The definition of Contract is given under S.2 (h) of the Indian Contract Act, 1872 which provides ‘a contract is an agreement enforceable by law’.
Whereas an agreement has been defined under S. 2 (e) as follows: ‘every promise and every set of promises, forming consideration for each other. When a proposal is accepted it becomes a promise. Thus an agreement is an accepted proposal. Therefore, in order to form an agreement there must be a proposal or an offer by one party and its acceptance by other party.
The second part of the definition deals with enforceability by law. An agreement is enforceable u/s 10 if it is made by competent parties, out of their free consent and for lawful object and consideration.
Thus, a Contract = Agreement + Enforceability.
Contract management, refers to the processes and procedures that companies may implement in order to manage the negotiation, execution, performance, modification and termination of contracts with various parties including customers, vendors, distributors, contractors, employees etc.
WHY Contract Management: The answer to this question is that contracts need to be methodically managed in order to ensure that financial and operational risk is minimized and performance maximized.
Contract management can be a time-consuming task, but if properly managed, can be one of the most lucrative areas for building business relationships and generating revenue.
First analyze and evaluate all existing contracting processes, and then categorize each by the following criteria:
- Level of Risk – High , Medium and Low
- Value to the Organization- In terms of transaction and volume
- Routine Agreements & Contracts vs. New/Infrequent Contracts
Draft questionnaire, contract checklists and draft templates accordingly.
Contracts are legally enforceable documents that should not be approached lightly. It’s important to be organized and prepared with the right resources.