Chapter 6 - Standard Clauses

Alternative Dispute Resolution

Disputes or ambiguities arising from an agreement may be settled by a number of mechanisms including a court of law, arbitration, mediation and negotiation. The general trend in North America in any type of agreement is to include an alternative dispute resolution (ADR) clause. Compared to resorting to court and going through court proceedings, ADR can be a less expensive and much quicker way to resolve a dispute arising under your agreement.

Generally, the licence should state that the parties will try in good faith to resolve any disputes arising from the licence, then to resort to negotiation, mediation, and, if necessary, arbitration. Arbitration still involves considerable expense; that is why licences often allow for negotiation, then mediation prior to resorting to arbitration.

An arbitration clause may state that the arbitrator be appointed by the, and/or subject to the, arbitration laws in any jurisdiction, should such laws exist. The arbitrator is a neutral third party who renders a decision on behalf of the parties. Arbitration may be binding or non-binding. Nonbinding arbitration means that you may still go to court to resolve this issue, notwithstanding the arbitration process.

Often the ADR clause will state that the costs for ADR will be borne equally by the two parties. Also, these clauses often state that should an in-person meeting be necessary, that it be in a place half-way between the geographical locations of the two parties.

Amendments

The amendment clause states how the agreement may be modified, i.e., in writing, and signed by both parties who signed the original licence agreement. This will ensure that no changes are made to the contract without agreement between the parties. It also emphasizes that the only understandings in relation to the licensed content is that agreed to in writing in the original written licence, or in a written amendment to it. It is most reasonable to have an amendments clause that allows either party to amend the agreement and not just one of the parties.

Binding Effect

This clause would allow the agreement to benefit, if applicable, successors, administrators, heirs, affiliates, and assigns of the parties signing the licence. Usually, the assigns are subject to the prior written approval of the other party.

Confidential Information

In certain circumstances, both licensors and licensees may want certain aspects relating to this agreement kept confidential from their competitors and customers. For example, the content owner may want the amount of the licence fee kept confidential, and the licensee may want to keep the usage and name of the users of the licensed content confidential. Each may want to keep confidential the business and operation practises within its own organization. What remains confidential is a matter of agreement between the content owner and the licensee. Whatever this information is, the agreement should clearly specify what is to remain confidential and the confidentiality clause should be limited to that information only.

If you are a public institution or are entering into a licence with a public institution, it is likely that any document created is a public document and may not be subject to confidentiality. Note that although the licence agreement itself is a public document, any user statistics are not part of the agreement and you may request that those are kept confidential. In Canada, under the Access to Information Act, a government institution will refuse to disclose records containing personal information as defined in the Privacy Act unless the person to whom the information relates consents, the information is publicly available, or the disclosure is in accordance with the Privacy Act. Additionally, government institutions shall not under the Access to Information Act disclose third party confidential information, such as financial, commercial, scientific and technical information, as well as trade secrets. If you are entering into a licence with a U.S. government operated entity that is subject to the U.S. Freedom of Information Act or other equivalent legislation, that entity will not be able to agree to keep the terms of the agreement confidential.

Currency and Taxes

Since many licence agreements deal with parties from various countries, you should state the currency of any dollar amounts set out in the licence.

Also, since licence agreements may be subject to certain applicable taxes, you should mention which one(s) might apply, and who is responsible for paying these taxes and remitting them to the appropriate government. This may include any applicable Canadian federal goods and services tax, provincial sales tax, and harmonized (combined federal and provincial) sales tax, as well as foreign taxes.

Entire Agreement

This clause states that the agreement, along with any appendices and attachments, stands on its own and represents the entire agreement between the parties. The agreement therefore supersedes any other written or oral agreements and any implied or explicit previous agreements. In other words, any prior emails, faxes, telephone conversations, etc. are not part of the agreement. As a practical matter, this means that anything you or the other person has asked for, or agreed to, must be in the written licence; otherwise it will not form part of the agreement.

As a licensee, you need to be prudent. If a content owner says to you during negotiations not to worry about a specific clause in the agreement because it will not be enforced, you should insist that that clause be removed. Otherwise, the clause is part of the agreement, and the other party's promise not to enforce it may itself be unenforceable.

Force Majeure

A force majeure is a condition beyond the control of either party. It literally means "greater force". A force majeure clause excuses a party from performing its obligations under the agreement if there is some unforeseen event beyond the control of that party. This is provided due care could not have been exercised to avoid the failure to perform the obligations in the agreement.

Traditionally, force majeure included war, strikes, floods and related conditions that could not be contemplated by either party and would prevent compliance with the terms and conditions in an agreement. In such circumstances, the contract would not be considered breached and would continue in effect. You may also want your force majeure clause to include power failures, destruction of network facilities, etc. This is an area where you may wish to consult with your technical experts. Generally, such things as server failures, software bugs, disputes with copyright owners, are not considered a force majeure.

A force majeure clause should apply equally to the licensor and licensee.

Governing Law

Online content generally means global access and it is very important to specify in any licence agreement:

• the jurisdiction of law for the interpretation of the licence;
• the court for submitting a claim against the other party;
• the place of litigation.

It is best to choose a jurisdiction under which you are familiar, e.g. your own province and country. Any party to an agreement will want that agreement according to the laws of its own jurisdiction as you, your lawyers and staff will be most familiar with these laws. You should specify both the state or province under which the agreement will be interpreted as well as the country. This is because some legal matters are regulated by a state or province such as contractual matters, where others such as copyright law are primarily federal or national laws.

Also, your licence should set out the state or province in which any legal action or proceeding would be instituted.

If you are entering into a licence with a U.S. state institution, that institution may be required to have its state laws govern your agreement (or to be silent on the jurisdiction.) You should undertake some research into the differences between your province's laws and the institution's state laws, as well as the difference between Canadian and U.S. federal laws, primarily copyright laws, as this may affect both the terms and conditions in the licence as well as any interpretation of them.

Related to governing law is the place of litigation. Should litigation take place, it can be quite costly if the licence states that any litigation or dispute arising from the licence take place in a state/province other than your own. For instance, it would be costly for an Ontario museum to litigate in British Columbia or in California. You want to choose a jurisdiction that is convenient in order to minimize travel to another country should a lawsuit arise.

The governing law clause can be a complicated matter and something that may need to be discussed with your lawyer. Some lawyers may suggest you leave the jurisdiction out of the agreement if you cannot agree on one. This is a judgement call that may or may not meet your needs.

Independent Parties

This clause would state that the agreement does not create a legal relationship, such as a joint venture or partnership, between the two parties signing the agreement.

Interpretation

This clause states that the headings used in the licence are for convenience only and are not intended to be part of any interpretations of the licence.

Negotiating Standard Clauses

Standard clauses are equally important to other clauses in your licence arrangement and should not be skimmed over when negotiating, reviewing or interpreting a licence. Read these clauses carefully because they vary from agreement to agreement. Make sure that your standard clauses are fair and reasonable, and are compatible with the day-to-day activities of your museum.

Notice

This clause states that notices relating to the licence (e.g. to prevent an automatic renewal of the licence) be in writing. It also specifies how they should be delivered to the other party, i.e., by courier, snail mail, fax or email. It is important that a contact name for each party is included in this provision so that the correct person receives any notice under this agreement. This will allow for immediate and efficient action on the part of the party receiving the notice.

It is important that the specifics of delivery of the notice are set out in the licence. For instance, the licence may require that the notice be in writing, be delivered by hand and that actual delivery would constitute the time and date of delivery. If by fax, you might require a fax back confirming delivery be sent. If sent by certified or registered mail, you might require that the notice be deemed to be delivered 5 days after sending it. In some situations, an email notice may be sufficient but again this should be clearly set out in the licence as to when it is acceptable and how it will be ensured that the recipient actually received the notice.

Remedies

A remedy clause provides for certain remedies in cases in which there is a breach of the contract. Examples of remedies include court injunctions to stop an action harming one of the parties to the agreement, and lawsuits to obtain monetary damages. Remedies also include ADR as opposed to solving the dispute by way of a court action (see above under Alternative Dispute Resolution.)

Severability

This clauses states that should any part of the agreement be invalid or unenforceable, that the remaining portions of the agreement, where possible, survive and remain in full force and effect. Some licences go further and state that only clauses that do not alter the entire licence arrangement may be severed and that the entire licence should cease should the removal of this clause make it unreasonable to continue the licence in a reasonable manner; this reflects the law in many jurisdictions.

Signature

It is important that the person who signs the licence actually has legal authority to do so. If an unauthorized person signs the licence, then either party may later argue that the licence is invalid and does not apply to the institution it purports to bind. Some licences include a clause to the effect that the parties to the licence warrant that the signing persons have the authority to bind their institution or company. In a public museum, for example, the museum board will appoint an authorized signing agent or person. Your museum's corporate counsel can help you determine who in your museum has authority to bind it to a legal agreement. Make sure that the other party undertakes the same efforts to ensure that the appropriate person is signing the licence.

The person who signs the licence may protect herself by asking her museum for written documentation setting out that that person does in fact have authority to sign the licence. This may protect this person should the other party ever take legal action personally against the signing person.

Survival

This clause states that certain clauses survive the termination of the agreement. Generally, clauses that would survive are those relating to warranties and indemnities, but your agreement may specify the survival of any clauses that make sense for your particular circumstances.

Transferability or Assignment

If your museum is incorporated into another entity, then what happens to the licence agreements you have signed? Does the new entity automatically assume them? And what happens if you are a licensee and the content owner is purchased by a new content owner - are you still obligated to the terms and conditions in the licence with the original content owner? All this depends on what your licence sets out. The licence may state that it terminates should either of the signing parties cease to exist. Or it may allow the licence to be assumed by the new entity, or perhaps only so upon approval by both parties.^{Footnote 9} This approval should be in writing and signed by both parties. If there is an automatic transfer without approval of either party, then you may want to obtain a written promise from the new entity stating that it will fulfill all of the obligations in the licence.

Waiver

This clause generally states that if one party fails to enforce any particular clause in the licence, it does not mean that that clause is being waived and that it is no longer part of the licence. For example, if one party ignores a violation of the licence, then the licence continues and the clause that is being violated is not necessarily waived. Generally, what you want to see in such a clause is that the only way that a clause may be waived by either party is by making an amendment to the agreement in writing (see Amendments, above.)