Special characteristics of sales contract in the health technology sector

Blogs April 4, 2016

Healthcare & Life Sciences

A contract may be legally binding whether in written, verbal or implied form. However, when a dispute arises, it is difficult to prove the validity and specific conditions of a verbal or implied contract. As such, for example intellectual property rights (IPRs) and liability issues are less often agreed upon verbally.

Firstly, due to the special characteristics of health technology products and services, it is useful to draw up a written contract regarding their sales. In general, IPRs are central to these products and services, and it may be vital for a company to protect them with a contract, ensuring that no IPRs contained within the product or service are passed onto the buyer in the sales process. A basic guideline is to not give away something that you would like to use in the future. On the other hand, in cases where it is necessary to grant the buyer a license to utilise the seller’s intellectual property, the right attention must be paid to how broad of a license is granted. For example, the license should not be exclusive if the same intellectual property is to be licensed to other customers in the future.

Secondly, health technology products and services are of such a nature that when they are sold, liability issues become even more pronounced. The seller cannot, even with a binding contract, deviate from their responsibilities to the consumer, set out in the Product Liability Act and the Consumer Protection Act; but on the other hand the seller must make sure that it is not held liable towards its business customers for use or modification of the product or service by such business customers against the guidelines and/or terms provided by seller. It is also always essential for the seller to limit its liability towards business customers, ensuring that the liability amount is relative to the value of the sale and to the risks involved in its execution. The seller must ensure that liability is limited, so that when such liability is realised, the seller is able to pay the required damages.

Thirdly, an essential matter for health technology sector contracts is to take into account the provisions of the Personal Data Act (PDA). The PDA defines personal data as “any information on a private individual and any information on his/her personal characteristics or personal circumstances, where these are identifiable as concerning him/her or the members of his/her family or household.” All such information is subject to the PDA, and it is essential to ensure that such personal data is not inadvertently collected from consumers in connection with health technology products or services contrary to the provisions of the PDA. However, if personal data is collected then this fact should be made clear in the consumer contract. Furthermore, consumers must receive an explanation of why their personal data is being collected and provide explicit consent. On the other hand, if the seller’s corporate customer collects personal data through the seller’s product or service, it should be made clear in the contract who is the data controller and therefore liable for fulfilling the obligations of the PDA.

Further to the above points, other generally important issues should of course be taken into consideration in health technology contracts. Perhaps the most important of these is defining the scope of the contract in sufficient detail, so that both the seller and buyer know what is provided under the contract, as well as how and when it is provided. Due to the nature of technology based products and services, it is useful to draw up written sales contracts, duly implement them, and where possible, use the help of a lawyer in drafting these.