August 12, 2013
When negotiating on behalf of an entity purchasing services or goods from a vendor or supplier, you have the opportunity to use the process to achieve a number of benefits. First, you should achieve clarity with respect to the performance required from the vendor. This minimizes the likelihood of disputes over ambiguities and lessens the potential for opportunistic behavior.
Second, you should ensure an appropriate allocation of commercial risk. There is risk inherent in every contractual relationship, but it is important to ensure that the risk is commensurate with the potential benefit the customer will derive.
Third, you should ensure appropriate remedies in the event of the vendor’s breach. Vendor failures do occur, and this is something for which you should plan. Fourth, you should protect and retain appropriate intellectual property rights in connection with the relationship. This will protect the customer from being hamstrung in its business, as well as from unfair competitive disadvantage.
Fifth, you should use the contract to establish a framework for managing the vendor’s performance. Carefully negotiated contract provisions can provide effective project management tools for the customer.
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Finally, you should create tools for minimizing the impact of disputes. In the unfortunate event that a dispute arises, carefully considered contractual provisions can minimize the disruptive impact of such a dispute.