In the previous installment, we defined how to prioritize contract review by risk. Here, we apply it to a real-world case: a cloud software contract of the kind medium-sized businesses sign every month without legal review.
In the previous article, we argued that the most expensive mistake in contract review is treating every clause with the same intensity. Efficient review allocates effort according to risk, rather than length.
This time, we show it in practice. We take a cloud services contract—the kind of agreement now supporting almost every business's operations—and review it as we would for a client.
Note: The following contract is fictional. "Nimbus Data Chile SpA" does not exist, and we drafted the text for this analysis. It does not reproduce or analyze any actual supplier's terms. The clauses are, however, based on patterns we frequently see in contracts of this kind.
We also avoid the expression "unfair terms." This is a technical concept under Law 19.496 that generally governs consumer relationships, rather than business-to-business contracts. We return to that point at the end because there is an important qualification. We therefore refer to high-risk clauses: valid, enforceable provisions that allocate risk unevenly and whose true cost is rarely appreciated when signing.
The contract
CLOUD PLATFORM SERVICES AGREEMENT
In Santiago, Chile, on [DATE], between:
NIMBUS DATA CHILE SpA, a company limited by shares engaged in computer services, Tax ID (RUT) No. [•], represented by Mr. [•], national identity card No. [•], both domiciled for these purposes at [•], Las Condes district, Santiago, hereinafter the "Supplier"; and
[CUSTOMER'S LEGAL NAME], a company engaged in [•], Tax ID (RUT) No. [•], represented by Mr. [•], national identity card No. [•], both domiciled for these purposes at [•], hereinafter the "Customer";
hereinafter jointly the "Parties" and individually a "Party," have agreed to the following services agreement, hereinafter the "Agreement":
Clause 1. Definitions. […]
Clause 2. Purpose.
2.1 Under this Agreement, the Supplier undertakes to provide the Services to the Customer, granting a non-exclusive, non-transferable, revocable license, limited to the term of the Agreement, to access and use the Platform as software as a service (SaaS).
2.2 The license permits use of the Platform by up to the number of Authorized Users specified in Appendix B, exclusively for the Customer's internal business operations.
2.3 The Customer acquires no ownership rights in the Platform, its source code, architecture or components.
2.4 The Supplier shall provide the Services on a shared-resource (multi-tenant) basis, without prejudice to the logical segregation of Customer Data from other customers' data.
Clause 3. Price and payment terms.
3.1 The Customer shall pay a monthly fee of UF 45 for licensing and platform services, invoiced monthly in advance and payable within 30 calendar days of receipt of the invoice.
3.2 The Unidad de Fomento shall be valued as of the invoice issue date.
3.3 Additional services not included in Appendix B, including custom development, specific integrations, migrations and in-person training, shall be quoted and invoiced separately, subject to the Customer's prior written acceptance.
3.4 The Supplier may adjust the monthly fee once per annual contractual period, giving written notice at least 60 calendar days before the new period begins. The adjustment may not exceed the cumulative change in the Consumer Price Index over the preceding twelve months plus three percentage points.
3.5 Late payment shall accrue interest at the current rate for inflation-adjusted transactions, without prejudice to Clause Fourteen.
3.6 All amounts stated in this Agreement are net of Value Added Tax and any other applicable taxes.
Clause 4. Term and renewal.
4.1 This Agreement shall have an initial term of twelve (12) months from the signing date.
4.2 Upon expiry of the initial term, the Agreement shall automatically renew for successive periods of twelve months, unless either Party notifies the other of its intention not to renew, by written notice sent at least 60 calendar days before the current period expires.
4.3 Renewal shall be on the same terms, without prejudice to the fee adjustment provided in Clause 3.4.
Clause 5. Service level. The Supplier shall endeavor to maintain monthly Platform availability of 99.5%. If that level is not achieved, the Customer shall be entitled to a credit equal to 5% of the monthly fee for the affected month, which shall constitute its sole and exclusive remedy.
Clause 6. Supplier's obligations. […]
Clause 7. Customer's obligations. […]
Clause 8. Incorporated documents. The Supplier's Terms of Service, Acceptable Use Policy and Privacy Policy, in their current versions published on the Supplier's website, form an integral part of this Agreement. The Customer declares that it knows and accepts them. The Supplier may amend these documents at any time, with amendments deemed incorporated into the Agreement upon publication.
Clause 9. Intellectual Property. […]
Clause 10. Confidentiality. […]
Clause 11. Personal data processing. […]
Clause 12. Limitation of liability. The Supplier's total aggregate liability for any cause arising from or relating to this Agreement shall in no event exceed the amount actually paid by the Customer during the three (3) months immediately preceding the event giving rise to liability. In no circumstances shall the Supplier be liable for lost profits, loss of revenue, loss of data, reputational damage, or indirect or consequential damages, even if advised of their possibility.
Clause 13. Indemnity. […]
Clause 14. Suspension of service. […]
Clause 15. Information security. […]
Clause 16. Subcontracting. […]
Clause 17. Termination and effects. Either party may terminate the Agreement by giving 60 days' written notice. Upon termination for any reason, the Customer's access to the Platform shall cease immediately. The Supplier shall retain Customer Data for fifteen (15) calendar days following termination, after which it shall permanently delete the data. During that period, the Customer may request a copy of its data, to be delivered in the format determined by the Supplier.
Clause 18. Assignment. […]
Clause 19. Governing law and dispute resolution. […]
Clause 20. Counterparts. This Agreement is signed electronically under Law No. 19.799, in one counterpart of identical wording and date, with each Party retaining a copy.
Step 1: Classify before reading in detail
Before reviewing clause by clause, let's apply the matrix from the previous installment. For a contract costing UF 45 a month—around 2 million pesos a month, 24 million a year—the first question is whether it exceeds the legal review threshold.
By amount, probably not for a medium-sized business. But by operational criticality, yes: this is the platform on which operations run. And by data processing, too, if the supplier will host customer or worker information. Two out of three criteria: it requires review.
This is exactly the kind of contract signed without review because "it is only 2 million a month."
Once classified, attention goes to three clauses: 12 (liability), 17 (termination and data) and 8 (incorporated documents). In principle, the others do not justify negotiation.
High-risk clause No. 1: The three-month liability cap
What it says
The supplier's liability is limited to payments made in the last three months—UF 135, about 6 million pesos—and excludes lost profits, loss of revenue and loss of data.
What it means in practice
Suppose the platform goes down for five business days during peak season. The business cannot issue invoices, loses orders, and its sales team spends a week explaining to customers why the system is unavailable.
The actual damage could be 80 or 100 million. The contract offers two remedies, both inadequate: Clause 5 makes the credit for an SLA breach the "sole and exclusive remedy"—5% of the monthly fee, about 100,000 pesos—and Clause 12 caps everything else at 6 million, excluding precisely the lost profits where the damage lies.
In other words, the supplier has a reasonable economic incentive not to invest in resilience. Its maximum exposure is lower than the infrastructure cost needed to prevent the problem.
There is, however, a qualification favoring the customer that almost no one knows. In Chile, intentional misconduct cannot be waived in advance, and prevailing legal scholarship and case law extend this principle to gross negligence, which is treated as equivalent to intentional misconduct in civil matters. If the outage resulted from the supplier's gross negligence, Clause 12 does not protect it, regardless of its signature.
That is useful in litigation. It is not a risk management strategy: proving gross negligence is expensive, slow and uncertain. It is a negotiating argument, rather than a substitute for a well-drafted clause.
How we draft it at Lexgo
Clause 12. Limitation of liability. The Supplier's total aggregate liability arising from this Agreement shall not exceed the amount actually paid by the Customer during the twelve (12) months preceding the event giving rise to liability.
The limitation established in the preceding paragraph shall not apply to: (i) the Supplier's intentional misconduct or gross negligence; (ii) breaches of its obligations concerning personal data protection and confidentiality; (iii) infringement of third-party intellectual property rights; and (iv) personal injury.
The Supplier shall not be liable for indirect or consequential damages. The parties expressly agree that losses arising from Platform unavailability attributable to the Supplier shall not be considered indirect damages.
The service-level credits established in Clause 5 constitute compensation for unavailability, without prejudice to the Customer's right to claim damages exceeding that amount.
Why we draft it this way. Four deliberate decisions:
a) Twelve months instead of three: The liability cap should relate to the contract's annual value, rather than an arbitrary quarter. Twelve months is the market standard and one of the easiest negotiations to win: suppliers frequently concede this point because they know their statistical exposure is low.
b) Explicit exceptions to the cap: Writing exceptions is useful even when some already follow from the law. It turns a litigation argument—"this was gross negligence, Your Honor"—into a clear contractual right. The difference between those positions is months of litigation.
c) Define what is not indirect damage: This is the sentence that prevents the most work later. Without it, the argument over whether profits lost through a service outage are "direct" or "indirect" becomes endless, and the supplier has the stronger argument. Defining it in advance settles the discussion.
d) Separate the SLA credit from the general remedy: The "sole and exclusive remedy" formula turns symbolic compensation into an absolute ceiling. Our wording preserves the automatic credit—which is convenient because it requires no proof—without waiving damages when the loss justifies them.
High-risk clause No. 2: Fifteen days to rescue your data
What it says
On termination, access ends immediately. The supplier retains data for 15 days and then deletes it. During those 15 days, the customer can request a copy in the supplier's chosen format.
What it means in practice
Of the three clauses, this is the one we have most often seen become a real problem.
First, the deadline. Migrating between systems does not take 15 days. It takes months of planning. A 15-calendar-day period—which might fall in February or between Christmas and New Year—is an emergency rescue window, rather than a migration period.
Second, and more importantly: "in the format determined by the Supplier." A 4,000-page PDF technically complies. So does an undocumented data dump whose structure no one can interpret. The obligation is satisfied by delivering something, even if that something cannot support operations.
Together, these conditions mean the customer cannot leave. Not because the contract prohibits it—Clause 17 permits termination on 60 days' notice—but because leaving means losing information. Commercially, this clause neutralizes your negotiating power at every renewal: the supplier knows the real alternative to accepting a price increase is starting from scratch.
There is another layer. If those data include personal data about customers or workers, the supplier relationship qualifies as an arrangement for processing personal data on your behalf. Law 21.719—which replaces the framework of Law 19.628 and provides for fines of up to 20,000 UTM—requires that relationship to be documented. Full entry into force is scheduled for December 2026, with a bill before the Senate that would postpone it by a year; check the current timetable. What does not depend on the date: a three-year contract signed today will still be in force when the law applies.
How we draft it at Lexgo
Clause 17. Termination and transition. Either party may terminate the Agreement by giving 60 days' written notice.
17.2 Transition period. Upon termination for any reason, the Customer shall retain read-only access to the Platform for ninety (90) calendar days. During that period, the Supplier shall provide reasonable assistance with migrating Customer Data.
17.3 Delivery format. The Supplier shall deliver Customer Data in a structured, commonly used, machine-readable format (CSV, JSON or equivalent), together with the documentation necessary to interpret it. Delivery shall occur within 15 business days of the Customer's request, at no additional cost.
17.4 Deletion. Once the transition period has expired and satisfactory delivery has been confirmed, the Supplier shall delete Customer Data from its systems, including backups, and certify deletion in writing within the following 30 days.
17.5 Survival. The obligations concerning confidentiality, personal data protection and those established in this clause shall survive termination of the Agreement.
Why we draft it this way. Three points:
a) Read-only access matters more than the deadline: A ninety-day period is useless if the system shuts down on day one; the customer cannot verify what was delivered or compare it against the source. Read access turns the period into an orderly migration instead of a blind race.
b) "Structured, commonly used, machine-readable format" is not decorative wording: It is the formula used by the right to data portability in personal data rules, both under the European standard and the Chilean framework coming into force. Using it anchors the obligation in a concept with defined substance, rather than leaving it to the supplier's goodwill.
c) Certification of deletion protects the customer, rather than the supplier: When the new law is fully in force and the Agency asks what happened to data held by a former supplier, the answer should be a document, rather than a memory.
A negotiating comment: suppliers often resist an extended transition period by citing infrastructure costs. That is a legitimate argument, with a reasonable solution: limit read-only access to 60 days or accept a limited maintenance charge during the period. The point you must not concede is the delivery format. This has no real cost for the supplier and determines whether an exit is viable.
High-risk clause No. 3: The contract the other party can rewrite
What it says
The Terms of Service, Acceptable Use Policy and Privacy Policy form part of the contract "in their current versions published on the website," and the supplier can amend them whenever it wishes, effective upon publication.
What it means in practice
This is the least visible of the three clauses and best illustrates why review requires a trained eye. It is short, uses no alarming language and sits in the administrative section, where no one looks.
Its effect is simple: one party can amend the contract unilaterally. Documents incorporated by reference often contain substantive obligations—usage limits, storage conditions, server locations, data processing and grounds for suspension. All of this sits outside the negotiated text and can change without notice.
In concrete situations, the supplier introduces consumption limits that did not previously exist, and your operations exceed them. Or it changes its privacy policy to allow international transfers to jurisdictions your own compliance rules do not accept. Neither change requires your signature, and under Clause 8, neither even requires notice.
Beyond the risk issue, there is also a question about the formation of consent: it is debatable whether a party can be bound by content the other may alter at will. But as we said regarding Article 1465, invoking this in court is an expensive plan B. Plan A is not signing it this way.
How we draft it at Lexgo
Clause 8. Incorporated documents. The documents identified in Appendix A form an integral part of this Agreement, in the versions current on the signing date. Copies are attached, and the parties declare that they are familiar with them.
8.2 Amendments. The Supplier may amend those documents by giving the Customer 30 calendar days' written notice. If an amendment materially and adversely affects the Customer's rights, payment obligations, service levels or personal data processing, it shall require the Customer's written acceptance. Without acceptance, the version current on the signing date shall continue to apply, and the Customer may terminate the Agreement without penalty within the following 60 days.
8.3 Order of precedence. If this Agreement conflicts with any incorporated document, this Agreement shall prevail.
Why we draft it this way.
a) Fix and attach the version: It sounds bureaucratic and takes ten minutes. It is the difference between knowing what you signed and not knowing. A supplier's reluctance to attach its own policies is valuable information in itself.
b) Distinguish material changes from minor ones: Requiring written consent for every amendment is unrealistic—a supplier with thousands of customers cannot operate that way—and probably a negotiation you will lose. Reserving consent for material changes is defensible and usually accepted. The list of what counts as material must be explicit; otherwise the supplier will dispute it.
c) A penalty-free exit as a release valve: If the supplier rejects prior consent, this is the fallback position: the amendment applies, but the customer can leave at no cost. It turns a unilateral imposition into a choice.
d) The order-of-precedence clause: Three lines prevent an unnegotiated document from effectively overriding what was negotiated. It is among the provisions with the best ratio of drafting effort to risk avoided.
What we do not negotiate
Identifying the three clauses above is as important as leaving the rest alone.
The UF fee in Clause 3 is appropriate: it protects both parties against inflation and avoids the quiet erosion described in the previous installment. The 30-day payment period fits the applicable general framework. Clause 17's 60-day notice period is reasonable for this kind of service. Availability of 99.5% is the market standard for this segment; what needed correction was the "sole and exclusive remedy" formula, rather than the percentage.
This is the hardest point to communicate: a review returning twenty comments is not better than one returning three. It is worse. It delays closing, strains the supplier relationship and spends negotiating capital on points that make no difference. Three well-argued clauses can be won. Fight over twenty, and you lose them all.
A note on available legal protection
At the outset, we avoided the expression "unfair terms." The reason is that the unfair-terms framework in Article 16 of Law 19.496 generally applies to consumer relationships, rather than business-to-business contracts.
There is an exception worth knowing. Article Nine of Law 20.416—the SME Statute—extends certain provisions of Law 19.496 to contracts between micro and small businesses and their suppliers. The thresholds concern annual revenue: up to 2,400 UF for microbusinesses and up to 25,000 UF for small businesses.
There are two practical consequences. If your business is below that threshold, you may have tools for challenging terms that you did not know were available. If it is above it—as most medium-sized businesses are—that safety net does not exist: with very few exceptions, the contract you sign is exactly what will apply to you.
That is why prior review matters more as a business grows. The law offers less protection, and the contract carries more weight.
The underlying point
None of the three clauses reviewed is illegal. All are enforceable. All appear in contracts signed every day in Chile. And none is detected by skimming a contract fifteen minutes before a board meeting.
What separates a business that manages contracts well from one that does not is having legal judgment available before signing, rather than discovering it only after a dispute arises. It is not having better attorneys.
Lexgo Counsel is an external legal department with a fixed monthly cost. Your team sends a contract and receives it reviewed, with the three important clauses identified and alternative wording ready for negotiation. Without requesting a quote for every question, without making questions expensive, and without deciding whether to review a contract based on how much budget remains this month.
If you have a contract on your desk right now, contact us. It is the best way to see how this works.
The contract analyzed in this article is fictional and was created for illustrative purposes. This content is informational and does not constitute legal advice for a particular case. Suggested clauses must be adapted to the specific circumstances of each transaction.