Broad and Vague Audit Clauses may be Unenforceable

Jun 21, 2016

Do you understand all the audit clauses? Do you find these broad and vague?


Leading UK law firm, Pennington Manches, recently carried out an analysis of the case of 118 Data Resource Limited v IDS Data Services Limited & others. This case covered audit clauses in a database license agreement, but has implications for any software vendor audit clause in an agreement as Pennington Manches reckon that broad and vague audit clauses may very well be unenforceable.

The judgement reiterated the requirement for software vendors to clearly set out in their licensing agreements the terms, in this case in relation to audits, as vague terms may well not be enforceable.


What Should your Software Audit Clauses State?


According to Pennington Manches, in order to be effective, and to adequately protect the software vendor’s rights to check that the licensee is not breaching the agreement and that the licensee’s rights are adequately protected, an audit clause needs to be drafted with sufficient particularity to the individual circumstances of the agreement in question.

In particular they recommend that the audit clause should specifically state:

  • The purpose for which the audit may be carried out
  • What information may be inspected
  • What information may not be inspected. Access should not be allowed to commercially sensitive information and legally privileged information
  • What consequences should flow if a breach is discovered by the audit
  • Should data be delivered up, if a breach is discovered
  • What use can be made of information obtained as a result of the audit
  • Who may carry out the audit- the other party or an independent third party
  • Where may the audit be carried out
  • The frequency with which audits may be carried out
  • The time at which audits should be carried so as to minimise the disruption to the business
  • Who should bear the cost of the audit

All of which means it may be well worth dusting down your license agreement and examining the audit clauses carefully to see how they have been phrased. As the likes of IBM, Oracle, SAP and Microsoft will employ an army of legal people, they will in all likelihood have covered this. But, you would have thought that for 118 data, and they fell foul of the courts in this area.

So, check your license agreement now before the next audit letter lands on your desk.

Looking for support ahead of your next software audit? Get in touch with Certero who can provide SAM services, including vendor audit response.

Follow us on Linkedin for more Cloud


Read more like this from

Ready to Speak to the Team that Makes Our Customers So Happy?

Certero's [software-as-a-service] Solution

Certero help organizations transform their outdated operations and technologies in days and weeks not years. All of Certero’s solutions can be delivered as SaaS with no loss of functionality. 

Certero Unified Platform
Learn more about Certero’s truly unique ‘unified’ platform.

Digital Transformation Edition
Transform in days and weeks, not months and years, start your journey now.

Verified Oracle LMS/GLAS Solution
Verified LMS (License Management Services), now GLAS (Global Licensing & Advisory Services) solution.

Cloud Management
Manage Visibility, Cost and Governance of your Cloud Resources 

Enterprise Standard Edition - ITAM / SAM for Wintel
Default solution to manage ITAM/SAM for a Wintel environment. 

Enterprise Premium Edition - ITAM / SAM for Wintel
All you need in one place to manage your ITAM/SAM for a Wintel & Citrix environment. 

Stand-a-lone or holistic solutions for IBM, SAP and Oracle.

Software License Compliance
One Stop Shop, products and services for any solution – all in one

Business Intelligence Solution
See how to turn DATA into INFORMATION then transform into KNOWLEDGE, all in a few clicks. 

IT Asset Visibility
Find out: What do I own? Where is it located? Who is using it?

ITSM & CMDB Integration 
Populating the CMDB with ‘Quality’ asset information is more critical than ever

SaaS Subscription Management
Discover, manage and optimize your SaaS investments.

Everything in One place, True Unification

IT Hardware, Software, SaaS and Cloud Asset Management products that can run ‘stand-a-lone’ or ‘holistically’ and optimally together as a single solution, no dependencies. True unification across all asset and platforms and all delivered as SaaS. All of Certero’s products have the best TTV (Time to Value) by some distance.

Certero for Enterprise ITAM
Networks, printers, routers, Wintel, Mac, Linux, zLinux, Unix, all virtualizations and much more....

Certero for Enterprise SAM
Focused on Wintel software vendors, including automated solutions for Microsoft, Adobe and much more...

Certero App Centre 
Enterprise ‘Application Portal’ for Self-Service application provisioning.

Certero for Mobile
Go beyond standard MDM and deliver full management and security for your mobile workforce.

Certero SRDB (Software Recognition)
Transform raw software inventory data into actionable intelligence about application usage and licensing.

Certero for Oracle 
Optimize your Oracle Database, Middleware and E-Business Suite applications.

Certero for IBM
Discover and manage all IBM software & entitlements across the network. Dual Inventory, ILMT and Certero.

Certero for SAP Applications
Managing and automating the analysis of complex SAP named user and engine licenses across your estate. 

An intuitive self-service password reset solution that can reduce service desk calls by 30%. 

PC Power Management solution. Save money and reduce your carbon footprint. 

Gartner Peer Insights Customers’ Choice

Rated #1 for SAM Customer Satisfaction year after year, after year

For the latest in ITAM, SAM, Cloud and SaaS Asset Management

White Papers and eBooks 
Download the latest white papers and eBooks for key insights and guides.

Read the latest news from Certero and the industry.

Events and Webinars
Keep up to date with Certero's latest webinars and events.


View our range of product videos, webinars and customer case studies. 

Data Sheets
Download our datasheets which highlight the key benefits and features of our world class products and services. 

Case Studies 
See how organization around the globe change they way they [Do IT].

We think [and do] IT Differently

We don’t believe in claiming to be something we’re not. We will not do mediocre, average, indifferent, or outdated. We are different and will do it differently.

About Us
Get to know us more

Our Story
See how our approach is different

Our Journey
A timeline of events

Our Vision, Mission and Purpose
Mission, Purpose and Values

Browse our current roles

Find our nearest location