Sunday, December 13, 2009

Business Contract 2.0 - Found a template

Knowing that I am flirting with the idea of doing consulting, I was looking for advices about common mistakes and better ways to evaluate client contracts. Contracts can put you in obligations you haven't thought and make you slip your deliveries, force you to make more work than planned and worst, jeopardize your relationship with clients. Root cause is most likely unclear expectations on both sides. With some spaghetti clauses that only juridic lawyers can understand, it is easy to fall in this path and everyone loose at this game.

RIM (Régionale des ingénieurs de Montréal/ordre des ingénieurs du Québec), was organizing a training Workshop called "Business Contracts 2.0". The presentation from Gilles Thibault of edilex was extremely interesting.

Currently, their is no established standard to create contracts. Basically their is as many form as the number of lawyers out there. Most of the time, lawyers are the only one comfortable with them because they've wrote them and it is in their juridic jargon. Unfortunately it doesn't help much who really used them. Most of the time, clients and contractors have hard time understanding them but it is a lucrative process for high hour rate paid lawyers. According to Gilles, lawyer will disappear if they can't provide better services for contracts (preaching for its business).

Edilex is proposing a template for contract to ensure nothing is missing and enforce structure to ensure clear expectation between each party. A contract need a table of content, its like a plan.

Proposed Template blocks:

  1. Identification & location (name + birth->juridic name + rights applicable)
  2. Party identification (Physic/moral-Society/union/coop ->representative liquidator Trustee/power delegation etc. )
  3. Preamble (context used for fall-back defect clauses)
  4. Lexicon (clarification/disambiguation & shorter sentences)
  5. Object (simple/multiple;utility conditions/redaction)
  6. Cost (adjustment/payment method/warranty/phase delivery/penalty late payment etc.)
  7. Attestations party A (not obligation/warranty-improve trust-don't want to fight about obligation and duty to disclose information)
  8. Attestations party B
  9. Reciprocal obligations
  10. Obligations party A (Align with Business process/order of execution)
  11. Obligations party B
  12. Special provisions (orphan/specific/bi-directional)
  13. General provisions
  14. End of contract (resolution/termination)
  15. Start of the contract
  16. Duration
  17. Scope
  18. Annexes
So basically, why a template?
  • Clearly define what it include and isn't (You can't remove sections)
  • Provide table of content (Don't need to reread all the contract)
  • Find holes/unclear-possible point of conflicts
  • Reduce dramatically judge interpretation during conflict
  • Can help deciding to not get involve in the project (risk/client honesty)
  • Provide structure/uniform frame
  • Enforce clarity

I will try to apply some of those ideas and it is making me way less scared and equipped to sign new contracts. I really like this approach.

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