1.
Appoint a Contract Manager This may be a full or part time role. It is a strategic role. Your Contract Manager should be able to provide you with precise details of the commercial and contractual implications of decisions you want to make, before you make them.

2.
Plan the project and Monitor Progress very closely An up to date project plan is required to monitor progress. For every day that a project is late there is additional costs for both parties – and somebody has to pay. Monitoring progress gives you an early indication of overall delays and allows you to assess your commercial and contractual obligations as a result of the delay. But remember – a delay to a Contract is not a change to the contract, except where it is as a consequence of a change to requirements, delay by the Customer or some other event specified in the Contract. Delay is a failure to perform and the responsibility for the risk of delay lies with whomever is responsible as determined by the Contract type.

3.
Formally advise the other party of their failures to perform If your client or supplier has not met their obligations under the Contract – tell them formally. If you do not, they will simply carry on with the view that there is not a problem. A failure to serve notices can be fatal in some circumstances, and can greatly weaken your arguments in the event of a dispute.

4.
Ensure there is a change control procedure In any project it is inevitable that there will be changes. These have to be managed effectively, and the impact on the requirements, the price and the contract dates need to be included as part of the variation document. It is also essential that both parties understand who is empowered to authorise changes. Those who are empowered must clearly know the levels of their authority and must understand that anything they agree is contractually binding.

All of this may sound as if it will create a very tense, very formal relationship between the customer and supplier. This need not be the case. What it does is provides a clear and business-like framework in which to manage the project.

Contract Disputes

So, your system is late and it looks as if it will never arrive, you’ve spent millions of pounds so far and got nothing to show for it or it simply just doesn’t work. You’ve had enough and you just want to drop the whole thing and move on. What do you do – Terminate the Contract and sue for damages?

If you terminate a very robust contract as described above, and you have managed it effectively, how do you know you even have the right to terminate the Contract? If you terminate a contract without having the right to do so, you may be found to be in repudiation of the Contract.

So what do you do?

Well there are a number of things that you need to do.

1.
Determine what your contractual position is You will need to understand what your rights and obligations are under the Contract. Then you need to work out where your rights were not met and where you failed to meet your obligations. This requires a detailed knowledge of contracts and contract law and a thorough forensic analysis of the events that have led you to conclude that you are no longer prepared to continue with the Contract.

2.
Work out what your losses are You need to work out how much you have lost as a direct result of the failure to perform. Most contracts have limitations and exclusion on claims so it is important that you have a clear understanding of what is and isn’t a loss.

3.
Notify the other party formally where they have failed to perform Even at this late stage, it is important that you notify the other party that they have failed to meet their obligations under the Contract. It may be a term of your contract that you have to give them an opportunity to put this right before you can access any remedies that you may have.

4.
Consult It is important that you consult. You will need to determine a detailed summary of events with supporting evidence, which should be produced as part of the action to determine your contractual position (Trett Consulting’s expertise is in producing a formal claim). They can then liaise with your lawyers for advice.

5.
Continue to talk with the other party and meet all of your contractual obligations It is essential that you continue to carry out the obligations required of you under the Contract or you may find yourself having to defend a breach of contract claim. Talk to the other party, on a Without Prejudice basis, and try to reach an amicable agreement to resolving the dispute.

6.
Only terminate the Contract when you are advised that you have the right to do so To do otherwise may prove costly.

Clearly, not all contractual disputes culminate in termination of a Contract. However, these principles equally apply in the event of a dispute over a single or multiple issues, and provide a framework for dispute avoidance.

Summary

These circumstances apply to hardware and software supply agreements and to support contracts. Before taking action, customers of the I.T. industry should take advice.

For advice on I.T. matters contact david.carrick@trett.com