A client of ours once said that the best contracts he’d negotiated were written and signed on the back of a beer coaster.
While it makes my law degree seem overpriced, there is merit in this because most business deals can be boiled down to:
- What are you going to do for me (scope)?
- What do I need to pay you for it (price)?
Despite this, many lawyers focus on the ‘T&Cs’ and barely glance at the scope or price. Or, if you’re a lawyer, you’ve probably lost count of the times you’ve been asked to review a contract without being given the scope or pricing schedules.
Tempting as it may be, I’m not saying we should all start signing contracts on beer coasters. I am saying that any good contract review should start with a review of the scope and the price. And no contract should be reviewed without that detail.
In this post, we’ll look at reviewing the scope (see Part 2 for a pricing review).
Scope of work
The most important part of any contract is the scope. If you get that right, chances are that most of the ‘legal bits’ will never need to be read again after contract signature.
Why? When a deal goes sour, it’s not usually because one party just decided not to deliver. It’s normally because the parties didn’t clearly agree on what was meant to be delivered. And the best time to flush out any misunderstandings in scope is before the contract is signed.
So, when you’re reviewing a statement of work:
- Make sure the scope reflects what you are actually buying/doing. Ask the ‘dumb’ questions – if something doesn’t make sense to you, clarify. Chances are, it doesn’t make sense at all.
- Assign every task to a party. The best way to do this? Remove passive language.
👎 The TVs will be mounted to the wall.
👌 The Supplier will mount the TV to the wall.
- Check how the parties will know when the contract is completed.
- Are you done when the term runs out (e.g., support or consulting contracts)?
- If not, how will you know when you’re done? E.g., is it appropriate to define an acceptance testing and completion certificate process?
- Think through what is being performed and identify the key risks.
- Does the work need to be done by a certain time? If so, check there are fixed timelines for delivery in the scope. Should time be of the essence?
- Are there things missing? Sometimes, the simplest things become issues if they’re not defined (e.g., is the customer providing parking on site).
- If the contract includes goods, is it clear when risk and title pass?
- If there are any project assumptions, ask the project lead to review them.
Most importantly, keep the key project risks in mind when you’re reviewing the rest of the contract. Without it, you’re just assessing empty terms.
Do: Start your contract review with the scope. (Then drink that beer)
Don’t: Review the T&Cs in isolation. (Or write them on a beer coaster)