Overview
This section addresses the legal risks associated with indemnification clauses found in commercial supplier license agreements, such as EULAs and Terms of Service. It establishes that such clauses are unenforceable against the government to prevent violations of the Anti-Deficiency Act.
Key Rules
- Applicability: Covers various supplies and services, most notably information technology, software, and web services governed by license agreements.
- Prohibited Terms: Identifies indemnification clauses as common features in commercial agreements that are often inconsistent with Federal law.
- Anti-Deficiency Act (ADA) Risk: Explicitly links unauthorized indemnification obligations to potential violations of 31 U.S.C. 1341, as they could commit the government to open-ended financial liabilities.
- Regulatory Remedy: Utilizes paragraph (u) of FAR clause 52.212-4 to automatically render these unauthorized obligations unenforceable, protecting the government and the individual signing the agreement.
Practical Implications
- Automatic Protection: Contracting Officers can procure commercial items without manually renegotiating every EULA, as the FAR clause effectively "self-heals" the contract by nullifying prohibited indemnification terms.
- Risk Mitigation: It prevents government employees from inadvertently committing the agency to illegal financial obligations when clicking "I accept" on digital terms of service.