Lawyer Mark Rhys-Jones explains the best practice for managing
supplier agreements
Contracts to supply and implement IT systems are notorious for
leading to disputes between the parties involved. Yet these are
also the contracts where the parties most need to avoid disputes,
and to resolve those that arise quickly and effectively. By their
very nature, contracts in the IT sector require the parties
concerned to co-operate to ensure delivery of the system.
Unless the contract is managed effectively, problems can develop
into large disputes that cause disruption and loss to both supplier
and user organisation, usually at significant cost. The risk of
disputes arising can be reduced by following a few simple
steps.
Communicate
Many disputes arise simply because the parties fail to communicate.
This lack of communication can create substantial problems in IT
contracts where the user may have a limited understanding of the
nature of what is being delivered.
Understand the contract
Anyone who has been party to an IT supply contract will know that
they are lengthy, complex documents. Both sides to the agreement
need to understand what the contract says.
It will help if there is a single project manager appointed from
each side who has in-depth knowledge of the contract and will take
control of administering the project. Additionally, the entire
project team should be given a basic understanding of the main
terms. The preparation of a contract summary can be useful for this
purpose.
Follow the contract
Having understood the terms of the contract, ensure it is followed
thoroughly. Most contracts will include a baseline change request
procedure. Yet one of the more common disputes can be over
variations in the project where the documented procedure has not
been followed.
Keep a paper trail
Disputes often arise as a result of differing recollections or
uncertainty over points that have been discussed. The recording of
meetings or telephone conversations in writing can be invaluable in
subsequently proving what was agreed.
A minute signed by both parties is clearly the best form of
evidence, but notes written by one party at the time of the contact
are better than nothing - particularly if these notes have been
sent to the other party and the contents were not disputed.
In the same vein, if you receive written minutes of meetings or
telephone conversations from the other side that you disagree with,
this should be raised as soon as possible. Failure to dispute a
point at this time might subsequently be construed by a judge as
acceptance.
Take care creating documents
If it becomes clear that a dispute is looming, ensure that the
organisation's project team is cautious about creating documents
that might be disclosed to the other party or to a court in any
litigation.
E-mails can be particularly troublesome as they are often treated
as informal communications; writers might commit something to
e-mail that they would not be prepared to put on paper.
But from a legal perspective there is no difference and both forms
of communication can be disclosed as part of a litigation process.
Additionally, as e-mails can be distributed easily to a wide
audience, they might find their way into the other side's hands at
an early stage.
The above guidelines should help to minimise the likelihood of
problems developing into fullblown disputes. But if disputes do
arise, the parties involved should look to manage them proactively
and ensure they are resolved quickly and with minimum disruption to
the project.
Mark Rhys-Jones is a partner at international law firm
Eversheds
www.eversheds.com
Steps to help stave off disputes
Don't avoid communicating with the other
party
Understand the contract and ensure that your
project team is aware of your obligations
Follow the contract and agree on and document
any variation to the original terms
Keep a record of all meetings and conversations
that affect either side's obligations under the contract, no matter
how informal these appear
Avoid creating harmful documents, even if these
are for internal circulation only.