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Originally Posted by Garry
We use a cross functional team and sign off team feasibilities both, for quotes and contracts. However, the contracts I am talking about are really complex with lots of hidden codes and clauses. What tools do you have to capture these codes and clauses and translate them into action on all levels within an organization? How do you ensure repeat contracts are capturing the same information’s? How do you do it if you have several customers all with their own special codes and clauses? Do you have a memory jogger a team runs through and becomes a traveling work sheet for the various departments to adhere too? Any examples?
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In my career, I have reviewed, "vetted," and edited literally hundreds and hundreds of "contracts" ranging from simple purchase orders to complex hundred page contract documents. I have also written dozens of multipage contracts from scratch.
Over the years, I have found several techniques
(none created by me, but willingly adopted and adapted by me) to organize such documents to ensure nothing gets lost or misinterpreted or skipped over in the fine print. Some of them may be workable in your situation.
Create a basic outline of the 6 bare bones elements of a contract
1. Intention to create legal relations
2. Offer and acceptance
3. Consideration
4. Capacity (legal capacity to contract)
5. Genuine Consent (without a mistake about the nature of the contract or undue pressure or misrepresentation)
6. Legality of objects
Use these as major headings throughout the contract. Use subheadings below each major heading to identify (for easy and ready retrieval or inspection) sub elements and consider adding a
Table of Contents or even an
Index (both easily added using features of modern word processing software.)
There is an added part of contracts which is "shadowy" under most laws - that is the list of "
representations" made by either party, which may need additional proof to make the contract valid or can merely be accepted as true by the other party unless later events prove them false.
(Under "capacity" for example, supplier may represent itself as legal distributor of brand X, but may lose its status as legal distributor before delivery of the goods listed in the contract.) Each situation is slightly different on the amount of "proof" required as an exhibit to the contract for each representation made. Where such proof is added as an exhibit, the contract should refer to that exhibit as the representation is made (
"Proof of which is attached as Exhibit 15A.")
So, if each contract you deal with is held up to a
Standard Outline, the drilling for information contained in the contract can be eased considerably by grouping the information according to that outline.
A real sticking point with complicated contracts is the reference to obscure codes and definitions which are NOT contained in the document itself. The important point here is to consider whether the likely audience reading and using the contract has those references readily available. If not, they should be attached as exhibits or, in the case of definitions, as a
GLOSSARY, which defines the terms as they are meant in the contract.
(For example, I might know what a PPAP is, but my CFO, who has to sign off on a big contract, might not.) One technique I have used recently is to put such words or phrases in
bold face with an explanation at the beginning of the contract that
bold face material is defined in the glossary. Therefore, the flow of the contract is not disturbed by inserting the definition with the regular text, hindering the reading of folks who do know what the terms mean.
[Added in edit: electronic versions can have links to notes or "popups" with the definition of the word or phrase as intended in the document.]
If we are creating a contract for services, the Consideration section of the contract ought to spell out plateaus of achievement, at which point the supplier may receive partial payments, or the contract canceled if the plateaus are not reached by fixed dates.
Most important - regard for the audience of the contract
In all regards, the most important factor in creating a contract is to ensure the proposed parties to the contract are able to understand every portion of the contract and ambiguous or special terms are fully explained and that referenced documents are readily obtainable and available for the parties to use as a reference.
(Lawyers are expected to be familiar with statutes and have ready access to them. A machine shop owner may not. Similarly, that same machine shop owner may not have access to Daimler Benz customer specific requirements if he is fourth or fifth tier down in the supply chain.)
AS9100 - 7.2 Contract Review - How others do Contract Review in a documented fashion
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