WIN Wise: Top Tips for contract governance and change control
In light of COVID-19, it is more important than ever that parties are familiar with their contracts and the key obligations under them so that they are able to act on an informed basis to resolve issues that may arise and cause business disruption.
This note gives practical tips to assist parties to understand and be familiar with their digital transformation and outsourcing contracts, to help ensure that the parties follow the terms of the contract and that any changes are carefully considered and documented.
Tip 1: Transparency
Under the contract, certain information will be needed to manage performance and the level of compliance with the contractual obligations. Be clear about what information and documentation you expect to see and what you may need to provide to the other parties, when it should be produced and how it should be presented.
By continuing to comply with these rules despite business disruptions parties will ensure that there are no gaps in any documentation and information throughout the pandemic, so that in this regard, things continue on a 'business as usual' basis.
Tip 2: Manage communications
Ensure that if the contract designates a specific representative to make and receive formal communications on behalf of the other party to the contract they are still able to receive these notices. If they are unable to receive notices, send a notice requiring the designation of an alternate representative.
Likewise, consider designating an alternate representative to make and receive formal communications on behalf of your organisation and make sure that the other party to the contract knows who that individual is.
Ensure the method of sending these formal communications is still possible, for example where it is specified in the contract that notices are to be sent by post, but there might be no one at the address to receive them. If there are no alternatives specified in the contract allowing you to deal with this issue, seek to agree to a new permitted method of service.
Ensure that formal communications, particularly those relating to contract changes or performance issues, take place via the authorised representatives. This will mitigate the risk of misunderstandings and the implementation of unauthorised actions.
Tip 3: Contract change - what are the consequences?
So that you can keep the contract on track and avoid claims being brought in respect of difficulties that the pandemic has given rise to, variation or renegotiation of the terms of the contract may be an optimum solution.
Long-term contracts are complex, and often have interlocking provisions. Before changing the contract, parties should consider the effects that such change would have in the contract as a whole and ensure that the implementation of the change will not lead to unintended consequences.
Run the proposed contract changes past the lawyers (ideally those who drafted the contract), and take time to understand the intended practical effects.
If the contract needs to be changed, make sure that, once you have considered the overall impact, all relevant provisions of the contract are amended and that the changes are made in accordance with the formalities required by the contract and by those with the requisite authority.
Tip 4: Contract change - be clear and consistent as to what this means (and doesn't mean)
Understand and consistently enforce the difference between project change and contractual change. There can be financial implications of a formal contract change - ensure you are content the matter in question is a genuine change (rather than something the contract already requires a party to do) and, if it is a genuine change, that there is a clear agreement on what the financial and other implications of that change will be.
The contract may allow for variations in the performance of the services. Such variations may not require the amendment of the contract, but make sure the correct procedures are followed.
Tip 5: Contractual approval - be clear and consistent as to what this means (and does not mean)
When the contract requires an approval to be given, always insist on the contractual approval being sought and given in the prescribed manner.
Deal with necessary approvals in a timely manner, and avoid starting work until the process of obtaining approval has been finalised.
If the parties cannot agree on something which needs a contractual approval, use the dispute resolution procedure provided in the contract or seek another form of resolution. Not resolving an issue will likely cause greater problems later on, affect other interdependent obligations and increase costs.
Tip 6: Governance meetings – managing disruptions
Due to self-isolations and even as companies come out of lock down, it may not be possible to hold physical meetings to agree to changes to the contract or to manage the operation of the contract through governance meetings more generally. Technology should be used to hold virtual meetings to avoid parties having to physically meet or such meetings being cancelled. This will be crucial to the success of any project as it is the lack of communication or poor communication which is at the heart of most disputes.
Note also that documents can also be sent over email and electronic signatures can be used where there are no printing or scanning facilities available.
For more information about the issues discussed in this article or any of our products and services, please contact a member of our team.
Find out more about our Tech Disputes products here:
