READI

(Rights for Electronic Access to and Delivery of Information)

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COMPLIANCE

Definition

Compliance encompasses those clauses of a contract that permit the parties, under appropriate circumstances, to inspect or audit the financial, security, copyright, population, or transaction records held by the other party.

Discussion

It is important to recognize that familiar contractual issues and elements may take on new meanings and interpretations in the networked environment. In addition, issues not covered in compliance contracts for print materials may be as (or more) important than those that are discussed. In classic contracts, parties have a right to review the aspects of business agreements that may be in dispute. For example, should an institution believe it is being overcharged (in a transaction-based agreement) the institution will have the right to the seller's financial records with respect to those transactions.

This clause may also provide for relief in the event that the supplier fails to deliver appropriately on those aspects of the agreement that it warrants (see "Warranties," "Liabilities," and "Disputes").

This part of the agreement may also include standard compliance language required by state and other local law. Naturally, these vary from state to state and from area to area and may also call for compliance with state and local tax regulations.

Inasmuch as our research indicated that compliance is largely concerned with legal matters--attorneys should pay special attention to this section and concentrate on how familiar issues may be viewed differently in this new environment. Conventional legal practice and experience in the networked environment is significant here.

Benefits

The obvious benefits of compliance clauses are that they offer the parties the ability to seek documentation when they feel that certain aspects of the agreement are not being satisfied appropriately. The parties agree on which records to keep and which may be accessed under certain circumstances. The appropriate circumstances, and the method of accessing the records are defined as well. It also cautions the parties from entering into agreements that may violate state and local law.

Risks

Parties to agreements should be aware that when opening their records for inspection, they may be divulging inappropriate or confidential information. Therefore, network information contracts should be highly specific as to what is open to inspection, who is permitted to inspection it, and when the inspection is to take place so as to limit exposure.

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Any comments, or feedback?		Last Update:   Wednesday, 03 July, 2002 - 04:22 PM - EDT