Most people view contracts as a necessary evil to doing business, full of heretofores, forthwiths and other legal jargon designed for lawyers by lawyers. Contracts are seen as the result of a long and painful process iterating content and are full of redlines and strike-out text.
In actuality, a clear and concise contract for an engagement with a client is as important a tool in managing the client-supplier relationship as is a resourceful and responsive client partner or account rep. A well-written and organized contract provides an easy-to-follow roadmap to make sure the services and deliverables sold are provided at the right time and are of the right quality. A contract also serves as a reference document if confusion arises in the future over expected results, dates, or pricing.
So what are the features of a well written contract? First it is BORING. It is not a proposal or sales brochure and does not pontificate on all the wonderful improvements to business results the client should expect to receive. Instead, a boring contract is factual, straightforward, and concise. It’s written in the active voice and has no slang, jargon, or ambiguous words.Structure
It obviously has a table of contents, clearly outlining the content and providing easy navigation to each section. Sounds silly to call this out, but it’s important. Related topics like milestones, pricing, and deliverables are grouped in their own sections, and reference diagrams and forms are put into appendices. Each section is numbered and paragraphs are short.
Scope
Next there is a detailed description of exactly what services and deliverables are being provided along with the boundaries around these "scope items" (what, how many, etc.). There is an explicit list of what is in scope and what is out of scope. Too many providers of services are afraid to articulate what’s out of scope for fear of upsetting the client, and as a result, arguments and even lawsuits can ensue, destroying the relationship between the service provider and client. To manage the addition of unforeseen services, a change control process is needed in the contract for handling items outside the initial scope boundaries.
Responsibilities
A good contract lists not only the supplier’s responsibilities but also the client’s. The client needs to be able to make arrangements for service provider personnel, provide access to facilities, internal systems, internet, and data. It is helpful to articulate when these items are going to be needed in order to avoid unnecessary delays.
Timing
Lastly, since all contracts have some kind of consideration (payment) and time frame, it is essential to be clear on when deliverables are to be completed (and possibly intermediate milestones), where work will be completed (for international deals), when the work on the contract is deemed complete (and any client sign-off process required), and when and what the client pays. These are all particularly important to ensure that the service provider can properly recognize expenses and revenue, and, for international agreements, may also have an impact on tax treatment.
Contracts are a part of any business relationship in which products or services are being sold. Sticking to a few simple rules in authoring a contract will help ensure that both sides share the same understanding of the agreement, and the client is satisfied with the deliverables received, when they are received, and the price paid for them.
