Your organization faces risky contract clauses. How will you navigate this challenging situation?

Risky contracts clauses invariably drive costs (directly or indirectly). Agreeing to such terms without prior discussion with the other party is an ingredient for potential poor behaviour let alone unwanted cost, time or quality impacts during performance. I do not like to say 'no' to customers but I do endeavour to debate high risk clauses to better address risk mitigation. Such mitigation when developed collaboratively reduces the risk of "surprises", educates, identifies who is best placed to manage and identifies any dependencies, assumptions and exclusions and how they may influence clause acceptance. Collaborative engagement at the outset, supports for a more effective contract agreement, considerate of risk.

Early identification and proactive management of risky clauses is essential. Tracked them, build automatic processes to manage them, and create guidance materials to assist contract managers interpret and apply them.

What would happen if we start using fair and equitable contracts in the industry? Imagine how much time we could save doing contract reviews, and trying to negotiate inappropriate causes and risk allocation? Seems pretty simple, right?

Successfully navigating risky contract clauses requires a comprehensive approach that combines effective drafting, diligent management, regular monitoring, and collaboration across departments. Organizations can mitigate risks and safeguard their interests by adopting best practices and utilizing contract management software, minimizing the likelihood of costly disputes or breaches. A proactive contract risk management strategy not only protects the business but can also enhance operational efficiency and foster stronger relationships with partners and stakeholders.

While standard contract clauses are preferred to save time incase of Projects including high risks the clauses shall be tailor made to share risks between the Parties for a fair contract. The Particular conditions shall state specific deviations to achieve this. Clauses of evergreen warranty without a sunset period, unlimited liabilities, compensation for extended period shall be categorically adressed to avoid disputes. Force Majuere clauses shall also cover specific events and shall exclude events common in the region where project is being executed. Eg have landslide in hilly areas cannot be a Force Majuere event. The dispute resolution clause & Arbitration clauses shall be unambiguous with respect to seat & governing law.

Expert roles will guide us in the proper direction if something is not included or overlooked in the contract.With the help of experts (like Legal consultant, commercial experts etc.) our pre-identified threats and their potential mitigation strategies will be reviewed and validated, so we will be more confident in negotiation.

Not always necessary, If the Company has inhouse capable team, the risks can be analysed by them, the reason is - Inhouse Legal Team of a Company has the authentic information about the functioning, products/ service, type of potential risks involved. Nonetheless, consulting from outside expert agencies may be taken in case there is a special project like you are acquiring another Company's business in "Slump Sale" without acquiring that Company, Project Management, Turnkey Projects to name a few, these are just examples

When you detect potential risks, consulting with legal and subject matter experts can provide valuable insights. These professionals can help you navigate complex contract clauses, suggest viable modifications, and assess the feasibility of renegotiating terms. Their guidance ensures that your risk management strategies are well-informed and comprehensive.

Dealing with risky contract clauses is never easy. I’ve been in those meetings where your stomach knots up as you read through the fine print. The key is to stay calm and focused. I like to break down the risks, understand the potential impact, and then dive into the negotiation. It’s about finding that balance between protecting your company and building a good relationship with the other side. Remember, a little give and take can go a long way.

Negotiation/s of the risky contract clauses requires through understanding, preparation and strategic planning in order to effectively navigate the same. Finding common ground and reaching mutually acceptable terms needs collaborative approach and open to options.

Navigating risky contract clauses requires a thoughtful and strategic approach. Conducting a thorough review, gathering relevant information, defining priorities, offering creative solutions, building trusting relationships, negotiating for mutual benefit, seeking legal guidance, and standing firm on essential points are key steps in effectively managing challenging contract negotiations. By approaching the situation with care and consideration, you can protect your organization's interests while fostering a collaborative and productive negotiation process.

Effective negotiation is key to managing risks in contracts. Approach negotiations with a clear outline of your concerns, and be prepared to offer compromises that align with your organization’s interests. Balancing the needs of both parties while maintaining your non-negotiables is essential for reaching a fair and sustainable agreement.

Al preparse para una reunión de negociación es necesario armarse de la mayor cantidad de información posible. Entender los riesgos que se está tomando al contratar es fundamental, y más aun es saber cuales riesgos está asumiendo la otra parte en el contrato. Cuando es necesario negociar cláusulas riesgosas e imperativo minimizar el impacto en el negocio, tambien es necesario saber cuales riesgos podrá estar enfrentando la otra parte y anticipadamente sugerir cambios en estos puntos claves. De esta manera se mantiene un equilibrio y se puede lograr con menos tensión la mejor redacción de cláusulas riesgosas.

Once a risk matrix is formed, it will indicate the 'high', 'medium' and 'low' risks and strategies can be formed to 'avoid' or 'accept' or 'transfer' the risk. Accordingly, some strategic amendments can be discussed with the other party (client/vendor) during negotiations and mutually agreed before signing of the contract. For the remaining risks, some cost may be inbuilt in the price and/or some time may be inbuilt in the schedule to take care of any challenging situation which may arise during execution of the contract.

Proposing changes to contract clauses that reduce your organization's exposure to risk while still being acceptable to the other party is challenging. However changing these contractual clauses is need due to its impact, risks and implications. Thereby strategic amendments are helpful to navigate these risky contractual terms.

Proposing strategic amendments to contract clauses can significantly reduce your exposure to risks. For instance, setting caps on liabilities or redefining indemnification clauses can protect your organization from excessive risk. Clear and precise amendments help prevent misunderstandings and future disputes.

All the negotiations on scope change must be formalised as per procedure of Contract Amendment only. Otherwise after execution of additional scope, dispute arises about price part & payment for longer period of time. To avoid the dispute process, adhere to the Contract provisions only.

Navigating risky contract clauses requires a strategic approach. Begin by assessing potential legal, financial, and operational risks. Consult legal experts to understand the severity and explore negotiation tactics. Propose amendments that mitigate risks while keeping the contract's intent intact, framing changes as beneficial for both parties. Incorporate safeguards like liability limitations, indemnity, or termination clauses to further protect your organization. Ensure all amendments are documented, reviewed, and approved by stakeholders, balancing risk reduction with the contract's overall objectives.

After successfully negotiating contract terms, having a detailed implementation plan is vital. This plan should outline how your organization will comply with the contract’s terms and monitor for breaches. Assign responsibilities within your team to ensure everyone understands their role in adhering to the new terms.

Designing and implementing the plan for the required steps to navigate the contractual risks like renegotiations, amendment to the contract so and so forth. This plan should detail how your organization will comply with the contract's terms and monitor for any breaches. Assign responsibilities within your team for overseeing contract execution and managing any issues that arise. Communication to the all the relevant stakeholders with regard to the concerns and proposed changes or implementation strategies.

After negotiating contract terms, develop a detailed implementation plan outlining compliance steps and breach monitoring. Assign team responsibilities for overseeing execution and addressing issues. This ensures everyone understands their role and the importance of adhering to the contract.

Suivi et révision : Mettez en place un système de suivi pour surveiller l’exécution des clauses et réviser régulièrement les contrats pour s’assurer qu’ils restent conformes aux objectifs de l’organisation.

Improvement on on going basis as part of contract management is always suggestable. To monitor & effectively manage the contracts especially to keep track on the performance of contracts.

Indemnity and liability related clauses are risky in nature hence one is required to scrupulously read through and negotiate as per the subject matter of the contract to achieve mutually agreed terms wherein equal opportunities are addressed in the contractual terms.

Contract management extends beyond signing. Continuously monitor performance and compliance, with regular check-ins and reviews. This proactive approach helps address issues early and maintain a strong position throughout the contract's duration.