CONTRACT LAW FOR NONLAW PROFESSIONALS
BY: RINA ING
Attorney at Law
Content
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Roles and responsibilities of a contract manager
Understanding Contractual Materials and Terms
Exclusion Clauses
Construction of the Contract
Vitiating Factors in a Contract
Managing Contract Performance
Essential Negotiation Skills
Enforceability – Is the contract enforceable?
Managing Contract Performance
Essential Negotiation Skills
Enforcement methods
Termination of Contracts
Remedies for the Breach of Contract
Roles and Responsibilities of A Contract Manager
Roles and responsibilities of a contract
manager
• Support to bid / proposal preparation and management, such as
review, development or identification of appropriate contracting
model and / or terms and conditions; managing stakeholder review /
approvals.
• Contracts (various: including formal, short form, and annual
contracts)—Drafting, Evaluation, Negotiation and Execution:
• Non Disclosure Agreements, Sales / Purchasing Agreements, Subcontracts, Consulting Agreements, Licensing Agreements, Master
Agreements, review of customer or supplier proposed terms and
conditions
Roles and responsibilities of a contract
manager
• Distribution Agreements (resellers, agents, joint marketing etc.)
• Commercial and Public (State and Local) Contracting
• Serve as the point of contact for customers or suppliers on
contractual matters. Act as contractual “middleman” between the
organization’s employees and customers, ensuring timely review and
approval / reconciliation of variations.
Roles and responsibilities of a contract
manager
• On all standard and nonstandard contracts, provide redlined
recommendations and often negotiate directly with lawyers,
commercial or purchasing staff until consensus has been reached
• Maintain contractual records and documentation such as receipt and
control of all contract correspondence, contact information sheets,
contractual changes, status reports and other documents for all
projects.
• As needed, provide guidance on contract matters to project managers
or other operational staff, including training to new project managers
and other employees in contracting practices and procedures.
Roles and responsibilities of a contract
manager
• Develop and implement procedures for contract management and
administration in compliance with company policy. As appropriate,
contribute to or influence company policies.
• Monitor compliance by company employees with established procedures.
Identify areas of recurrent pressure.
• Work with Risk Management Department / Finance to coordinate
contractual insurance requirements.
• Work with Finance to ensure adherence to broader finance and risk
requirements such as revenue recognition, pricing and discounting
policies,, export controls etc. May include ‘financial engineering’ and
understanding / evaluating economic impact of terms and term options.
Roles and responsibilities of a contract
manager
• Support Product Management / Marketing to ensure company
products and services are offered with appropriate, competitive
terms and conditions
• Monitor competitive terms. Monitor customer or supplier satisfaction
with our terms and conditions and contracting practices. Recommend
changes.
• Ensure that signed contracts are communicated to all relevant parties
to provide contract visibility and awareness, interpretation to support
implementation.
Roles and responsibilities of a contract
manager
• Handle on-going issue and change management
• Monitor transaction compliance (milestones, deliverables, invoicing
etc.)
• Oversee Service Level Agreement Compliance
• Ensure contract close-out, extension or renewal.
Understanding contractual materials and
terms
What are the Essential Elements of a Contract?
• An Offer
• A specific proposal to enter into an agreement as an enforceable
contract.
• An Acceptance
• An offeree’s agreement, verbally or in writing, to the terms of a
contract.
• Competent Parties
• A competent party is “sufficiently mentally able to understand and
execute the document.”
• Mutual Consideration
• A benefit which two parties bargain for and is the primary reason
either party enters into a contract.
• Legality of Purpose
• Courts will not enforce contracts that are for an illegal purpose.
• Certainty of Subject Matter
• The reason you are entering into the contract must be stated and the
terms to which each party is subject to must be clearly defined and
specific. If material terms are omitted, there is no contract to enforce.
Contracts include, but are not limited to:
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Agreements
• Licenses
Cooperative Agreements
• Leases
Memoranda of Understanding • Permits
Interagency Contracts
Clinical Agreements
Purchase Orders
Loans
Easements
Insurance Policies
Other Parties include but are not limited to:
•State Agencies
•Local Agencies
•Non Profit Organizations
•Private Businesses
•Partnerships
•Individuals
What standard provisions should contracts include?
• Introduction
• Identifies the parties and the binding nature of the contract
• Contractor should be indentified by it’s full legal name, type of entity
(if applicable) and the state in which it is located.
• Scope of Work
• The true subject matter of the contract
• Each duty and obligation of each party should be clearly described,
including any necessary details regarding how the duties and
obligations will be performed.
• Term of the Contract
• A definite period of time that the contract will remain in effect
• Needs to be a set day, date or condition for the contract to start and a
day, date or condition for the contract to end.
• If the effective date of the contract is different from the date of
execution, then the execution date should be clearly stated.
What standard provisions should contracts include?
• Payment
• Describes the method of payment and contract payment type
• Should Include the process of payment to the contractor, the format
of invoices, the timing of invoices and payment schedule.
• Force Majeure
• Excuses a party from liability if some unforeseen event beyond the
control of the party prevents it from performing its obligations
under the contract
• Usually includes acts of god, riots, strikes, natural disasters, terrorism,
war, epidemics, etc.
• Independent Contractor Status
• In the case of an independent contractor, the state agrees that the
contractor is not an employee of the state, and the state is not liable
for negligence as a result of the work the contractor performed, or
for any subcontractor-related disputes.
• Assignability
• In general, neither party shall be able to assign its duties and
obligations without the permission of the other party.
What standard provisions should contracts include?
• Venue
• Governs where a case will be tried should a lawsuit arise
• Severability
• If any term or provision of an agreement is found to be invalid, the
invalidity of that section should not effect the validity of any other
section of the agreement, provided that the invalid provision is not
material to the overall purpose of the agreement.
• Default
• If the contractor does not abide by the terms of the contract, the
inclusion of an abandonment or default clause provides a way for
the state to cancel the contract at the time of non-performance.
• Events of Default should be clearly stated.
• The name, address, e-mail, telephone number and fax number of each
party to be notified, should a default or breach occur, should be
included.
What standard provisions should contracts include?
• Termination
• Provides a remedy in the case of default or breach of a
contract’s terms.
• Dispute Resolution
What provisions should not be included in contracts?
• Attorney Fees & Line of Credit Terms
• General Liability Insurance
• Confidential Information
What provisions should not be included in contracts?
• Indemnification of any party
• Arbitration
• Workers Compensation
• Warranties
What do I do if my contract contains provisions that shouldn’t
be included in contracts?
• Send the contract through the contract routing process.
The Contract Administration Office will contact the vendor to negotiate
contract terms.
Please understand that the contract will take longer to process.
Stages of a Contract
• The following elements of contract management must be considered:
Exclusion Clauses
Exclusion clauses
• The purpose: to exclude all liability for failing to carry out the
contract, either at all or not properly; open to abuse
• In order to prevent parties relying on unfair contract terms, there are
strict legal rules about the use of exclusion clauses
• The law protects consumers in particular against the wrongful use of
exclusion clauses by businesses
Construction of the Contract
Contract formation
• Offer
• Acceptance
• Consideration
Offer
• An indication of willingness to do or refrain from doing sth that is
capable of being converted into a legally binding contract
• It is made by an offeror to an offeree and is capable of acceptance
only by an offeree who knows of its existence
Offer
• An offer is terminated when it has been revoked, or lapsed, or met
with a counter-offer
Acceptance
• Agreement to the terms of an offer that, provided other requirements
are fulfilled, converts the offer into a legally binding contract
Acceptance
• If the method by which acceptance is to be signified is indicated by
the offeror, that method alone will be effective
• If it is not, acceptance may be either express (by word of mouth or in
writing) or inferred by the offeree’s conduct, e.g. if he receives goods
and makes use of them
Acceptance
• Must involve some action on the part of the offeree
Validity of acceptance
• 1) it must take place while the offer is still in force;
• 2) it must be on the same terms as the offer
• 3) it must be unconditional
• 4) it must be communicated to the offeror
Counter-offer
• Acceptance: Only when all the terms of the offer are agreed to
• If you propose a change to the terms of an original offer, you are
making a new offer – this is called a counter-offer
• Counter-offer – a rejection of the original offer; there can be no
contract until the counter-offer is accepted
Special cases
• When the offer consists of a promise to confer a benefit on whoever
may perform a specified act, the offeror waives the requirement of
communication
Example
• If the offeror offers a reward for information, a person able to supply
the information is not expected to accept the offer formally
• The act of giving the information constitutes the acceptance, the
communication of the acceptance, and the performance of the
contract
Intention to create legal relations
• If it can be shown that it was not the intenion of the parties to create
a legally binding relationship, there is no contract
• Presumption: if the agreement is with family or friends, the
agreement was not intended to be binding; commercial agreements –
the other way round
Consideration
• An exchange of promises to perform acts in the future
• An act, forbearance, or promise by one party that constitutes the
price
Principles
• 1) a valuable consideration is required, i.e. the act, forbearance, or
promise must have some economic value
• 2) consideration need not be adequate but it must be sufficient (it
need not constitute a realistic price as long as it has some economic
value)
Principles
• 3) consideration must move from the promisee
• 4) consideration must not be past
Legal capacity
• Adults have capacity, but not if they are of unsound mind
Breaking off contractual negotiations
• In legal systems where the doctrine of good faith is recognised,
breaking off contractual negotiations may give rise to legal
consequences
• No duty to negotiate in good faith in English law; no liability for
pulling out of negotiations at any stage or for whatever reason
Privity of contract
• You get the rights or have to fulfill the obligations of a contract only if
you are a party to the contract
• If you are not a party, you can neither sue nor be sued because of the
contract
Exception: third party
• Example: you have entered into a contract with an insurance
company; the aim – that your partner can benefit from the contract;
it would be pointless if the company later refused to pay anything to
your partner because she was not a party to the contract
• English law allowes a third party who is to benefit from the contract
to enforce it
Contents of the contract
• Express terms
• Implied terms
• Conditions
• Warranties
• Exclusion terms
Terms
• Conditions or duties which have to be carried out as part of a
contract, arrangemens which have to be made before a contract is
valid
Express terms
• Terms that the parties have specifically agreed to, being terms the
parties either said or wrote
Implied terms
• Example: you buy a boat. The first day you go sailing the boat sinks.
You complain to the seller, he says the contract did not promise that
the boat would float
• One of the terms implied into a contract of sale –that goods are of
satisfactory quality and are fit for their purpose
Terms of a contract
• Term: a promise that is part of the contract
• Terms of a contract:
• 1) conditions
• 2) warranties
Condition
• A fundamental term
• If a party does not carry it out, you not only have the right to claim
damages, but also to treat the contract as terminated
Warranty
• A term of contract of lesser importance
• Does not deal with the main purpose of the contract
• If you have not carried out your obligations under a warranty, the
other party has the right to sue you for damages, but not to
terminate the contract
Vitiating Factors in the Contract
Reasons to have a contract set aside: vitiating
factors
• Misrepresentaion
• Duress and undue influence
• Mistake
Misrepresentation
• A representation – a statement that was made to encourage you to
enter into a contract, but it does not itself become part of the
contract
• Misrepresentation (false representation) – you cannot bring an action
for breach of contract, but you can bring special acton for a
misrepresentation if you would not have otherwise entered into the
contract
Remedies for misrepresentation
• Misrepresentation makes the contract voidable
• Recission: if you rescind the contract, the parties are put back in the
position they were in before the contract was entered into. It is as if
the contract never existed
• Damages: you can sue for financial compensation if you have suffered
any losses
Duress and undue influence
• Duress: either actual violence or the threat of violence was used to
make the other party enter into the contract (“sign this contract or I’ll
shoot you!”)
• Undue influence: improper pressure other than violence (e.g.
blackmail)
Mistake
• If absolutely fundamental, as it gets to the very heart of the
transaction, the contract will be considered void from the outset