web based contract management

Be Smart About Creating Contracts

Sales Contract is the best tool for entrepreneurs, business owners, companies and all other activities that involves creating what we called sales contract. It is important for import/export- and cross-border sales transactions. It applies mainly to the sale of manufactured goods but can serve as an example to work on for other types of products as well. This concise model is fair and balanced for all parties involved by clearly presenting a comprehensive set of rights and obligations. Providing clear directions to sellers and buyers, its introduction takes the parties step-by-step through the process:

  • -from A to Z covering;
  • -general characteristics of the contract;
  • -scope of application;
  • -termination of the contract;
  • -dispute resolution; and more.

This updated version takes into account recent developments in international business and trade finance. It incorporates the latest trade rules, as well as the new Bank Payment Obligation (BPO) rules developed jointly by the ICC Banking Commission and SWIFT.

Succinct and practical, it will be an invaluable instrument for companies engaged in international trade and their lawyers. It carries the authority of the International Chamber of Commerce (ICC), the organization that pioneered many of the basic rules and mechanisms at the heart of international trade.

If both supplier and customer want the maximum benefit from Agile, then traditional style Contracts need to be rethought. This is an evolving area and organizations are constantly searching for new models of Contracts. Consequently, here are opportunities for Agilers (it sounds nice) to disrupt the status quo.

This post will look at four models available to suppliers and customers for establishing Contracts for Agile projects.

Old Style: Fixed Sales Contracts

The fixed price, fixed duration, fixed scope Sales Contract continues to be the standard benchmark for Contracts in the IT industry. A Contract of this type is based on the idea that an initial project can define the scope of the work. Once the project scope is defined, the Contract can be signed and executed as detailed.

While I have worked in many waterfall projects, I still have to be part of a project successfully completed without relaxing at least one of the “fixed” parameters (scope, cost, or schedule). The IT industry has been signing these kinds of Contracts for years. Failure risk is very high – the scope of the project changes, new requirements emerge, existing requirements are overlooked, while still others are misinterpreted. Whatever the reason, once requirements change in a “fixed” Contract everything else must change too.

The reason why these type of Contracts survive is that they can be defended in court. While one side claims the Contract was not fulfilled the other side claims it was – leaving it up to a judge to decide. It is really funny to believe that two parties agree on requirements, duration, quality, and costs from the very beginning. It will never happen never.

Simple: Hide It

The simplest way of using Agile within a delivery Contract is just to hide it. Don’t tell the customer you are working any differently to normal. Estimate and plan the work as you would normally, sign a normal Contract, then use Agile techniques to improve delivery.

Test driven development, continuous integration, refactoring regularly and re-planning will help you to deliver quality software anyway.

Naturally, if customers ask “progress against plan” it’s fundamental to merge everything in a “work progress status”. I know this is not fear at all and, as contractors, we should be trustworthy.

So to make the “hide it” approach work there needs to be a “don’t ask, don’t tell” type policy. If you have a customer who is prepared this policy, and instead measure progress against actual deliveries rather than following the plan, then hiding Agile might work.

Scary: No Cure, No Pay

Adopting this approach requires a certain degree of confidence. It is simple: if the customer doesn’t like what you deliver there is no fee. However, if they don’t pay for what you produce they don’t get to keep it either.

While such an approach looks scary it does provide the opportunity to increase the fee. Using this approach the clients reduce their risk exposure while the contractor increased theirs. The price for this re-balancing of risk is a higher price.

Such an approach introduces a new risk. Since the client is less exposed they have less motivation to make the project a success. When clients are not involved in the game any failure is entirely the failure of the contractor, clients have nothing to loose.

This risk might be offset if suppliers choose to work only with customers who will maintain their commitment. This assumes that the contractor feels able to turn down work they judge risky and can correctly assess the commitment level of the client.