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Avoiding Disputes: Ensuring Clarity of Intent

February 28, 2013

IACCM research has pointed to the fact that disagreement over scope and goals is the primary issue underlying claims and disputes.

At today’s IACCM member meeting in Paris, speakers from law firm DLA Piper expanded on that with some observations regarding ‘clarity of intent’. They highlighted a number of recurrent factors that underlie disagreements and disputes:

  1. Recycling of old contracts. Business groups may either simply select an old template which may either not include relevant or updated terms, or they may use an agreement that was actually designed for a different purpose or relationship.
  2. ‘Renewing’ an expired agreement. If companies have been working together for some time, it is easy to continue issuing purchase or work orders that either implicitly or explicitly relate to an ‘expired’ agreement. Again, this may be missing key terms – for example, changes of regulation or new internal policies – or it may be an entirely different type of project or acquisition.
  3.  Use of clauses from another jurisdiction. Rather than go to the time and expense of checking the applicability of corporate standards, there can be a tendency to use tried and tested clauses which may not work in the context of a foreign jurisdiction.
  4. Poor version control. The intent may be confused not only between the parties, but also within the parties. Often it is hard to work out what is the ‘final’ version, especially if there have been extensive on-going changes .
  5. Multiplicity of documents. Increasingly there are very long contracts with many supplements, attachments, appendices, schedules … with many different people drafting them, there is often weakness in naming conventions, so even if there is an order of precedence clause, it may be unclear which category a particular document falls into. And then there are emails, which often prove critical in determining intent, but are not formally embraced by ‘the contract’ at all.
  6. Last, but not least, is when the contract has been lost!

I thought this was a useful list of things to consider when seeking to protect against the risk of disagreement over intent. Maybe you have other causes you would like to add.

One Comment
  1. I like the list. A variant on number 1 that I jave experienced is using standard contract forms when a bespoke agreement would be better. About 10 years ago I put two collaborative contracts in place, both for major process industry projects. One was bespoke, the other used a standard form (IMechE Green Book if I’m not mistaken)

    Bespoke was by far better – easier faster smaller and owned by the senior management of all paeties.

    Adapting the standard was difficult and gave no process for involving the various business teams (other than their contracts folk). It took a long-time to shoehorn a collaborative payment scheme in.

    With the bespoke one we started with the core team and a flip chart. As we evolved the heads of agreement we also built a team. We negotiated and argued over the substantive points, something that in my experience you have no problem involving business leaders in. Only once our flipcharts had turned into 8-12 pages, including the performance-linked payment scheme, did we pass it to our legal team anf ask them to fill the gaps and correct the language. They produced (and agreed) something we could sign within a few weeks.

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