Contract management in vendor agreements.
Introduction
Contract management is simply the process by which a person takes the responsibility of managing an agreement. The process is meant to be free and very interactive between the parties to the agreement and the many processes that lead to the decision to enter into contracts. Contract management plays a very essential law in modern commerce.
Key players in trade could benefit from contract management as it could seek to make their transactions simpler. This article seeks to assess the importance of contract management in vendor agreements. Furthermore, the article shall look at the process of contract management and approaches to the same for vendors.
Defining contract management
Contract management is where the company, parties to a contract and enterprises outsource the function of contract negotiation, drafting and audit to a third party. The third party in this case a contract manager will take charge of these activities under the instruction of the party entering the contract.
The contract manager is limited in its functions to the extent of the instructions given by the company or the parties to the contract. He/she/it has to ensure that it runs the prospective actions by the employer so that they are approved and verified. They cannot act against the interests of the employer.
The contract manager is thus an expert who handles all things related to contracts. So, while their clients focus on their duties, they will focus on entering into agreements and negotiating on their client’s behalf. They merely further the interests of the client and seek out a better deal.
The danger of entering unenforceable contracts plagues a lot of people entering into contracts on a daily basis. Thus, contract managers are essential in ensuring that the company can enter enforceable contracts while focussing on the essential economic duties. The outsourcing hence acts as an essential way of devolving duties and enduring risk reduction.
Vendor contracts and the need for contract management.
In any market place, there are many transactions, agreements and pacts entered by buyers and sellers. Vendors in truth transact on a variety of platforms. From instance, in relatively small agreements with small scale suppliers to large scale contracts for high volume supply and procurement.
Contracts are legally binding agreements between parties on specified terms and conditions. Making a contract and enforcing these agreements may require a special set of skills and expertise. The vendors here may not have knowledge to enter and make these contracts. Hence, contract management is needed to aid vendors in negotiation and enforcement of contracts.
The potential risks to vendors are that, they will end up making contracts which may not be legally enforceable. Also, vendors may be exposed to harmful practices based on limited disclosure by the other party. This means that a vendor may enter into a contract blind of the nature of the agreement or the subject matter. He/she may also lack knowledge on the legal issues involved in contract making and enforcement.
Contract management comes in to provide an easy avenue to claimants to make and enter such contracts. The contract managers act as the middlemen in this case. This means that they take care of the contract negotiation, making and enforcement. They will work on instruction from the vendor and ensure that the contract seeks out the best interest of the vendor.
They will engage in the following activities:
- Contract making and formation
Here, the contract managers will take charge of the formation of contracts. This includes not only coming up with terms but ensuring an offer, acceptance and consideration is properly outlined. The terms will be based on the vendor’s needs and stipulations which will guide contract negotiation.
It is important that above and beyond all considerations, the contract managers should ensure they seek the consent and direction from the vendor. They are not to come up with new provisions but simply stand in on behalf of the vendor.
- Drafting the contract:
Contracts need to be clear and precise especially as to the terms. Contracts need to clearly state the duties of the parties to ensure that there is clarity. The contract manager will help ensure the contract meets the legal standard of clarity, ensuring clearly spelt out provisions and terms.
- Negotiation
A contract is merely a written or oral pact that evidences what is agreed between the parties. Before arriving at terms there is a very long and tricky process of negotiation and deliberation. Each party will ordinarily seek out its own interests. Negotiation is complex and will at times require understanding of certain skills. The contract management will come in with these skills and ensure the best interests of its client will be furthered.
- The post contract audit and review
Where there is a need to change and review contractual obligations, wording in a contract or introduction of new terms, contract managers ensure that such is done. The essential purpose of the contract manager is to take off the load to review the contract from the vendor allowing him/her to focus on the business end. As such, the contract manager allows an expeditious, efficient and less stressful handling of the matter.
Benefits of using contract managers
The following are benefits accrued to the vendor from using contract managers:
- It makes the contract making process quick and efficient. The vendor will devolve the contract making and enforcement to contract managers who will delve only on the legal part of contracts leaving the business to the vendor.
- It makes the negotiation of contracts expeditious to the vendor. This means that there will be financial optimization. The contract managers are to well suited and equipped to ensure that they bargain for the best interest of the clients. This ensures a better deal for the vendors increasing financial gains for the client.
- It improves operational effectiveness. Contract managers basically carry out devolved functions. They act as the managers of all things contract leaving the business area to the vendor. It allows the apple seller to deal with supply and demand while they focus on the legal issues of possible enforcement of agreements.
- Contract management is important for risk reduction. There is a wide array of potential risks associated with contract formation. When dealing with people who might not fully understand the inner workings of contract law, it may prove tricky and dangerous to go in unarmed. Contract managers will come in as experts and reduce risks of an untrained vendor. In the long run, it increases operational effectiveness.
- Contract management makes it easier to increase contract volumes. The contract managers are well suited to open up the contractual capacity of the client to a greater volume. They increase the chances of the client to get into better agreements with a wider array of actors in the market. It thus opens up the vendor to many more potential opportunities than if he/she was alone.
- Contract managers will aid in the analytical aspects of contracts. A good contract manager will pay attention to details in agreements. The nitty-gritties of contacts may evade the vendor while transacting alone but when subjected to the expert’s lens, they are noted and acted upon.
What to look for in a contract manager
The following are the various characteristics to look out for when a vendor wants to employ the services of contract managers:
- Contract managers should be good managers of time. Contract management is based on the fact that the managers can ensure efficiency and speedy negotiation of contracts. It thus requires a firm that can get the job done in time.
- Contract managers should have knowledge on the vendors’ practise. Where the vendor carries out the sale of stationery for instance, the contract manager should have at the very least, knowledge on the sale of stationery. This will ensure that there is a proper negotiation that meets the interests of the client.
- Contract managers should have good communication skills. This requires the managers to only represent the interests of vendors in an eloquent manner but also ensure that such interests are brought out in a clear and direct way.
- Contract managers should have an understanding on contracts. A good contract manager in this case is one who understands the transactions that vendors engage in. This will include an understanding on the compliance requirements for each contract.
Conclusion
A vendor will always seek to make profits. Profits can only be achieved where there is increased workflow. In order to make such profits the vendor interacts with suppliers, customers, service people and others depending on the circumstances. These transactions may require agreements and contracts some of which require legal knowledge and expertise. This may seem difficult tricky and challenging as the vendor balances between making profits and legal compliance. The best option to solve this issue might be the appointment of contract negotiators. They will take the heavy load off their shoulders and allow operational effectiveness and financial optimisation.
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