables in your organisation’s next outsourcing contract are clearly defined.

You should, for example, make sure a detailed description of the services to be provided is laid out in the contract. All expected deliverables should be listed with specific timelines, and any exclusions or limitations will need to be clearly outlined.

When you are detailing the scope of work and deliverables in your organisation’s outsourcing agreement, you should make sure precise language is always used to avoid ambiguity.

How can I ensure that IP rights created during an outsourcing arrangement are clearly allocated?

When a business outsources functions to an external provider, a key risk that might arise is a dispute or confusion with regard to who owns the intellectual property (IP) rights for any work or product the third-party provider creates.

Your organisation may adopt certain strategies to help guard against this risk in its outsourcing contracts. Here at Cranbrook Legal, we can help make sure your next outsourcing agreement clearly defines IP ownership and outlines any usage rights and restrictions that may apply.

What clauses need to be included to address confidentiality and data protection?

Confidentiality and data protection are vital factors for a business to address in its outsourcing contracts. Certain key clauses in the agreement will help with this.

Such clauses will likely include a clear definition of confidential information, as well as obligations to maintain confidentiality, and specific security measures to be implemented.

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How should I address dispute resolution in the outsourcing contract?

Your business’s outsourcing agreement should clearly set out the preferred method for resolving disagreements between the contracting parties.

Typically, outsourcing contracts take a tiered approach to dispute resolution. Such agreements usually state that as a first course of action, the parties must try to resolve disputes through good-faith negotiation and direct communication.

If this initial approach is not sufficient for resolving a given dispute, the contract is likely to set out conditions under which mediation, and then arbitration, may be pursued.

What steps should be taken to define how I terminate the contract?

If you are still in the process of drafting an outsourcing agreement, you will need to give careful consideration to the termination clauses to include.

You might, for example, decide to include a termination clause “for convenience” – in other words, the contract can be terminated without any specific cause being given.

Termination of an outsourcing contract might also be possible as a result of a significant breach of contract, one party becoming insolvent, or the parties mutually agreeing to terminate the agreement, to cite just some possibilities.

If your organisation has an existing outsourcing contract and you wish to terminate it, you will need to locate the termination clause in the agreement, and understand the specific conditions that allow for termination.

If your organisation is seeking to terminate an outsourcing agreement, certain processes may need to be followed. These steps may include a written termination notice being sent to the outsourcing provider, in compliance with a required notice period before the termination officially takes effect.

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Contact our Commercial Solicitors In London on 0208 215 0053 or
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How do I ensure the other party meets quality standards?

Through the implementation of various monitoring and auditing provisions, your organisation can keep a close watch over the outsourcing supplier’s performance. This will help you verify that the other party is adhering to agreed service levels as laid out in the contract.

In cases where the outsourced function is of particularly critical importance to the operation of your business as a whole, you might go as far as including step-in rights as part of the outsourcing contract.

Such rights could enable your organisation to assume management control over outsourced services in the event of the supplier’s level of service falling and remaining below what was agreed in the contract.

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1. What are the risks when outsourcing services?

The outsourcing of one or multiple of your business’s functions can be highly advantageous when this process is executed correctly.

However, outsourcing can also open your business to certain risks, such as:

  • A loss of control, especially if the distance between your business and the outsourcing vendor makes it difficult to monitor the latter party’s performance and productivity
  • Issues with the quality of the outsourced work, due to such factors as poor decision-making or a lack of authority
  • Security and confidentiality risks, due to these responsibilities being shifted from your business to the external outsourcing vendor
  • Hidden or additional costs – for example, because there is a need for further work that was not adequately and clearly addressed by the original outsourcing contract.

A well-written outsourcing agreement can help minimise the risks presented by issues like these.

Our in-house commercial lawyer at Cranbrook Legal can assist you in putting together an outsourcing contract that will help ensure the vendor delivers as-expected performance levels.

We can, for instance:

  • Incorporate performance incentives and penalties into the contract, so that the interests of your company and the outsourcing provider are aligned
  • Define clear performance benchmarks and set out a system of rewards in the event of the outsourcing vendor surpassing your expectations
  • Stipulate the penalties that will be imposed if the outsourcing provider underperforms, misses deadlines, or otherwise fails to meet quality standards.

In the case of most of our legal services at Cranbrook Legal, we operate on a pre-agreed fixed-fee basis. Please consult the fees page of our website for in-depth information.

If you would like to engage the services of our legal firm for a certain prolonged period of time to assist with your organisation’s outsourcing contracts and other aspects of its operations, please contact us for further advice and guidance.

You are welcome to call our central London-based team on 0208 215 0053; you can also fill in and submit our online contact form to book a free consultation.

A commercial lawyer can help protect your business’s interests through a variety of interventions in relation to outsourcing contracts.

Here at Cranbrook Legal, we can:

  • Carefully draft and review your business’s contracts to help ensure the terms are fair and your organisation’s rights are protected
  • Ensure your organisation complies with pertinent laws and regulations
  • Advise on how your organisation can protect its intellectual property such as patents, trademarks, and copyrights
  • Represent your business in legal disputes, including negotiations, mediation, and litigation.

Yes, we can tap into our contacts across a range of industries – such as information technology (IT), software development, marketing, and more – to help your organisation access freelancers that could suit your needs. Please contact us to find out more.

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