Conditions or stipulations enable progress from one step to another. Project managers can better manage project risks by breaking down deliverables and then tying each deliverable to the next thereby mapping the progress of the project. When clear and specific conditions are incorporated into the contract; compensations, scope, costs and risks can be made more definite and final by immediately communicating these in the legally binding project document.
Definition - What are Conditions or Stipulations?
Conditions or stipulations are terms tied with their corresponding scope, cost, compensation and risk management clauses. Conditions provide for answers in case certain events occur or do not occur. As such, stipulations or conditions consider certain scenarios and address these with forward-looking clauses. Hence, it can be generally said that conditions or stipulations follow an if-then structure.
Why Carefully Considered Conditions or Stipulations Can Save Time and Money
For example, consider the Acceptance-Response Provision as a basic safety net in project deliverables and payment. In the legal public domain, it is generally known that receipt is not equal to acceptance. This principle holds that a buyer may have received goods or services and yet it does not necessarily mean that the goods or services have been accepted.
Hence, such principle implies that a buyer can return the goods or deny payment to services when such things have not been accepted although the buyer have received these and signed a delivery receipt or acknowledgment receipt. This also implies that the buyer may have been using the goods or services and benefiting from those for quite some time to the detriment of the seller.
However, certain legal principles can also be applied here in the protection of sellers. For the purpose of this discussion the sellers, in the case of a project contract, will be the projects company or project management company. Good faith, unconscionable conduct and promissory estoppel can be applied in this case.
First, the projects company should have established good faith in the provision of the service. Some indications will include delivering to specifications, delivering on time and/or properly making the buyer aware of the delivery.
Second, the projects company should have established that the buyer has engaged in an unconscionable conduct that has placed the project company at a disadvantage.
Third, the projects company should have established that even though such action by the buyer has not been covered in the terms and conditions of a contract, the projects company has acted in good faith while the buyer has engaged in an unconscionable conduct.
Without a clearly stated condition or stipulation addressing such scenario, a project company will have to engage in litigation to recover payment and/or win compensation for damages. Moreover, the projects company will have to prove good faith and unconscionable conduct.
Therefore, a more efficient alternative is to provide a condition or stipulation covering an acceptance-response scenario subject to the review of contract lawyers. The advantage of this is that things such as time-to-act and compensation are already clear and definite– no longer subject to the determination of the court in cases of litigation.
Moreover, alternative dispute resolution will already have clear baselines as to the determination of costs and damages that can be negotiated on.
Sample Acceptance-Response Condition or Stipulation in a Project Contract
If the buyer does not reply in writing within 30 days on any reasonable objection to any acknowledged project deliverable submitted for acceptance or approval, then said deliverable will be deemed accepted and approved.
In case the buyer withholds payment for such deliverable without any written objection on said deliverable within the response period, then the buyer shall compensate projects company a compound interest of 8% per month on the full cost of the deliverable plus the cost of the deliverable, lawyers fees and other expenses that have been incurred by the projects company pursuant to this stipulation.
Any litigation that shall ensue from this provision shall be filed in a court of law in Newark, New Jersey.
Essential Conditions in a Project Contract
Aside from contract template conditions, project-specific conditions or stipulations should also be considered and included in a project contract. Some of these are:
- Time Freeze Provision
- Deployment Processes Test Scenarios Provision
- Transactional Processes Test Scenarios Provision
- Applications Coverage Provision
- Force Majeure Provision
- Hyperinflation Provision
- Separability Provision
Recommended Readings:
- Contract Administration in Project Management – Concepts
- 9 Innovation Management Strategy Categories
- Contract Management Basics of Operations in Project Management
Melvin Tandoc - Melvin currently works for the project management software company that makes 2-plan Desktop and 2-plan Team.
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