Background: SloppyTech (the supplier), a technology development firm, has agreed to build customized on-premise software for VitaMix (the customer), a vitamin distribution company. The software will help VitaMix manage its distributors, keeping track of sales, shipments and payments.

• The parties have agreed that SloppyTech will indemnify VitaMix for IP infringement suits about any software SloppyTech provides (among other indemnities that you do NOT have to worry about for this assignment).
• The parties have also agreed that each party will indemnify the other against personal injury and property damage suits related to their work together, i.e., mutual indemnities.
• No one has said a word to you about the limitations of liability, but even if you are representing VitaMix, you know some limitation is standard, and there's no way SloppyTech will do the deal without one.
• The whole deal - services and software - will cost VitaMix an estimated $1,000,000 and involve one year of work.
• Someone at VitaMix (not sure who) has "pulled off the shelf" the provisions set forthbelow.

Assignment: Analyze IP Indemnity and Limitation of Liability provisions. If a portion of a provision already protects your client well, say that it does and (especially important) WHY and HOW it protects your client in your comments. Be sure to include in your draft provisions and/or comments on Limitation of Liability a discussion of dollar caps, how you arrived at the number, if any, along with what is not subject to the cap and why. Answer as a representative of sloppy Tech in this scenario.

SloppyTech/VitaMix Indemnity on behalf of VitaMix 11.1. IP Indemnity. SloppyTech shall defend and indemnify VitaMix and VitaMix's Indemnified Associates (as defined below in Section 11.3) against any "Indemnified Claim," meaning any third party claim, suit, or proceeding arising out of, related to, or alleging infringement or misappropriation of a third party's patent, copyright, trade secret, or other intellectual property right as a result of VitaMix's authorized use of the Software. However, Indemnified Claims pursuant to this Section 11.1 do not include, and SloppyTech's obligations do not apply to, any claim, suit, or proceeding to the extent that it arises out of, relates to, or alleges: a) VitaMix's breach of this Agreement, including without limitation its failure to cease use of Software related to the Indemnified Claim after SloppyTech's direction given by written notice; b) revisions to the Software made without SloppyTech's written consent;

c) VitaMix's failure to incorporate Software updates or upgrades that would have avoided the alleged infringement or misappropriation, provided such updates and upgrades do not materially reduce the Software's compliance with the Specifications and SloppyTech offered them without compensation not otherwise required by this Agreement; d) SloppyTech's creation or modification of the Software in compliance with specifications furnished by VitaMix; or e) use of the Software in combination with hardware, software, or other products or services not provided by SloppyTech ("Third Party Products"), unless the Documentation or Specifications refers to or recommends use of or combination with such Third Party Product or such use or combination achieves functionality described in the Documentation or Specifications (provided neither the Documentation nor Specifications directs the user not to perform such combination). 11.2 Personal Injury, Property Damage Indemnity. Each party ("Indemnitor") shall defend and indemnify the other party ("Indemnified Party") and Indemnified Party's Indemnified Associates against any third party claim, suit, or proceeding arising out of or related to the injury to or death of any individual or loss of or damage to real property or tangible personal property caused by the act or omission of Indemnitor or of any of its employees, subcontractors, or other agents (an "Indemnified Claim"). 11.3. Clarifications. Indemnified Claims include, without limitation, government enforcement actions. Indemnitor's obligations above in this Section 11 include, without limitation: (a) settlement at Indemnitor's expense and payment of judgments finally awarded by a court of competent jurisdiction, as well as payment of court costs and other reasonable expenses; and (b) reimbursement of reasonable attorneys' fees incurred before Indemnitor's assumption of the defense (but not attorneys' fees incurred thereafter). (The "Indemnified Associates" are Indemnified Party's subcontractors and the Indemnified Party's and such subcontractors' officers, directors, employees, shareholders, parents, subsidiaries, agents, successors, and assigns.) 11.3 Defense. Indemnified Party shall provide prompt notice of any Indemnified Claim and reasonably cooperate with Indemnitor's defense. Indemnitor will control the defense of any Indemnified Claim, including appeals, negotiations, and any settlement or compromise thereof; provided: (a) if Indemnitor fails to assume the defense on time to avoid prejudicing the defense, Indemnified Party may defend the Indemnified Claim, without loss of rights pursuant to this Section 11, until Indemnitor assumes the defense; and (b) Indemnified Party will have the right, not to be exercised unreasonably, to reject any settlement or compromise that requires that it or an Indemnified Associate admit wrongdoing or liability or subjects either of them to any ongoing affirmative obligation. Indemnitor's obligations above in Section 11.1 or 11.2 will be excused if either of the following materially prejudices the defense: (i) Indemnified Party's failure to provide prompt notice of the Indemnified Claim; or (ii) Indemnified Party's or an Indemnified Associate's failure reasonably to cooperate in the defense. 12. Limit of Liability. NEITHER PARTY'S LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT WILL EXCEED $3,000,000. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR LOST PROFITS OR LOSS OF BUSINESS OR FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT. However, the preceding two sentences do not apply to: (a) breach of any provision of this Agreement calling for liquidated damages or reimbursement of attorneys' fees or litigation costs; (b) breach of Section 5 (Nondisclosure); (c) breach of Section 11 (Indemnity); or (d) losses caused by gross negligence or willful misconduct.