Desktop version

Home arrow Sociology arrow A short guide to contract risk


As noted in earlier chapters, contracts themselves—including their individual terms or wording—are seldom the real sources of contract risk. the biggest contract risks are related to people's perceptions, expectations, and feelings of disappointment or injury. often people do not simply expect their contractual provisions to be enforced; they expect their beliefs and understandings of these provisions to be enforced. these understandings are sometimes different from what the text of the contract and its legal interpretation provide.

one reason for this is that people might not read contracts. Even if they do, they might not understand them. they may rely on verbal promises the contract text does not include or on what they believe to be industry practice. the legal interpretation and literal enforcement of contractual requirements, rights, responsibilities, and remedies may differ from people's beliefs and predictions.

Contract risk management should focus on aligning the contract with the parties' expectations of the deal or relationship. The contract should reflect the real deal. In addition, to make sure the contract is implemented successfully, the contract should be clear and understandable. Business success often depends on how well the people implementing the contract understand the contractual requirements, roles, and responsibilities. If these are fulfilled as the parties intended, there is little (if any) need to rely on the clauses dealing with liabilities or remedies (or their limitations).

Sometimes contracts cover complex projects and topics no single professional can master. Sometimes they use terminology that is incomprehensible to the non-expert. often they are voluminous, dense documents that touch many professions and disciplines. Contract risk and opportunity management can only succeed when the different stakeholders collaborate, which inevitably leads to challenges related to communication.

< Prev   CONTENTS   Source   Next >

Related topics