One of the major challenges that companies face in the creation and execution of contracts is the issue of contractual conflicts. It is common for trading vendors/clients to have a difference of opinion, which can escalate if left unchecked. Even a meticulously drafted contract document would contain certain terms and provision, which may not be welcomed by the involved parties. Contractual conflicts require arbitration, a failure of which can incur legal costs. It is prudent of the contract managing team to understand the nature of the involved parties and incorporate a smooth approach in resolving conflicts amicably. Here are some pointers on avoiding contractual conflicts.
Establish Clear Communication
A vast majority of contractual conflicts arise because of ambiguity in communication. When the right information does not reach the intended receiver at the right time, it tends to create a rift between the parties. Especially with the terms and conditions in a contract document, transparency and unambiguity are essential. Vague terms and conditions and uncertain deadlines can create confusion and conflicts between the involved parties.
A best practice, in this case, would be to rope in a professional contract content writer, who could draft the content in a clear and crisp format. An additional best practice would be to install an agile contract management software, where the contractual content can be drafted and reviewed by the contract manager.
Negotiations & Amendments
Not all parties would accept the terms and conditions of a contract. It is natural for the involved parties to raise concern regarding a provision or a clause. Flexibility in contract negotiation is necessary for a smooth and amicable contracting process. Negotiations are a part of a healthy contract making. However, at certain times, illicit organizations make enormous demands with unrealistic demands. The contract manager must remain cautious in such cases and inform the stakeholders of the outrageous terms to avoid further issues.
Contract management tools offer the feature of redlining, where negotiation of the contract terms can be done digitally. The contract manager can effectively manage the terms as well as make informed decisions regarding the changes proposed through redlining by the parties.
Conflicts arise when there is a lack of verbal discussions. Imagine one of the parties not meeting their contractual requirements consecutively, and you do not receive an update or intimation regarding the same. It can cause a rift between the partners and potentially result in legal repercussions. However, with due notice and a detailed verbal discussion, conflicts can be resolved effectively.
Making regular reviews and discussions on contracts a mandatory feature for future renewals is a best practice in establishing a healthy relationship. With enterprise contract management software, the contract team can incorporate KPIs that enforces regular review of contract documents and stakeholder discussion on the same.
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Nail the Deadlines
The most common reason for contractual conflicts is missing the deadlines. Contract deadlines are established to implement the service/product delivery. It is an important aspect of the contract since missing a deadline can adversely affect the involved parties. Besides contract renewal and cancellation dates require intensive monitoring because missing a renewal/cancellation deadline can add to the costs of the company.
An agile contract lifecycle management software enables the contract manager to set contract dates and deadlines in the system, which reminds the team of the upcoming event. With such features, it helps the manager to stay ahead of deadlines and help save costs for the company.
Contractual conflicts are unavoidable to an extent. Not all the involved parties would accommodate the changes in contracts and would challenge the company regarding the same. It is imperative for the contract manager to have a fail-proof conflict management system that dictates the course of proceedings in case of a serious conflict with the involved parties.
Implementing clauses regarding contractual conflicts in the document is one of the best steps to undertake. With a contract management software system, the team can include the clauses in case of conflicts, the arbitration method, the jurisdiction of proceedings; the terms of conflict resolution can be established.
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Although conflicts are unavoidable, the contract team can manage the conflicts by implementing protocols, engaging with the partners, improving the terms of agreements and adopting a sturdy software in tracking and monitoring the contractual process.
DocuCollab ‘s Contract Management Software is one of the leading CLM software that facilitates the contract team to expedite their processes and implement a conflict management system effectively. To learn more about the software, click here.