Successful contracts analogy
A successful contract is like a neatly tied bow tie. Just as a bow tie has 3 visible parts, there are 3 parts to a successful contract:
The left wing represents what happens pre-contract.
The knot in the middle represents the contract.
The right wing represents what happens post-contract.
Just as it takes a bit of effort to ensure all 3 parts of the bowtie are neat, a bit of effort is needed for all 3 parts of the contract journey to bring about a successful contract.
Here are some tips.
The pre-contract stage (left wing)
Start with a pre-contract plan.
Firstly, work out for yourself:
your goals, better still, mutual goals
what you can / can’t deliver in terms of the specifications of your products
for service businesses, the scope of works clearly
as early as you can, who are your quality suppliers and start the contract journey with them
how you intend to keep parties’ expectations aligned
how you will deal with disagreements.
Secondly, negotiate with an open mind. Articulate your goals, assess your contracting partner’s capabilities, discuss what success looks like. Identify potential weaknesses and work out how to mitigate your risks. Until you sign a contract, you can still decide not to do business with someone that you lack confidence in. Sometimes this can be a very hard commercial decision to make.
Get pre-contract advice from a contract lawyer. Don’t sign any document (such as a memorandum of understanding, or term sheet or contract) before understanding the legal implications of the document.
The Contract (middle knot)
This is the stage where the information from the first stage gets reduced to document form.
Be careful with off-the-shelf contract templates. They may not cater for your specific needs. Like a knot that binds, so a contract is binding on you. You cannot change your mind on what you agreed to without negative repercussions. It is always prudent to ask a contract lawyer to prepare a contract that works for you and your project.
The post-contract stage (right wing)
This is where the rubber hits the road. Both parties must take action to complete their side of the bargain, according to the agreed price, agreed timeline, and agreed standards.
The task of this stage is ‘contract management’. Continuously monitor performance, and put in systems and controls to identify risks of inability to deliver on the bargain.
As the world is not perfect, any shortfall in expectation should be dealt with promptly and by reference to the terms of the contract. Important provisions to pay attention to include:
provisions relating to aspects of the contract being breached (for example, clauses on pricing, timing, specifications)
provisions on breach
dispute resolution provisions.
Seek advice promptly as your contract may contain restrictions on right to sue and deadlines for giving notices of breach.