Given that there is no perfect contract and that changing circumstance is inevitable, good contract management dictates that business professionals be actively involved in managing agreements after they are signed. The reality is that, once signed, contracts should not be simply filed and forgotten; but instead actively managed and administered from “cradle to grave”. When performing such active management, bear in mind that several different contract clauses may be relevant in dealing with a particular event. Let’s say for example that there is some failure to perform or breach. Such an event could implicate the scope of work, warranty, force majeure, and notice provisions. Let’s say that there is an issue as to whether extra work was performed. This issue would potentially implicate the sections of the contract pertaining to integration, changes, notice and scope. Likewise, a dispute over termination, whether for cause or convenience, would likely implicate the portions of the contract pertaining to cancellation, termination, notice, scope, close out responsibilities or renewal obligations. Personal injury or property damage would involve the sections pertaining to indemnification, insurance, notice, and independent contractor status. Clearly, a common denominator is emerging; namely, the all-important obligation, both as a matter of contract and good faith, to provide notice. Providing notice of a claim or breach is the keystone to good contract management. The law (and judges) recognize the obligation to provide notice as fundamental to exercising one’s remedies. It allows the recipient to take corrective action, preserve evidence and presumably resolve disputes amicably, thereby conserving judicial resources. Providing notice is easy to do and the consequences for failing to do so can be severe. Make sure you and your colleagues follow the notice requirements as dictated by your contracts and the duty of good faith.
Paul Humbert is president of The Humbert Group, LLC and provides consulting services on process improvement and transactional matters. He has co-authored several books for use in contract development and implementation, project management, and process improvement. They include: Playbook for Managing Supply Chain Transactions with Desktop Tools, References and Sample Forms; Contract and Risk Management for Supply Chain Management Professionals; andModel Contract Terms and Conditions with Annotations and Case Summaries.
Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.