NEW ZEALAND Law and Practice Contributed by: Liz Blythe, Troy Pilkington, Emma Peterson and Craig Shrive, Russell McVeagh
ranties by the service provider would typically entitle the customer to bring a damages claim against the service provider for breach of the agreement. Service Levels and Service Credits Service levels and service credits are a further pro - tection typically included in IT outsourcing contracts. Service levels are agreed performance metrics in respect of the services and/or components of the service. These vary depending on the type of service being provided but commonly include availability, response and resolution times and reporting obliga - tions. Service levels can be used as a measure of the service provider’s performance under the contract and the customer will usually seek to supplement these with a service credit regime in the event of service- level failures. A service credit is an agreed reduction in price so as to reflect that the service provider’s performance has not met the agreed standards. However, service credits that amount to a “penalty” are unenforceable in New Zealand, as discussed further in 4.3 Liability . A customer will typically also include reporting and audit rights in relation to the service levels, thereby ensuring that it is able to monitor and verify the ser - vice provider’s performance against the same (which it may otherwise be unable to do). A customer may also seek to include milestones in particular statements of work, with the service pro - vider receiving a specific payment if it meets the rel - evant date for achievement of that milestone. Con - versely, failure to meet the relevant date may result in a discount on the price for the relevant service and/ or deliverable. This incentivises the service provider to complete work in a timely and efficient manner, in addition to providing the customer with protection against unreasonable delays and additional costs (particularly in the initial transition phase). Termination and Termination Assistance The customer will want to ensure that it has sound termination rights in the contract, as further dis - cussed in 4.2 Termination . The customer may also seek to include a termination assistance regime, which requires the service provider to help the cus - tomer transition the services to a replacement service
provider or in-house in the event that the agreement comes to an end. The outsourcing contract will typi - cally require the parties to agree on an exit plan at the outset of the agreement, with obligations to con - tinually refresh the same throughout the term of the agreement. Relationship Management and Governance Practising good contractual management is another way that a customer may obtain some protection and mitigate its risks in an outsourcing contract. To achieve this, the customer may seek to include specif - ic governance requirements such as regular meetings, the appointment of a dedicated service-provider rela - tionship manager, rights in respect of the replacement and removal of key personnel, and strong reporting and audit rights. These rights are particularly impor - tant in the context of outcomes-based outsourcing arrangements. The contractual rights should be supported by a capa - ble in-house team and relationship manager who are able to monitor the service provider’s performance against contracted standards and enforce contractual protections afforded to the customer where required. Indemnities The customer may seek indemnity protection from the service provider in respect of certain key losses, including third-party breach of IP rights and breach of data protection laws. The liability regime in respect of a breach of these indemnities is discussed in 4.3 Liability . Business Continuity and Disaster Recovery The customer will also typically seek to receive assur - ances from the service provider in respect of its busi - ness continuity and disaster recovery plans and may include obligations to review, test, update and report to the customer regularly or on request. This is also a mandatory regulatory requirement imposed on New Zealand banks, as discussed in 2.2 Industry-Specific Restrictions . Step-In Rights Step-in rights were once commonly requested by cus - tomers in outsourcing arrangements for critical ser - vices, whereby the customer would have the right to
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