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Red Hat Customer Agreement: the Good and the Bad

Otto Hanson, JD Dec 16, 2020 6:09:24 AM

Have you ever found yourself wanting to purchase a good or service that your business needs, but having a moment of panic when you are asked to accept the vendor’s contract terms in order to move forward?  Should you just sign the terms and hope for the best?  Spend the significant amounts of time and money necessary to get proper legal review and perhaps even negotiate the contract?  Fortunately, there is now an inexpensive alternative that lets you answer those questions quickly and safely.  

The TermScout Approach 

TermScout is an online contract review platform that identifies the key gotchas in vendor contracts, letting you immediately see how favorable or unfavorable a vendor’s terms are and how those terms stack up against those offered by competing vendors. We review contract provisions line by line, analyzing over 600 data points in every contract, using a combination of AI and licensed attorneys. TermScout then presents you with the bottom line as to whether this is a fair contract, with simple graphics, summaries, and pointers back to the contract itself. The result is the most comprehensive and easy to use review of public-facing contracts available on the market.

For an example of how this works, read on to see how we analyzed the Customer Agreement (officially known as the Red Hat Enterprise Agreement) that Red Hat uses to sell its cloud services and looked at how those terms stack up against Red Hat’s competitors in the platform as a service (PaaS) market category.  

Detailed Provisions

Like most vendor agreements, the Red Hat Customer Agreement is a substantial legal document comprised of numerous provisions that can impact the customer’s rights and obligations in significant ways.  Some of these provisions are favorable to the customer, but many are not.  Overall, the Red Hat Customer Agreement earned a TermScout rating of Unfavorable, and ranked 7th out of the ten company contracts analyzed in this market category.  

Favorable Provision(s)

Like most contracts, Red Hat’s Enterprise Agreement is not all bad and contains a number of customer favorable provisions.  The most customer favorable of these provisions include the following:  

  1. Red Hat cannot assign the Agreement to another party without Customer’s consent
  2. Customer may freely assign the Agreement as part of a corporate reorganization 
  3. Red Hat cannot modify the Agreement without Customer’s consent
  4. Red Hat may not unilaterally change any secondary documents (e.g., privacy policies, etc.) that are nested in the Agreement

These terms are unusually favorable to the customer, with the way that Red Hat handles contract assignments being the best in class for this market category.  Kudos to Red Hat for going above and beyond in these areas!

Unfavorable Provision(s)

The most customer unfriendly provisions in Red Hat’s Enterprise Agreement include the following:  

  1. Claims against Red Hat are barred unless Customer files them within 18 months
  2. The damages that Customer may recover if Red Hat misuses Customer’s confidential information are highly limited 
  3. Red Hat will not defend and indemnify1 Customer against claims that Customer’s use of Red Hat’s service violates a third party’s IP rights 
  4. Red Hat may require Customer to defend and indemnify Red Hat against third-party claims even if Red Hat fails to notify Customer of such claims in a timely manner
  5. Customer’s indemnification obligations expose Customer to an unusually broad array of costs 

Comparison to Competitors

So how do the terms that Red Hat is offering compare to what its competitors offer?  Not so well.  Overall, Red Hat finished 7th out of the ten companies analyzed by TermScout in this market category, meaning that a majority of Red Hat’s competitors offer more favorable terms.  Companies offering more customer-friendly terms include Microsoft Azure, Google Cloud, and VMware, with Microsoft Azure earning TermScout’s Best in Class award for this market category at the time of publishing this blog article.

For more information about TermScout’s rating system, the Red Hat Customer Agreement review, and the PaaS market category click here.

Summary

Red Hat’s Enterprise Agreement contains a number of customer-favorable provisions but overall falls short of the terms offered by many of its competitors.  In order to make an informed decision about how to proceed on this agreement, you  will want to view all the data and insights provided by TermScout, which you can do by clicking here.

Disclaimer

* All Information shown is accurate as of October 10, 2020 but is subject to change as TermScout continually expands its contract database.*

Legal Terms

  1. Indemnification – A duty to make good any loss, damage or liability incurred by another
  2. Assignment – The transfer of rights, property, or other benefits