This article has been written by Bahnidipa Roy pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction 

A legally binding agreement is known as a contract. An agreement comes into existence when the minds meet in a common intention, and is moulded via offer and acceptance. Such an expression of approval of the offer can be shown by words or by conduct. 

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For example, A and B conspire to poison C’s fruit juice. B, in conformity with the agreement, procures poison, and A adds poison to the juice that C drinks, which results in C’s death. Here, A and B’s minds meet. They take steps to carry out their respective obligations. But this does not amount to a contract because the agreement itself is illegal. The parties shall be responsible for conspiracy, which involves the meeting of minds to commit something unlawful. In this instance, the parties are in agreement to fulfil an unlawful purpose, which is to poison and kill a person. It’s an unlawful agreement and does not amount to a contract. 

A contract involves an agreement between 2 parties to implement specified legal obligations. For a contract to be legally enforceable, it needs to fulfil these important elements: 

  • An offer
  • Acceptance of such an offer
  • Mutual consideration
  • Capacity
  • Legal purpose 

Contracts, as well as being widely known for enforcing legally enforceable rights, are also responsible for creating certain obligations. The essential pre-condition for enforcing the legal obligations of a contract is that such a contract must be valid and legally enforceable. Therefore, the obligations of the contractual parties emanate from the terms of the contract itself.

Purpose of a contract 

  1. Repository for rights and obligations:
    • A contract serves as a legal document that outlines the rights and obligations of the parties involved.
    • It clearly defines what each party is entitled to and what they are required to do.
    • This helps prevent misunderstandings and disputes.
  2. Remedies and protection in disputes:
    • In the event of a dispute, a contract provides remedies and protection to the affected party.
    • It outlines the specific actions that can be taken to resolve the dispute and compensate for any losses incurred.
    • This helps in maintaining fairness and justice.
  3. Framework for mutually successful trade:
    • A contract serves as a framework for a mutually successful trade or exchange.
    • It establishes the terms and conditions of the transaction, ensuring that both parties benefit from the agreement.
    • This helps in promoting cooperation and collaboration.
  4. Apportioning risks:
    • A contract helps in apportioning risks between the parties involved.
    • It outlines who is responsible for certain risks and how they will be managed.
    • This helps minimise the overall risk associated with the transaction.
  5. Generating financial benefit:
    • A contract can assist in generating financial benefit for the parties involved.
    • It establishes the terms of payment, including the amount, timing, and method of payment.
    • This helps in ensuring that both parties receive the financial benefits they are entitled to.
  6. Corporate and brand values:
    • A contract can denote the corporate and brand values of the parties involved.
    • It reflects the level of professionalism, ethics, and commitment to fair dealings.
    • This helps in building trust and strengthening relationships between the parties.

Contractual obligations

These are particular duties, promises and responsibilities that are expected to be fulfilled by the parties to a contract with the aim of fulfilling the purpose of the contract. The contractual obligations are key constituents of a contract because it generally outline the terms and conditions that govern the relationship between the parties. 

These obligations depend upon the subject matter of a contract, and since there are various types of contracts, there are various kinds of obligations. But generally, there are some common types of obligations, such as payment, delivery, the quality of the goods, etc.

Managing contractual obligations

Dealing with contractual obligations is not an easy task. However, there are certain ways in which we can fulfil and manage such obligations. They are as follows: 

  • Contracts can be managed by utilising contract templates.
  • The terms of the contracts should be negotiated properly.
  • The contracts should be thoroughly scrutinised to make sure that they are legally binding. All the obligations in the contract should be defined clearly. If the contract requires e-signature, make sure to collect such legally binding e-signatures.
  • Keep a check on all the contracts. It is necessary to track all of these documents for easy management of delivery and expiration dates as well as obligations.
  • There should be clarity when creating expiration or renewal terms.

Contract deliverables

It is a tangible or non-tangible product that is produced or purchased due to a contract. The deliverables can vary in range and also in terms of cost. These deliverables can be utilised in contracts such as enterprise as well as the purchasing of documents and negotiations. They can also be called a subset of project deliverables. It serves as a basis to assess the success and completion of a contract. These deliverables serve as a touchstone for judging the performance and compliance of the parties to the contract. 

For example: If the contract relates to any services-based projects, such as consulting, then the contract deliverables for it shall be completed tasks, detailed service reports, etc. If the contract is related to software development, then the contract deliverables shall be the source code, user manuals and other related documents.

Utilising contractual deliverables

Contractual deliverables hold significant value and can be utilised for a wide range of purposes within the framework of a contract. Here are some key ways in which contractual deliverables can be employed:

  1. Conveying contract terms: Contractual deliverables serve as an effective means of communicating the specific terms of the contract to all relevant parties. They outline the various commitments and obligations that each party has agreed to undertake, ensuring clarity and mutual understanding. By providing a detailed account of the contract’s conditions, contractual deliverables help prevent misunderstandings and disputes.
  2. Document submission: Contractual deliverables facilitate the submission of necessary documents related to the contract. These documents may include technical specifications, design plans, financial reports, or any other information deemed essential for the successful execution of the agreement. By establishing a designated platform for document submission, contractual deliverables streamline the process and ensure that all pertinent information is readily available to authorised individuals.
  3. Deliverable history: Contractual deliverables play a crucial role in maintaining a comprehensive history of the project. They serve as a repository for all submitted documents, allowing authorised personnel to easily access and review past deliverables. This historical record provides valuable insights into the project’s progress, enabling stakeholders to track changes, assess performance, and identify potential areas for improvement.
  4. Contract tracking: Contractual deliverables enable effective tracking of a contract throughout its lifecycle. From the initial stages of contract inception to finalisation and execution, contractual deliverables provide a structured framework for monitoring progress and ensuring compliance. By establishing clear milestones and deadlines, contractual deliverables help identify critical milestones, monitor the completion of tasks, and ensure timely delivery of project deliverables.
  5. Due date assessment: Contractual deliverables assist in assessing the due dates associated with various deliverables. They specify the expected completion dates for each deliverable, ensuring that all parties involved are aware of the timelines and can plan their activities accordingly. This assessment helps prevent delays and ensures that the project remains on schedule, minimising disruptions and maximising efficiency.

These deliverables can automatically be reported to the contractual parties regarding the due date or if they have become overdue.

Issues with contract deliverables

Contract deliverables might face n-number of issues, which can hamper profitability as well as the success of the project. Some of the underlying issues are as follows: 

  • Undefined requisites: If a contract deliverable is loosely defined, then it might create issues between the parties since both parties would have different expectations.
  • Acceptance criteria are vaguely denoted: In the absence of clear acceptance criteria, it becomes hard to understand when such contract deliverable has been completed properly. Such vague criteria shall lead to delays in payments as well as deliverables getting rejected.
  • Scope creep: Amendments or additions made to the scope of the project can happen without corresponding changes to the budget, time or resources, which shall lead to poor quality of contract deliverables or might even effect the deliverability.
  • Substandard planning: The absence of detailed planning of how such deliverables shall be achieved might lead to cost overrun or missing of deadlines.
  • Ineffective communication: A breakdown of communication between the stakeholders can result in mismatch in their expectations, thus resulting in deliverables not satisfying the needs of the clients.
  • Limited resources: Meagre resources or resources that are misallocated, such as materials, personnel and technology, can cause obstruction in the production of such contract deliverables.
  • Quality issues: If the contract deliverables do not fulfil the requisite quality standards, it might result in disapproval by the client and affect the credibility of the project.
  • Penalties: Failure or delay in fulfilling the contract deliverables can lead to the evocation of contractual penalties like price reductions or liquidated damages,
  • Legal and compliance risks: Failure to implement or conform to the regulatory requirements will lead to financial liabilities and legal action.

Best practices to define the deliverables clearly 

When it comes to defining the deliverables properly, clarity is paramount, since clear communication and accurate definitions are important for establishing successful contractual relationships. Let’s proceed ahead to witness some of the best practices to ensure seamless execution and fulfilment of contractual obligations: 

Proper understanding of the contractual obligations

Prior to signing any contract, allot yourself some time to go through the terms and conditions thoroughly. The proper inspection should not just be limited to the terms and conditions but also the payment terms, timelines, termination clauses, confidentiality clauses, etc.

Clearly define obligations and deliverables

Ambiguity can lead to miscommunication or misunderstandings in disputes. Contracts should be precise and unambiguous so that the stakeholders don’t face any issues while understanding and determining the terms and responsibilities as well as fulfilling expectations.

Forming realistic timelines

It is significant to set up realistic and achievable timelines for functioning of successful contract management. The stakeholders should have a clear understanding of due dates of specific obligations and deliverables. The potential challenges and unforeseen situations must be taken into consideration when building a flexible timeline.

Regularly communicate and collaborate

There should be regular and transparent communication throughout the contract duration. Communication should be established in a way that includes regular check-ins, progress reports and a mechanism to resolve disputes. This ensures that there will be no misunderstandings and that all parties are on the same page.

Document amendments

Any kind of change made in the contract terms, be it regarding obligations, timelines, etc., should be documented formally; amendments or addendums to the contracts should be drafted. Proper documentation assists in keeping away disputes and notifying the parties of such modifications.

Implementing a sturdy monitoring system

Monitoring is a crucial task to keep a check on whether contractual obligations are being fulfilled. KPIs, regular audits, and performance metrics need to be maintained to track progress.

Issues addressed immediately

The disputes arising during the course of the contract should be dealt with promptly. The dispute resolution mechanism should be defined properly so that minor conflicts can be resolved quickly without becoming major ones.

Conclusion

Contracts play a crucial role in the making or breaking of a project. To mitigate these issues, it is important to have clear documentation, effective contractual management, and transparent communication means between the stakeholders. While these actions require some time, effort and expense, they diminish the causes of disagreement, issues and other troubles, which, if not dealt with soon, could turn out to be an expensive affair. Moreover, utilising tools and templates would assist in handling contract deliverables effectively.

References

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