Outsourcing remedies—step-in rights, service credits, liquidated damages and termination
Outsourcing remedies—step-in rights, service credits, liquidated damages and termination

The following Commercial guidance note provides comprehensive and up to date legal information covering:

  • Outsourcing remedies—step-in rights, service credits, liquidated damages and termination
  • Remedies
  • Step-in rights
  • Service credits
  • Liquidated damages
  • Termination
  • Choosing the right remedy—alternatives to step-in rights

This Practice Note explains the remedies of step-in rights, service credits, liquidated damages and termination, as these apply to IT outsourcing arrangements, with a particular focus on step-in rights and their interaction with other remedies. It also discusses the practical aspects of enforcing step-in rights and the key concerns from each party's perspective that commonly arise in negotiations about step-in rights.

Remedies

An IT outsourcing agreement will typically include a raft of remedies that a customer can elect to call upon in the event of supplier default or other situations where the customer may need to interpose in the provision of the relevant services, the main ones being:

  1. step-in rights

  2. service credits

  3. liquidated damages

  4. ultimately, termination

Each is explained in detail below, with more comprehensive discussion about step-in rights, because service credits, liquidated damages and termination are explored more fully in other related materials (as specified below).

The most appropriate remedy in each case from the customer's point of view will largely depend upon the nature of the services (including the industry within which they are being provided), the reason that remedial action has become necessary and the outcome that the customer is seeking to achieve in the circumstances.

Step-in rights

Step-in rights essentially refer to the ability of the customer to temporarily intervene in the provision of