DPA Negotiations: Don’t Let Data Privacy Addendums Catch You Off Guard
As data privacy and security requirements tighten, businesses are increasingly encountering demands to sign data privacy addendums when entering into major vendor, partner, or customer contracts. What seem like simple flow-down provisions can actually have huge legal and operational implications if not carefully negotiated.
A data privacy addendum (DPA) is essentially a supplementary agreement that outlines detailed data protection obligations and responsibilities for handling personal information under that overarching contract. On the surface, these addendums may appear routine for compliance purposes. But the devil is in the details. All too often, businesses fail to adequately review and negotiate DPA terms before signature.
This can inadvertently commit them to stringent – and sometimes unrealistic – data safeguarding requirements, indemnification risks, liability exposures, and customer audit rights that greatly exceed their internal capabilities.
When it comes to negotiating DPAs, a few key areas require particularly close scrutiny:
Data Security Obligations. DPAs frequently prescribe very granular, IT-heavy data security controls and frameworks (encryption, access controls, monitoring, etc.) that may not fit your current systems or would require costly overhauls to implement properly. You need configurability here.
Breach Response and Liability. Stringent breach notification timelines, sole-fault indemnification requirements, and uncapped liability exposure in DPAs can create undue business risks. Negotiate reasonable qualifications.
Customer Audit Rights. Many DPAs grant audit rights to customers/partners that enable them to inspect your data security practices and systems at will. Overly intrusive provisions need limitations.
International Data Transfers. For companies handling EU personal data, DPA requirements around international data transfer mechanisms and compliance with GDPR can be extremely prescriptive.
Subcontractor Provisions. If you use subcontracted data processors or remote workers, make sure DPA language doesn’t create unrealistic subcontractor vetting, monitoring, and approval burdens.
The bottom line – do not take data privacy addendums lightly or assume they are risk-free paperwork. They can create expansive legal and security obligations requiring extensive (and expensive) operational overhauls to data practices.
“Do not take data privacy addendums lightly or assume they are risk-free paperwork.”
Ahead of signing any DPA, have an experience data privacy attorney carefully review and negotiate appropriate modifications to fit your risk profile and technical capabilities. A few surgical amendments can provide vital legal and financial protections.
In today’s climate of intensifying global data privacy laws, sound data governance is non-negotiable for businesses. But committing to excessive or misaligned DPA terms can create more legal exposure than it mitigates. Negotiate strategically.