Top tips for avoiding contract disputes in the tech sector

Contracts and projects in the IT, tech and telecoms industries can cause immense amounts of pressure for parties on both sides.

Due to the rapid changes in these sectors and the demand for improved services at a lower cost, many businesses face contract re-appraisals and re-negotiations, which can often lead to disputes and disagreement.

Regardless of your position within a dispute or your relationship to the project in distress, the main focus should always be to manage the situation effectively.

This is where it is important to have expertise and experience in dispute resolution at hand.

We have worked with a wide range of clients in these sectors on various disputes and conflicts and over many years.

Calling upon our considerable experience, we have put together a list of points for businesses to consider.

Make sure it is in writing 

It may seem obvious, but many intended agreements are made orally or in a very loose fashion on paper or via emails. These types of potential agreements may end up being deemed unenforceable, so far better to put the matter beyond doubt and prepare a carefully drafted, written contract.

This should set out what both parties envisage as the outcome of the contract and the responsibilities and obligations of each business. Contract law can be complex, as can the process of negotiation, so one should ideally take legal advice.

Obligations

Any contract should set out what is expected of each party and what the remuneration and consequences for failing to meet the obligations should be.

If an obligation is not laid out in a written contract, then it could be difficult or impossible to enforce it at a later date.

In addition, no business should accept any risk over and above that which it is comfortable with.

Laying the groundwork early on, and considering every likely scenario, will pay dividends should a dispute arise.

Be clear

The key terms should be drafted in simple and clear language.

Whether it is a service or goods which are being supplied, a written agreement should set out the parties’ expectations.  In the majority of situations a detailed specification will be required; otherwise there may well be a dispute at a later date as to what exactly was being sold.  Express clauses also need to be included dealing with matters such as performance levels and the timing of delivery.

Spell out clearly what processes will be used for monitoring and reviewing performance and what recourse there should be if the agreed standards are not met.

Exit Strategy

A contract should allow for early termination (particularly from the user’s point of view), by providing break clauses under which a contract may be ended.

Provision should also be made for early termination in the case of breach.

The parties will also want to agree which clauses of the contract, if any, shall continue post termination.  An example might be provisions concerning confidentiality or perhaps even some restrictions on the poaching of staff.

Maintain a record 

Where possible, all written correspondence between the parties should be kept and safely stored, with back-ups.

Should a dispute arise, or a relationship fundamentally breakdown, this may provide evidence that can be used to support arguments concerning the intention of the parties or the construction of clauses in the contract.  It will also assist in proving when complaints were made and what losses were suffered.

In the modern age, this may also include instant messaging logs and WhatsApp data. Where telephone calls are made instead of sending an email, make a note of the time called and what was discussed. This can help with recollection in future. If you are particularly concerned about your relationship with the other party, follow calls up with an email confirming everything relevant which was discussed.

Do research (due diligence)

In a world awash with information it has never been easier to access details about a potential business partner. Take time to make sure they have the necessary expertise and check whether they have the means to pay you for the work (or if you are the user, that the supplier has the means to pay compensation if something goes wrong). There is nothing wrong with asking for references or proof of previous results.

Changes 

Things can and do change during a contracted period of work. It is vitally important that any changes that are likely to affect the initial agreement are made in writing.  A clear process for “Change Control” should be included in the contract.  Among other things, this will set out what additional work is “in scope” and what is “out of scope”; the latter possibly attracting further charges.

Be level-headed

If you are running a business then it is reasonable to assume that you are emotionally invested in its success and so it is easy to see how disputes can become quickly heated. If possible, try to take a step back and keep level-headed. Don’t escalate a dispute if you don’t have to.

Indeed, the Courts have made it clear that they expect suppliers and users to try and work together to overcome problems which might occur.

Speak to us

One of the best ways to avoid disputes and litigation is to seek advice early on from professionals who understand your field. When iLaw was founded, it was created with a vision to help those businesses and entrepreneurs in the most innovative sectors to succeed.

By working with our clients, we have helped them to craft contracts that suit their needs and commercial goals. However, if things do go wrong then we have an outstanding record for negotiating settlements or enforcing our clients’ rights in Court.

To find out how we can help you to prevent disputes from arising, why not contact us