Reviewing and negotiating the contract for a U.S. project worth over USD 10 million

The client was about to enter into a services agreement with a counterparty for a large project in the United States worth more than USD 10 million, and Jaehoon Lee handled the review and negotiation of the U.S. contract proposed by the counterparty.

The counterparty's revised draft substantially added or changed provisions that were not in the existing contract, covering acceptance procedures, intellectual property, representations and warranties, information security, damages and termination. Some of these provisions in particular could increase the client's costs or scope of liability during the project, or affect future payment and intellectual property.

Because the contract was large and the project involved a range of work over a long period, it was important not only to judge whether individual provisions were favorable or unfavorable, but also to review how each provision would operate as the project actually progressed.

In particular, acceptance of deliverables was tied to payment, yet the counterparty's revised draft did not sufficiently provide objective acceptance criteria or a procedure under which acceptance would be deemed complete after a certain period.

In addition, rights in the deliverables were defined broadly, so that not only the final deliverables but also materials, tools and templates the client already owned, and interim work product created during the project, could fall within the counterparty's rights.

Jaehoon Lee compared the counterparty's revised draft with the existing contract clause by clause and analyzed what had changed and the resulting legal and business impact.

On acceptance and payment, he proposed clarifying objective acceptance criteria and the acceptance period, and treating deliverables as approved if no proper notice of rejection was given within the set period. To prevent repeated revision requests or requests going beyond the original scope of work, he also reviewed the revision procedure, the number of revisions, and the standards for handling additional work.

On intellectual property, he limited the deliverables vesting in the counterparty mainly to the final deliverables, and distinguished the materials, tools, templates and working methods the client already owned, as well as interim work product not used in the project. He also proposed revisions linking the transfer of rights in deliverables to payment of the corresponding fees.

He further reviewed the contract as a whole, including information security, use of AI, representations and warranties, damages and termination, identified risks that could arise in carrying out the project, and supported the revision and negotiation of key provisions.

As a result of the negotiation, the main review comments were reflected in the final contract.

In the final contract, the grounds for rejecting deliverables were limited to cases of material issues that do not meet the agreed criteria, and deliverables were to be treated as approved if no proper notice of rejection was given within the set period. A limit was also placed on the number of revisions, and requests going beyond the original scope of work were classified as subject to a separate adjustment of scope and cost.

On intellectual property, the materials, tools, templates and working methods the client already owned, and interim work product not included in the final deliverables, were excluded from the rights transferred to the counterparty, and the contract provided that the transfer of rights in the final deliverables would take place only after all related fees had been paid.

Through this, the client was able to proceed with the contract with the risks around payment, scope expansion and intellectual property that could arise in a large U.S. project more clearly allocated.

Related: Corporate & Business · U.S. Entry & Investment Center · U.S. Services · Contracts & Business Transactions (U.S. Associated Office)

This case study is based on confirmed facts of an actual matter; information that could identify the client or the matter has been anonymized. Outcomes depend on the facts and applicable law of each matter.