Technology Contracts: Make Sure the User Understands the Vendor’s Services

For lawyers advising clients in the tech sector, it is essential to discern which services and technologies fall under the vendor’s direct control, as opposed to those managed by the vendor’s affiliates, third-party subcontractors, or major outsourcing firms. This understanding is vital when considering the flow-down conditions to incorporate into the technology services agreement. Vendors must bear full responsibility and liability for their affiliates' and direct subcontractors' actions and failures, especially regarding privacy, cybersecurity, and overall performance. However, larger vendors like Apple may find it challenging to provide customized assurances on behalf of their extensive networks.

Clients, depending on their own regulatory and compliance needs, may want to govern whether the vendor can transfer certain rights and obligations under the agreement to approved affiliates, or restrict the use of subcontractors to those situated in specific geographic regions or countries, as well as oversee where their client or user data is processed. Whatever the client decides, this information must be thoroughly documented in the technology contract signed by the vendor.