Skip to Content

April 22, 2024

Avoid Signing a Bad Contract with Responsibility and Procedures

Q: We’ve had problems recently with managing responsibility over contracts and discovered we have signed some bad contracts. How do most members set up a contract signing procedure?

A: Great question and a major source of trouble with everyone lately. Even prior to the contract acceptance or execution stage, we take too many shortcuts in the proposal phase. Your company should have a very clear policy on who has final authority over pricing and labor estimates. That should be a function of management (sales and/or ops) and not the individual sales rep. Once that happens, the proposal terms and conditions should be set and maintained. Your terms and conditions (payment, deposit, cancellation fees, sales/usage tax, late fees, restocking, etc. etc.) should be included in every proposal. What gets our people in trouble is they send the proposal via email with the price and deliverables, but gloss over the terms and conditions of the sale. Typically the customer (end user, GC, or EC) will send back a purchase order referring to your quote/proposal sent via email. So by the time this job gets to the contract phase where you sign and accept the project, many of your terms and conditions have been overlooked, leaving the buyers terms and conditions (as per the PO) to be assumed.

A better approach is to have only one or two (well-trained) people assigned and authorized to execute contracts. They should also be responsible for creating a checklist for managing contract terms and developing the standard language for every salesperson to then be included in every proposal. As a policy, make sure every quote goes out with those terms included. Finally, when a sub-contract agreement, a purchase order, or an AIA type contract comes in, make sure your terms and conditions are accepted without exception. It’s frequently found where the contract language very clearly overrides and negates any proposal terms and conditions. Having just one or two people authorized to sign will allow you to become better at spotting these variations hidden in the fine print.

Now don’t panic when your terms don’t match the purchase order or their purchasing agent plays hardball with you. It’s an opportunity to negotiate and build a relationship, not a crisis as the sales person may report. Remember that after all the bullying and posturing is over at the end of the day good business people like doing business with other good business people. Discussing terms before signing a bad contract illustrates you know more than just the technology…you know how to run a technology business. NSCA has standard proposal terms and conditions language in our NSCA Essentials of Systems Integration Online… CW

Share This Page