13 Major Components of a Contract
Contracts are mutually binding agreements that detail the obligations of both parties: in terms of procuring work, they relate to both the buyer and the seller.
While contracts are customized for each agreement, they tend to fall into a number of standard patterns, such as fixed price, cost reimbursable, or Time and Material (T&M) contracts.
A Project team is procuring the manufacturing unit for its new line of footwear. After seeking the advice of Subject Matter Experts and reviewing historical records of similar projects, the team estimates the manufacturing cost of $250,000. Including this manufacturer’s fee of $10,000 , the entire contract will be worth $25,000. This is an example of a fixed price contract because it establishes a definitive total price for a product or service.
Here are some of the major components of a change contract…
#1 General description
The contract has to describe what the project is all about. It has to explain what the major focus of the project will be as well as some of the major deliverables and general scope of the project.
#2 Delivery date
The contract also has to specify the delivery date for the general project as well as some of the milestone dates that the project has to meet before it can be considered a success.
#3 Authority identification
The Project also has to identify some of the authority and major stakeholders that will have to decide whether the project is acceptable in its final state or not. They will also be the one to set some of the terms and conditions of the contract.
The contract also has to specify the role of the individual awarding the contract and the contractor that will be performing the obligations of the contract. To have to be sure that all parties understand the roles that they have to perform on the contract assignment.
There is a need.for.the contract to also specify how the technical and management aspect of the project will be managed. He needs to know who will be the contact person in case the right thing is not be done. Therefore each party to the contract must know who the contact person is.
#6 Price and payment terms
There is a need for you to also discuss price and payment terms relating to the contract. All contracting parties have to be on the same page concerning payments and other terms of the contract in order to avoid failures.
#7 Provision for termination
When you are about to enter into a contract, you have to make sure that all those breaches that can lead to termination of contracts are stated. If you are not ready to waive your right, it must also be stated in the contract as well.
#8 Guarantee and warranties
Also, you have to make sure that you have all the promises of guarantee and warranties in places when you are negotiating with the supplier. You will not want to want to spend money on stuff that will get spoilt a few weeks later.
#9 Limit of liabilities
There is a need for you to know what is covered and what is not covered in the contracts. You will not want a situation where one of us thinks it supposed to be part of the contract but it was not included. There should be no room for assumptions. You have to make sure that all parties are on the same page as far as their requirements are concerned.
You need to also make sure that your contracts cover indemnity in case of losses. Like I said earlier, there should be no room for assumptions. You have to state it where you are not going to waive your right. If it is not clearly stated, you cannot claim any right thereafter.
As part of measures to protect the deliverables of a project, you need to purchase an insurance cover to Indemnity you against losses. When you have insurance in place you need to be sure that you will be indemnified against losses.
You have to make sure that you involve a lawyer when you are negotiating a contract. Some of these legal terms include nondisclosure, patent indemnification, non-complete, or other applicable legal statements.
#13 Other terms
There are other terms and conditions that need to be fulfilled when you are signing a contract. Avoid later regrets. You must ensure that whatever you have agreed to orally must ensure that all oral agreements are put in verbal records.
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