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CalAttorney2
CalAttorney2, Attorney
Category: Legal
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Experience:  Civil litigation attorney for individuals and businesses.
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We sell packaged computer software. The State of Colorado

Customer Question

Hello there. We sell packaged computer software. The State of Colorado has this clause in a contract the want us to agree to.
"Contractor shall be liable for excess costs incurred by the State in procuring from third parties replacement Work, Services, or substitute Goods as cover."
Are the "excess costs" limited or unlimited?
Is there a limit on the "excess costs" or can the State spend us much as it wants to substitute our software with another solution?
Thanks.
Submitted: 1 year ago.
Category: Legal
Expert:  CalAttorney2 replied 1 year ago.

If there were to be a dispute over this, the court would impose a "reasonableness" standard on any "excess costs" but the value is not expressly limited and may exceed the value you would actually spend on the product.

  • For example, if you were a contractor to supply 2x4 s to the state for a building project, and the contract price is $2/board, you pay $1/board, but you fail to deliver, the state can go and purchase boards for $3/board, and you would be expected to reimburse the state for this amount.
  • However, if the state went and bought a superior product that cost much more - they would not be substituting the same goods, rather they would be buying an improvement (our example again, the state buys boards of higher quality for $8/board - you could argue that you are not required to reimburse the state as they decided to purchase a different product, replacing your contract).

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