What does the contract say?
Many things are easier when contracts are well written, followed by the parties and reflect a joint understanding of how cooperation shall take place. Everything cannot be regulated in contracts but many pains can be eliminated or reduced by being careful with contracts.
Initial preparation of contracts can be a big task and the same with contract administration. If this is the case sufficient time, legal capacity must be allocated to the task.
There can be many different types of contracts in play in projects including software delivery contracts, software license contracts, operations and IT management contracts, advisory – and resource purchase contracts and, SLA’s. The different contract types have different characteristics and pitfalls to be aware of
| Activities |
|---|
| Define contracts relevant for the project |
| Define responsibilities for contracts |
| Define need for legal assistance |
| Define contractual processes to be followed |
| Create contract |
| Define who shall be involved |
| Allocate legal advisor |
| Define business needs to be covered |
| Define contractual process with counterpart with sufficient time |
| Define contractual format |
| Create contract - good structure with all required paragraphs and appendices |
| Review contract |
| File contract |
| Managing contracts |
| Define responsibilities |
| Screen contract for contractual obligations |
| Incorporate obligations into project incl. deadlines |
| Set up regular meetings with counterpart to follow-up on contract |
| Maintain written documentation regarding contractual obligations |
| Risks |
| Parties do not fulfill their contractual obligations |
| Problem: Obligations defined in the contract is not being fulfilled by the parties (e.g., ensuring deliverables, following schedule, reporting, adhering to the payment plan, escalating problems). Consequence: Cooperation may be harmed and time is wasted on raising issues and settling disputes. |
| No formalized contract mgt. processes |
| Problem: There is no formalized process for ensuring that the contract with its related obligations, remedies and mechanisms are being implemented in the project. Consequence: There is a risk that the contract is not being followed in accordance with its intentions. Contractual obligations may not be met and the project is exposed to contractual disputes. |
| Lack of legal expertise for contract process |
| Problem: Expertise to understand, create and transform business needs into legal terms is not available or included in the contract process. Consequence: There is a risk of a poorly made contract with missing or ambiguous content or the contract may favor the counter party. A poorly made contract may become costly and require considerable costs to rework and manage. |
| Time for the contract process is underestimated |
| Problem: There is not enough time for contract activities like contract creation, reviews, negotiations, approvals, filing, communication to relevant parties and establishment of contract management. Consequence: There is a risk that a poor contract is being created and the added risk of project delayed if extra time is required to rework it. |
| Contract is missing or is poorly made |
| Problem: Key terms may be missing, including deliverables, obligations, acceptance criteria, price and payment details, and terms of termination. Consequence: There is no contract to regulate the cooperation between the customer and supplier. The project is exposed to dispute in case something goes wrong during project execution. |
OBV Consulting ApS
Skovvej 5 DK-4180 Sorø
info@obvconsulting.dk
Ole Barkou Vilstrup
+45 61 62 73 12
obv@obvconsulting.dk
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