In Search of a Balanced Contract: New Guidelines for IT Purchases in Finland
Jukka Airaksinen -
Pekka Tarkela -
Nothing is more frustrating than thinking that you are buying one thing and ending up buying something else. This dilemma is particularly present in the information technology sector – an area rich in the varied names given to products and services.
In Finland, the new IT2010 contract terms and conditions, published on 19 May 2010, attempts to cut through the confusion in terms, while also providing standard contract conditions. The publication is an effort of the Central Chamber of Commerce of Finland, the Finnish Software Entrepreneurs Association, the Finnish Association of Purchasing and Logistics (LOGY), the Federation of Finnish Technology Industries and the Finnish Information Processing Association (FIPA).
But, as we present below, while the new guidelines offer advantages, parties may also want to think about modifying the standard terms and conditions in some places.
Understanding the New IT2010 Contract Terms and Conditions
The IT2010 contract terms and conditions contain a set of general terms and conditions, accompanied by specific sets of terms parties can use in various types of IT supplies, for example, maintenance and support services, hardware, firmware, and, as a new feature, network-based software services. The new terms and conditions replace the old IT2000, which were typically used by small and medium-sized Finnish enterprises in the sale and purchase of products and services in the IT sector. The idea behind using standard terms and conditions is to simplify the procurement and agreement process. The prevailing thinking is that standard IT terms and conditions help parties cut transaction costs and saves both time and money during contract negotiations. Obviously, less of both are needed where parties negotiate their IT service or supply contract from scratch.
Help to Foreign Companies
The standard terms and conditions also help foreign companies entering the Finnish market to better perceive the business landscape and get a picture of what kind of contracting practices and specific terms are regarded as “typical” or overly severe from the point of view of the supplier, or of the company procuring IT products or services.
To make this assessment, a foreign firm may need to acquaint itself not only with the new IT2010 terms and conditions, but also with other sets of standard terms. For example, there is a specific set of terms for public IT procurement, called the JIT2007: Terms and Conditions of Government IT Procurement. These terms are published as annexes 1 to 7 of the Finnish Public Administration Recommendations JH 166, and can be found at: www.jhs-suositukset.fi/web/guest/jhs/recommendations/166. IT companies dealing with the Finnish administration are well-advised to review these terms in advance, and will most likely find the JIT terms attached to or referenced in their request for proposals.
Vendor Infuence in End-Project
Obviously, the JIT terms reflect in many ways the needs and interests of the purchaser. This, of course, is the case with all standard terms and conditions: they always reflect compromises between the different interested parties, which is important to understand if you rely on the standard terms in your business. With regards to the new Finnish IT2010 contract terms and conditions, the preparatory history, which had broad industry participation, shows that there has been a serious attempt to avoid bias. Looking at the final IT2010 terms, it is evident, however, that there are several areas where the interests of IT vendors seem to have strong influence.
In general, the IT2010 contract terms and conditions can be said to be as favourable towards suppliers as were the previous IT2000 contract terms and conditions. In our view, and in certain key areas, it can also be claimed that the IT2010 contract terms and conditions do not provide equal contractual protection for buyer-customers. If used alone, and without knowledge of the Finnish IT contracting environment, they do not necessarily always strike a balance between the interests of the supplier and the IT customer.
A Repair Kit is Published
In our view, clients should, in all cases, be aware of the overall situation before making a decision on the use of any specific set of terms. This is why we have a specific set of terms that clients can use to amend the new IT2010 standard terms and conditions, where necessary. This set is referred to as an IT2010 korjaussarja in Finnish, which translates literally as an “IT2010 repair kit”.
The IT2010 korjaussarja give parties a chance to evaluate the need to modify the IT2010 contract terms and conditions, and draws their attention to certain key provisions where, in our experience, further discussion and negotiation may be needed to ensure a balanced contract. In concrete terms, the IT2010 korjaussarja addresses questions such as an IT supplier’s free right to adjust prices and the general level of liability of the vendor (see the table of comparison regarding certain key modifications to the IT2010 terms). The aim is to keep the modifications at a minimum, so as not to unnecessarily limit the applicability and use of the IT2010 standard terms and conditions. This means that in the IT2010 korjaussarja there are changes to approximately 15 terms and conditions found in IT2010.
More Documents Online
B&K’s IT2010 korjaussarja may be included as part of the contract whenever the IT2010 contract terms and conditions applies.
The IT2010 contract terms and conditions are available from Teknologiainfo Teknova Oy’s online shop at: www.teknologiainfo.net. The use of the IT2010 contract terms and conditions requires an annual licence.