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Please, no more contracts

April 9, 2019

I have just spent two hours reading about trust and governance, the need for agile projects, the importance of collaboration. I’ve also been answering questions on how parties can best maintain alignment over a multi-year agreement and the role of optimism in ensuring success.

Ostensibly, none of these things has much to do with contracts. In fact, a fairly consistent theme in each of them is that contracts are either irrelevant or an impediment. We’d probably be better off without them. That’s a sentiment with which I strongly sympathize – yet violently disagree. The contract should actually be the framework for all these things. The fact it is not is because we use the wrong form of contract.

Humans will be humans

Trust, governance, agility, collaboration are all important principles, but they are not innate to human or organizational behavior. There are limits to trust; our perceptions of rules and procedures are different; we do not innately adapt and adjust to change; we do not automatically and consistently collaborate. Those who believe we just need to say or write the words and then rely on ‘relationships’ to see us through are quite simply unrealistic. By dismissing contracts, they lose the fundamental tool that frequently represents the difference between failure and success.

Challenge our beliefs

Too often, we’ve come to accept that contracts are formulaic templates, poorly structured, obtuse, almost impossible to understand. There’s no reason why they have to be this way, other than traditional custom and practice and a failure to push for something different.

So what if business executives and project owners started to demand contracts that are designed to support and enable trust, governance, agility and collaboration. Would that be impossible to achieve? Far from it – such characteristics are entirely achievable. IACCM works with its members every day pursuing and increasingly realizing these goals.

Fitness for purpose

Contracts and the process under which they are formed and managed is frequently based on presumptions of risk that assume bad faith, that seek to impose unilateral rights or obligations, that ignore key aspects of governance and view change as opportunistic. In other words, the complete opposite of the traits we actually believe are needed for success. The answer to this is not to eliminate contracts, but instead to revolutionize their application and design. 

Contracts are manufactured to support a purpose. If they are failing to provide what you need, it’s time to reflect on the production process. Either you’ve got the wrong people producing them, or you’ve failed to adequately define your purpose.

Don’t dismiss the tool – make it fit for purpose!

 

International Association of Contract and Commercial Management | www.iaccm.com
Join us at our 2019 Conferences – Creating Value Through Change: Contract Economics, Ethics, Innovation

 

16th Annual Europe Conference | May 13-15, 2019 | Madrid, Spain
IACCM’s 9th Annual Asia Pacific Conference | July 24-26, 2019 | Sydney, Australia
IACCM’s 18th Annual Americas Conference | November 4-6, 2019 |

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