The Redline Mandate

Question 14: The Redline Mandate

Your role

You represent Bellhaven Insurance Group, the customer, in negotiating a software subscription agreement with Quartzline Analytics, the vendor. This is a drafting assignment. Your client has given you a negotiation mandate. Produce the revised clauses and nothing that violates the mandate.

Client mandate

Must achieve:

• Vendor defends and indemnifies Bellhaven against third-party claims that the service infringes intellectual property rights.
• Liability cap of at least 12 months of fees, with a separate cap of at least twice that amount for data-breach and confidentiality claims.
• Indemnification obligations, breaches of confidentiality, and the vendor's data-security obligations excluded from the ordinary cap.
• No vendor right to use Bellhaven data, including usage data, to train models or improve services for other customers, except with prior written opt-in.
• Bellhaven retains ownership of its data and anything derived from it. Feedback may be used by the vendor under a license only, no assignment.

Must not concede:

• No exclusivity of any kind.
• No automatic renewal longer than one year.
• No broadening of the vendor's license to Bellhaven materials beyond what is necessary to provide the service.

Acceptable fallbacks:

• The IP indemnity may exclude claims arising solely from Bellhaven's combinations or modifications.
• The data-breach supercap may be expressed as a fixed dollar amount not less than $4 million.

The vendor's current draft

Section 7. Indemnification. Customer shall defend, indemnify, and hold harmless Vendor from and against all claims, damages, and expenses arising out of Customer's use of the Services or Customer Data.

Section 8. Limitation of Liability. Except for Customer's payment obligations, each party's total aggregate liability arising out of or relating to this Agreement, regardless of theory, shall not exceed the fees paid in the three (3) months preceding the event giving rise to the claim. In no event shall either party be liable for indirect, incidental, consequential, special, or punitive damages, including loss of data.

Section 9. Intellectual Property; Data. Vendor owns all right, title, and interest in the Services. Customer hereby assigns to Vendor all feedback, suggestions, and ideas, and all derivatives of Customer Data created by or through the Services. Vendor may collect, use, and disclose Customer Data and usage data to operate, analyze, and improve its services, and to develop new products, provided such data is aggregated or de-identified where practicable. This Agreement renews automatically for successive three-year terms unless either party gives notice 180 days before renewal.

Assignment

Produce, in final form:

1. Revised Sections 7, 8, and 9, redrafted in full contract language, achieving every "must achieve" item, conceding nothing on the "must not concede" list, and using the fallbacks only if you conclude they are needed. Where the vendor draft is silent on something the mandate requires, add the necessary language within these three sections.

2. A rationale memo of no more than 150 words per section explaining what changed, which mandate items each change satisfies, and the single point in each section you expect the vendor to counter hardest.

Accuracy notes: do not introduce terms outside the mandate's scope, do not concede anything the mandate forbids, and do not silently drop the mutual damages exclusion or payment-obligation carve-out unless the mandate requires it.

Q14 key (Redline Mandate, drafting)

Score the redline against the mandate; each unmet mandate item and each forbidden concession is a candidate material failure.

1. Section 7 rewritten to a vendor IP defense-and-indemnity running to Bellhaven (defend, indemnify, hold harmless against third-party infringement claims), with customer indemnity, if any remains, narrowed to unlawful-use or customer-data claims; the wholesale one-way customer indemnity cannot survive.
2. Fallback used correctly if at all: IP indemnity may carve out claims arising solely from Bellhaven's combinations or modifications; nothing broader.
3. Section 8 cap raised to at least 12 months of fees; a separate supercap of at least 2x (or a stated figure of $4 million or more) for data-breach and confidentiality liability.
4. Cap exclusions added: indemnification obligations, confidentiality breaches, and vendor data-security obligations sit outside the ordinary cap.
5. The mutual consequential-damages exclusion and the payment-obligation carve-out are retained, not silently deleted.
6. Section 9: feedback assignment converted to a license; the assignment of Customer Data derivatives deleted; Bellhaven ownership of its data and derivatives stated.
7. Data use: no training or cross-customer improvement without prior written opt-in; aggregation and de-identification language cannot swallow the restriction.
8. Renewal: three-year auto-renewal cut to one year or less; no exclusivity introduced anywhere; vendor's license to Bellhaven materials limited to what is necessary to provide the service.
9. Rationale memo: within length, identifies the mandate items per change, and names a plausible hardest counter per section (expected: indemnity scope, supercap size, training-data restriction).