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Resisting Contractual Changes

March 28, 2012

An attorney undertaking the IACCM Managed Learning program made the following observation:

“As a lawyer, when I had just began my experience in Contract Management, I thought that contracts requiring changes was a sign of their being imperfect. Now I know it is a sign of a healthy contractual relationship and a sign of efficiency in the contracting teams to have timely, complete and accurate changes to the terms and conditions.”

For many, this comment may sound surprising, or reflective of naivete. Yet if we pause for thought, we must surely admit that many contracts are drafteed in ways that fail to facilitate or accommodate change. The goal of many drafters and negotiators is to establish certainty and remove areas of doubt. This can often preclude too much thought about the future, which represents a morasse of uncertainty. When pricing a contract, we also regularly avoid the tough questions about how changes will be managed and this leads us to the frequent battles over chargeable or non-chargeable, within or outside scope.

Traditionally, there was the school that believed the contract should be assigned to the filing cabinet and change would be managed through ‘the relationship’. And indeed, if contracts are fixed items that can only be adapted through massive renegotiation, this will continue to be the case. Yet such an approach is a source of risk because it leads to a lack of structure and discipline underpinning the evolving rights and obligations of the parties.

In today’s dynamic and volatile bsuiness conditions, one of the key attributes that renders a contract ‘fit for purpose’ is the extent to which it can be easily adapted to deal with change. This means a need to incorporate improved governance terms and practices. It also requires us to think hard about traditional contract structure and form – for example, how the contents are organized and inter-relate, the way that electronic versions can be designed and managed. The legal profession is often reluctant to accept ‘ownership’ for the contracting process, yet is slow to respond to the needs for change in the way that contracts are drafted, designed and managed. I welcome the honesty of the attorney who made my opening quote; it is long overdue for the legal profession as a whole to step back and think about the practical value and effects of the contracts they produce.

 

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