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Methodology Continued

In addition to the factors that influence the TermScores of all provisions, which can be viewed here, TermScout also considers the following factors when reviewing specific provisions. Information on industry-specific provisions can be found below.

Provision Factors affecting customer favorability
Limits on Company’s Liability
  • Is the limit on types and amounts of damages rationally tied to the value and risk of the services?
  • If the limit on amounts of damages is tied to fees paid:
    • Is it fees paid for all services, or just a subset of services?
    • What is the amount of time used to measure fees paid, and when does the time period begin?
  • Are there reasonable and customary exceptions to the limits on types and amounts of damages sufficient to protect the customer against the types of liabilities that could be most harmful and/or over which the customer has little or no control?
  • Are there other provisions that might materially impact a customer’s ability to recoup damages from a vendor, such as limits on the period of time during which a claim can be brought or unreasonably broad force majeure provisions?
Your Indemnification of Company
  • If the customer must indemnify the company, is the scope of the indemnification rationally tied to the legitimate needs of the company?  
    • Is the indemnification narrowly tailored to protect those legitimate needs?
    • Could the provision be interpreted to require the customer to indemnify the company for harms caused by the company?
Limits on Your Liability
  • Does the company offer any limitations on the types or amounts of your liability?
  • If so, how do these limits compare to the limits on the types and amounts of the company’s liability?
  • Are the exceptions to the limits on types and amounts of your liability narrowly tailored and rationally related to the company’s legitimate needs?
Company’s Indemnification of You
  • Does the company indemnify you against harms caused by the company over which you have little or no control (e.g. claims that your use of company’s software infringes a third party’s IP) or other claims that could be especially damaging to customers?
  • If there are exceptions to the company’s indemnification obligations or procedures that must be followed in order for the obligations to be binding, are the exceptions and/or procedures reasonable?  
  • Are indemnification obligations clearly carved out of the limitation of liability? Are there other issues potentially denigrating the effectiveness of the indemnification (e.g. exclusive remedies provision)?
Warranties
  • Does the company offer warranties sufficient to protect the customer’s reasonable expectations about the product or service?
  • Are the disclaimers of warranties narrowly tailored?  Do the disclaimers strike a balance between the company’s reasonable and legitimate business interests and the expectations of its customers? 
  • Does the company disclaim its own actual warranties (e.g. does it broadly disclaim “all express warranties,” without qualification)?
  • Does the company disclaim the implied warranties (e.g. the implied warranties of merchantability, fitness for a particular purpose, etc.)?
    Termination for Convenience
    • When a contract is entered into for a defined term, do the customer or vendor have any rights to terminate for convenience?
    Termination for Cause
    • When a contract is entered into for a defined term, do the customer or vendor have any rights to terminate for cause?  
    • If the company does have such rights, are they reasonable?
    • Will the customer receive a refund for any prepaid fees if it terminates an agreement for cause?
    Termination Effect
    • Upon expiration or termination of an agreement: 
      • Does the company place any unreasonable burdens on the customer?
      • Does the company commit to returning the customer’s data and confidential information (if applicable)?
      • Are there any unexpected or unreasonable consequences?
    Readability of the Agreements
    • How difficult is it to make read and understand the contracts, policies and other agreements that govern the use of the products and services in question?
      • Are there multiple layers of nested agreements that are difficult to sort out?
      • When there are multiple documents that must be understood, is it clear how the documents interact with one another and which govern in the event of inconsistencies among them?
      • Does the company itself offer plain language explanations of any of its provisions?
      • Is it relatively easy to find the documents needed to conduct a comprehensive review?

    Industry-Specific Provisions

    Software as a Services (SaaS)

    Data Protection Measures
    • Does the company contractually commit to protecting your data?
    • If so, how do the contractual commitments compare to the company’s extra-contractual commitments (e.g. the commitments it makes in its marketing materials or on its websites)?  Does the company contractually agree to adhere to the commitments it makes in its marketing materials?
    • Does the company publish a breach notification policy?
    • If so, does the company contractually commit to adhering to published policy?
    • If there are exceptions to the company’s obligations to adhere to the policy, are they narrowly tailored and reasonable?
    • Are the commitments within the policy reasonable in light of the type, nature, and sensitivity of the data the company is likely to store or process for its customers?
    Increases in Pricing
    • For services that involve significant customer onboarding costs, switching costs, or other customer investment, does the company commit to limiting the extent of price increases?
    • When the company increases prices, does it commit to notifying its customers in a manner reasonably likely to actually notify the customer?
    Payment Terms
    • Are the payment terms clear and easy to find?
    • Are the consequences for missed or late payments reasonably and rationally related to the severity of the missed or late payment?
    Protection of Your Confidential Information and Intellectual Property
    • If the company has access to customer intellectual property, is the license narrowly tailored? 
    • Does the company attempt to take ownership of any work product that a reasonable customer under the circumstances would expect to retain ownership of?
    • If there is a possibility that the company will have access to its customers’ confidential information, does the company commit to (a) protect it from disclosure or unauthorized access and (b) refrain from using it except as needed to provide the services to its customers? 
    • If there are exceptions to these obligations, are they reasonable and narrowly tailored?
    • Does the company attempt to take exclusive ownership of feedback or suggestions provided by its customers?
    • Does the company receive a license to use feedback or suggestions provided by its customers?
    • If so, does the license place any restrictions on the customers’ ability to use such feedback or suggestions (e.g. is the license exclusive)?

    Airlines

    Provision Factors affecting customer favorability
    Change and Cancellation Fees
    • How long before departure can a flight be cancelled by a passenger?
    • Is there a change/cancellation fee? If so, how expensive is it?
    • If the fare of your new flight is less than the fare of your original flight, will the airline give you credit for the difference?
    Cancelled Flights
    • Does the airline provide additional compensation for lengthy delays?
    • If so, how expensive is it?
    Baggage Fees
    • How much does it cost to carry a bad on?
    • How much do the first and second checked bags cost?
    • How much do additional checked bags cost?
    • Are the baggage size restrictions reasonable/market?
    • Are additional benefits granted to military members?
    Baggage Liability
    • Does the company offer the ability to declare a higher value for checked bags?
    • What is the cost of declaring a higher value?
    • What proof must passengers provide in order to be reimbursed for lost/delayed/damaged bags?
    • Does the company have any additional policies that compensate passengers for difficulties with baggage (such as providing a credit for bags that are not available at baggage claim within a given window after a plane has landed)? If so, what are they?
    • How long do passengers have to file a claim with the company?
    • NOTE: We do not consider the actual limitation of liability, since every airline we reviewed limits liability to $3,500.
    Accessibility Policies
    • NOTE: In our analysis, we discovered only trivial differences in accessibility policies across the ten airlines. This area is heavily regulated by the federal government, and as a result, the airline policies we reviewed are functionally identical.
      Unaccompanied Minors
      • How much does it cost for a minor to travel unaccompanied?
      • Does the airline provide special services/benefits to unaccompanied minors?
      • Are there restrictions on the types of flights on which unaccompanied minors can travel?
        Pet Policies
        • Does the airline accept pets as checked baggage?
        • What are the fees for traveling with pets either in the cabin or as checked baggage?
        • What types of pets are permitted?

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