A contract is one of the basic social and legalinstitutions in modern society.A contract frames and coordinates humaninteractions. It is an agreement thatcreates, assigns, delegates, and transfers rightsand obligations, tangible and intangiblegoods, services, and entitlements between thecontracting parties.
What is a Contract?A contract is an agreement between two partiesthat creates an obligation to perform (or notperform) a particular duty. A legally enforceablecontract requires:1. An Offer (I’ll mow your lawn this weekend, if you pay me $30)2. An Acceptance (You’ve got a deal)3. Consideration (The value received and given – the money and the lawn mowed) 6
The Kind of Contract• Person to Person• Person to Organization• Organization to Organization• Person to Society• Person to State• State to State
• Contracts can be either written or spoken (oral).• Bad memories of oral contract terms have probably led to more avoidable business disputes than any other cause.• Avoid oral agreements in business. They are generally worthless in any subsequent dispute.
Major Areas within Every Contract• Parties • Warranties• Effective Date and Terms • Remedies• Statement of Service (SOS) • Risk Allocation• Pricing • Boilerplate• Performance Standards • Signatures 9
Common Contractual TermsThree commonly negotiated/contentiousprovision:1. Warranties2. Indemnification [protection against loss or liability from 3rd party claims]3. Liability & Damages [legal responsibilities] 10
• Project details• A Definitions section• Length of the proposal• Fees and other charges• Changes and “after–contract” additions• Client / Designer Responsibilities• The right to promote your work• Confidential information• Termination policy
Five Reasons1. Protect Yourself2. Establish Expectations3. Establish a Time Line of Events4. Establish a Payment Schedule5. Establish Ownership of Work and Usage Rights
Understanding the Commitment• The Principle Issue: Ensure there is a clear understanding of the two parties’ commitment.• Ensuring Enforceability: 1. Establish objective measures of performance (did you get what you wanted?) 2. Create methods to resolve disputes without affecting progress. 3. Determine means of recourse and remedies, if all else fails. 15
Negotiation is the process ofconferring with others to reach anagreement.Bargaining occurs when there is adispute over the terms involved.
Types of Negotiation1. Positional Negotiation With the positional style of negotiation, each party starts with an extreme (usually unjustified) position. The basis for this approach stems from the belief that the ultimate solution will be favorable only if the initial offer is extreme. It is seen as a zero-sum game. One party will win and one will lose. An extreme position increases the chances of a "win.“ Common tactics include foot-dragging, threatening to walk out, and stonewalling.
Types of Negotiation2. Principled or Interest-based Negotiation Principled negotiation seeks a winning outcome for parties by bargaining over the interests of both parties, not on the positions. It is based on complete and early sharing of information in the belief that "the pie" of options being divided is made larger by understanding what is most important to the other party.