Contracts come in all shapes and sizes. There are plenty of simple agreements and even more complicated ones. Unfortunately, contract disputes are fairly common, and they are often the result of ambiguity and misunderstanding. Fortunately, these issues are avoidable by adopting the following approach:
The whole point of the contracting process is to formalize a negotiated agreement, the final version of which ends up in a written, legally binding form. Although the verbal discussions that lead up to the execution of a contract tend to focus on the big picture, the written contract needs to include ample detail. It is all too common for contract disputes to arise because the parties fail to define key terms and requirements in the actual executed contract.
As contract negotiations progress and crystallize, it should be clear to both parties what they plan to give and gain from the contractual arrangement. These intentions should help give shape to the goals of the contracting relationship, and this is exactly what the contract must dictate. In general, a strong contract elucidates both the scope and goals of the contract by utilizing simple, direct language, including clear and concise clauses, and defining important terms and timelines.
In addition to defining the scope of the contract, establishing concrete goals, and ensuring that these are clearly integrated into the terms of the contract, there must be an explicit understanding regarding mutually agreeable expectations. The contract must make it clear who is expected to deliver what and when, and each party must strive to perform as stipulated.
For the most part, the “how” aspect of fulfilling a contractual obligation, meaning how each party goes about living up to their end of the deal, is slightly less important, provided that the ends are appropriately met. Ultimately, a well-written contract will not leave any important matters to the dangers of subjective interpretation.
It seems like regardless of the topic, the importance of communication always manages to sneak its way into the conversation. But, this happens for good reason. If we haven’t said this enough, because we know we have mentioned it on more than one occasion, effective communication is absolutely critical to every contractual relationship.
Unfortunately, parties often want to avoid communication if the message in need of conveyance is negative. Contractual matters can be rather delicate and many impose onerous consequences. As a result, many companies like to gloss over hiccoughs to avoid confrontation and in the hopes of being able to rectify things before they devolve into something worse. Regardless of how well-intentioned this may be, it is never wise to skirt the truth. If the initial scope of the contract somehow gets out of hand or the agreed-upon goals will not be met, it is better to get in front of the situation as soon as possible, and this can only be done if both parties are always on the same page.
In some contracts, allowing for flexibility simply may not be an option. For example, if a set number of items are slated to be delivered on or by a certain date and failure to deliver would result in a canceled order or severed relationship, then failure to comply would clearly be unacceptable. However, there are plenty of contracts where such rigidity may not be necessary.
Sure, it is important for parties to perform and the goals of the contract to be achieved, but this does not mean that there cannot be some level of adaptation when circumstances change or unforeseen issues arise. This really ties into the communication piece, as things are bound to happen at some point and a solid contracting partnership recognizes that this is a possibility, communicates when it happens, and responds in a manner that preserves the essence of the contract.