In a recent article, we discussed contractual audit provisions that give the buyer of technology goods and services the right to verify that the supplier is meeting its commitments. In this article, we consider audit rights in the supplier’s favor.
Suppliers typically request audit rights when key buyer obligations or supplier rights hinge on factors that would otherwise be invisible to the supplier. For example, suppliers’ fees are often based on their customers’ consumption of a product. Particularly in the case of on-premises software, a supplier does not have direct knowledge of the customer’s consumption behavior (e.g., where license fees are based on the number of users, the number of instances of the software, the number of CPU cores, processing speed or other metrics known only to the buyer). Therefore, many software license agreements include audit provisions that give the supplier a right to verify the metrics on which license fees are based.
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