Contracts. Love them or hate them, they’re a major part of business life. So as a non-lawyer, how do you go about quickly and easily understanding their contents?
Here are some things to consider in order to quickly gain a high-level overview of the contract (I'm breaking lawyer-code here, don’t tell anyone!):
- What industry does the contract relate to? There are similarities between many contracts in the same industry. So construction contracts generally have similar features to other construction contracts (eg a defects liability period, the concept of practical completion, construction works insurance, a Statement of Requirements/Specification etc). ICT contracts have similar features to other ICT contracts (eg Acceptance).
- What type of contract is it? Services contracts are generally similar to services contracts. And so on. So, if you’ve read a services contract before, you’ll have a good idea what will be in this one. For example, a consultancy services contract will have (usually) a fit for purpose clause, PI insurance, milestone payments etc.
- Have a quick scan of the TOC. Once you’ve read a few contracts, you can start to identify the more unusual clauses at a glance. Most contracts have standard “boilerplate” clauses which are pretty similar - particularly at the end. You’ll be more interested in the other less usual clauses. For example, any clause with “indemnities” in the title. The Table of Contents give you a quick overview of what unusual clauses are in the contract.
- Have a look at the Contract Particulars or Contract Details (often in Schedule 1). Usually, these are the variable terms in a contract - eg the payment clause will say that the contractor gets paid but the Contract Particulars will say what amount the contractor gets paid.
- Follow each Contract Particular item back to the relevant clause to see what that clause says. Often, clause numbers are on the left side of the Contract Particulars table.
- Check out the documents in the schedules or annexures. These are the technical requirements that say what must be done and to what standard.
The above is a practical way of simplifying the concept of a contract, to make it easier to digest. Obviously, you still need to read it, but the above steps should help you get a bird’s eye view first.
How about you - do you conceptualise and review contracts at a high-level in this way? Or do you have different tricks you'd like to share?
Business Development Director - QinetiQ Australia
3 年Great tips! I also like to scan the contract initially and note all instances of the words "will"/ "shall" and "may" to get an overview of obligations & conditions. There can be a lot, but this is usually where the gotchas are hidden that can easily be huge pitfalls if we're not on the ball.
The Franchise Accountant | Mastering Cashflow and Profitability for Franchises | Non-Boring Conference Speaker ??
3 年Great tips Rachelle Hare !
Combined Construction Law, Contracts & Commercial Law + Business Advisory + Management Consultancy ?? 23+ yrs Law & Business ?? I help you solve your Business Challenges!
3 年An important skill for any owner, manager, contracting or other procurement processional to have!