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Construction litigation has lessons for CIOs

Sophie Dawson | July 1, 2014
A recent construction case highlights some key lessons which are relevant to CIOs and their teams when it comes to reviewing, understanding, and enforcing, contracts.

Second, if key aspects of scope are not determined, consider having a design phase with appropriate mechanisms to address possible disagreement or other problems at that stage.

Third, if you refer to or otherwise incorporate a part of a document in one of your contracts, then attach it or take other steps to make sure that someone without any knowledge of your negotiation will in future be able to tell what is referred to.

Fourth, bear in mind that all your communications relating to contractual negotiations may end up being used as evidence in court and could have a big impact on the meaning given to the contract.

They are also significant in relation to potential misleading or deceptive conduct claims. So, it is wise to keep records of key matters and considerations, including key communications between the parties.

Records of relevant communications are also likely to be admissible in any proceeding (as evidence of the commercial context known to both parties or on another basis). Even material which is not admissible may be helpful in the dispute resolution process.

After each contract is signed, ensure that somebody gathers the materials relating to contract negotiations and that they're kept in a safe place for as long as there is a possibility of a dispute. That way, your legal team can easily access the information if it is required.

A fifth lesson to be taken from this case is that business common sense should be applied when interpreting contracts. Don't be fooled by arguments based on uncommercial and literal interpretations of words which have a different meaning to you.

In many cases, the IT team with its detailed knowledge of systems and commercial considerations will have the best understanding of the likely meaning of a term in a contract.

Be sure to share your team's thinking with your legal team when seeking advice so that they have the benefit of your specialist knowledge.

Finally, when different interpretations of a contract or other problems emerge, try to resolve them quickly.

Inevitably, the party whose understanding of the contract is found to have been incorrect will find themselves more out of pocket than they would have been if the issues of interpretation had been resolved earlier.

Disagreements are sometimes unavoidable, but by quickly deploying practical measures to resolve them (including escalation processes in the contract), they can usually be resolved.

 

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