What contractors cannot do without in their written contract

Someone recently asked me this question; ‘What can contractors not be without in their contract?’

My first response was that it seemed a bit glib -- but on reflection, I realised it was actually a more interesting question than it appeared at first sight, writes Roger Sinclair, legal consultant at egos.

And the answer is pretty well the same as what my answer is to ‘What do I look for --  as a contracts expert, when I’m reviewing a contract for a client?’

So, let’s set the scene.

We are talking about a written contract, for services. 

What’s the purpose of a contract?

The purpose of a written contract is to document the joint vision of the parties, in language which clearly spells out -- to anyone who might read it -- the rights and obligations of each party, and which makes clear what that joint vision actually is. 

The importance of plain-speaking and unambiguity

There’s no room in a contract for ambiguity, or for the language of diplomacy. 

What you read there should be mean the same to you as it means to anyone else who reads it -- the same as it means to the other party -- and the same as it might mean to a judge having to decide an issue relating to it, should you be unfortunate enough to end up in such a position! 

A judge faced with a contract dispute must first identify the joint intentions of the parties when they entered the contract; and his/her starting point will be what the parties actually documented, according to the meaning of the words they chose to use. 

There’s no scope for ‘the words may have said that, but what I meant was something else.’ If the words are clear, then, in the contract, they will be taken to mean what they say.

So, first, read it through.  As a matter of plain and simple English, is the wording clear, do the words actually make sense? 

Will the wording of the contract, if strictly followed, produce the end result you expect? If the wording doesn’t make sense to you, chances are it won’t to anyone else – and so we would already have a potential breeding ground for a later dispute (yes, lawyers, and cost). 

Are there any contradictions or ambiguities? If so, they need to be addressed and corrected.

Like diplomatic language, there’s no room for fear (or assumption)

Don’t be afraid to challenge or propose changes – if the contract needs change, in order to make clear what is intended, then it’s in the interests of both parties for that change to be made. 

Is there anything in it which appears to be based on assumptions which are not expressly stated in the contract? 

If so, then unless the assumptions are objectively obvious (i.e. obvious, not just to you, but to any other reader), then it may be wiser to expressly state those assumptions.

Key contractual questions for contractors and suppliers to ask

For contractors in particular, what does the contract say about your primary obligations – the work that you are to do? 

Is that sufficiently clear and concise? Does the scope of that work as stated in the contract include all – and no more than all - that you yourself expect to do? If the scope extends beyond that, then maybe the scope is broader than it should be – in which case, change it.

What does it say about how (or where, or when) that work is to be done? Does the contract express a greater degree of control that you would expect? If so, maybe the joint vision isn’t shared as closely as you had imagined – so, get that clear, and amend as appropriate.

Turn the tables

Then look at the other party’s primary obligations – generally, this will be payment. Is the payment basis clear? 

Is the time for payment clear? Are there any constraints to payment that you would not have expected, or would not regard as reasonable? Is there any scope for obstacles being raised which might interfere with or delay payment?

The worst-case scenario

Similarly, now think about what might go wrong – and how that might play out, against the background of the wording of the contract.

Having done that, look at all the provisions which are secondary to the work itself and payment for it – such as confidentiality, Intellectual Property Rights, indemnities, limitation of liability (N.B. you would generally want your liability to be limited to no more than your PI insurance). If you understand them, and they are acceptable, then it is likely that you are ‘good to go’. If not, challenge them.

Finally, five fundamentals

When all’s said and done, the contract should:

1. make clear what you are to do, and any constraints as to how/when/where
2. make clear the payment basis, and any potential obstacles
3. make clear the circumstances in which the contract may be terminated prematurely – by either party
4. include an adequate and acceptable framework which will govern what might happen, if something were to go wrong
5. not contain anything else which creates an undue or unacceptable degree of risk or exposure.