Contracts that are fit for their purpose

What is the purpose or function of a contract? Is the focus legal or operational?

According to research from World Commerce and Contracting, contract users defined at least 11 functions for contracts including:

  • legal: a record of the parties rights and responsibilities; protection and remedies in the event of a dispute; a framework for a mutually successful business relationship
  • operational: a tool for risk allocation/management; an effective communication tool; providing operational guidance
  • commercial: managing governance; a tool for generating financial benefit; demonstrating brand and corporate values
  • technical: managing performance

What's your primary purpose?

In 2015 my post ‘answer your why‘ listed three main functions or purposes of a contract:

  1. work transfer ie roles, responsibilities and obligations
  2. risk transfer or more accurately risk management
  3. motive transfer ie the commercial, operational and technical aims of the project.

These broadly reflect the purposes found in the World Commerce and Contracting survey. Clients and contract users were much more likely to focus on risk, commercial, or operational aspects than the legal purpose of a contract.

What should you do?

Don’t let the tail wag the dog!

That’s an English expression and is meant to convey the fact that the legal purpose seems to have taken precedence over all the other critical functions of a contract. Legal drafting should be an enabler of the other aspects, not the other way round!

So focus on your key purposes for a contract and ask legal to help you express that clearly so both parties know exactly what they have to do, when, where and how.

Don’t let legals drive the rest of the content.

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