With more IT activity moving to the cloud, managing vendor relationships competently is critical. It begins with entering sound business agreements. This is more than feeling comfortable with an individual or a company, because people move on, and companies change. In the end, it is the contract that governs the relationship between you and your vendor.
When IT enters a contract or negotiates with vendors, the business entrusts IT managers to make sound evaluations and enter well-structured contracts. If you perform IT for a government agency, you already understand the importance of contracts, because myriad regulations force most agencies to set up separate areas that focus on contract administration. The same goes for large enterprises, which have their own legal departments. However, if you are the IT manager for a small or midsized business, you are often the person the company relies on to define and recommend the contract.
Regardless of where you’re managing, the growth of cloud computing and other outside services makes it essential for any aspiring IT manager, director, or CIO to have a fundamental understanding of contract law. This understanding begins with some basic legal concepts in which decision-makers should be versed. They include:
Contract. A contract is an agreement between parties where promises are exchanged to do something in exchange for something else of value. The agreement is secured by consideration (e.g., a retainer fee) and must contain very specific terms for the price, item contracted, parties to the contract, and time of performance. If any of these are vague, be sure to clear them up before moving forward.
Adhesion. This term from contract law means that whoever first drafts the contract will generally draft it to be in that party's favor. Be sure to read the entire contract, including the fine print. Make notes if there are areas you need to modify or clarify.
Contract modifications. Contracts usually come in a “boilerplate” form. If you want to modify it by crossing out terms and adding others, the vendor usually comes back and tells you that its legal department won’t accept it, because its policy is not to alter the body of the contract. Don’t let this stop you! You can modify the contract by attaching your conditions in an addendum to the agreement.
Integration. Under contract law, courts look for everything entered in the contract to be done at the same time. If you modify a vendor's boilerplate contract with your own addendum to the contract, the way to effect an integration of your addendum with the boilerplate agreement is to draft a cover letter stating that the conditions in the addendum will supersede those stated in the boilerplate contract, and that the entire agreement (boilerplate contract, addendum, and cover letter) constitutes a fully integrated writing that represents your agreement with your vendor in its entirety.
Venue and arbitration. No one ever anticipates vendor disputes and having to go to court or arbitration, but just in case, make sure that the contract is set up for venue (i.e., where the court proceeding or arbitration will be held) in your home state. Vendor boilerplate contracts generally place venue in the state of the vendor’s home office.
Finally, contract law is a highly specialized field and not one that most IT professionals want to spend much time with. But before you throw a contract over the wall to administration for review, take a few minutes to familiarize yourself with some legal background on the subject. It isn’t difficult, and it will serve you well. And regardless of how good you get at it, always see an attorney for a contract review before signing on the bottom line!
I think one huge downfall of IT departments and their handling of contracts is that the CIO is often unwilling to approve the cost of contract review as an initial outlay - either in the form of the time of the IT Director taking the extra hours to review what's being signed or in the form of paying an attorney to do it for them.
In a recent project I did the contract negotiation took 5-weeks. At the end of that process I felt like I had legal chops; but it also made me realize how imperative it is for all of us to start to talk and think like a lawyer.The more we are inundated with leagaleeze and exposure financially it might be prudent to at least have some formal training. There is an idea for an on line training course “Legal Rosetta Stone”.
@Cyrus- You're probably right. I guess I'm just looking for a way to help distribute that legal knowledge to the people we need it without sending everyone to law school. But I people will hide behind it.
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