Trade practices, fair trade and consumer laws including statutes and jurisprudence have strong provisions against misrepresentations in the conduct of business. Contract templates or contract software can be considered to achieve greater operations efficiency in a project company or project management company. More importantly, project contracts should be carefully crafted, reviewed and edited both by contract lawyers and project managers to prevent any misrepresentations in it.
Definition - What are Representations?
Representations are non-actionable statements that pertain to prior facts which are the main causes why two or more parties/signatories are entering into a contract.
For instance, when a contracting party states that it has 20 years of experience in a particular field of specialization which affects the decision of the other signatory to decide and enter into a contract with that party, then the statement will be considered as a fact. As such, this is a representation.
Representations are typically worded in a contract after a WHEREAS. Thus, WHEREASes are almost always synonymous with representations. Moreover, representations typically occur prior to the terms, conditions and warranties of a contract.
What Constitutes a Misrepresentation?
Lies are misrepresentations. These are legally called fraudulent misrepresentations and are usually subject to civil liability with their corresponding damages and compensation for the affected signatory in the contract.
Another type of misrepresentation is innocent misrepresentation. Here, one signatory has no intention of defrauding the other signatory but by virtue of perceptions, the other signatory perceived one thing when the other meant another thing. Elements of good faith are present in an innocent misrepresentation.
Another type is negligent misrepresentation. Here, one signatory lacked due diligence such as in cases where an appropriate elaboration of the fact is necessary but the negligent signatory did not disclose the significant matters to the fact.
For instance, contracting for the installation of asbestos roof shingles and lead pipes in a country where such materials are not yet banned and yet the contractor fails to disclose the health hazards of such materials can be classified as negligent misrepresentation.
In this example, the misrepresentation may have been innocent but negligent nonetheless if the contractor may have won the deal based on a lower price and yet fails to disclose the dangers of such materials which the other signatory may not be aware of since he/she was deciding based on a lower price.
Contract Templates and Contract Management Software
Contract templates or contract management software providing ready-made contracts will typically include several representations already. However, these contract templates or contract management software should be carefully evaluated along these points with contract attorneys:
- What laws from what country or state are the contract templates or ready-made contracts based on?
- Are the laws used as basis for the software or template updated?
- What parts are not applicable to the project?
- What provisions that pertain to the project should be included?
Contract Lawyers or Contract Attorneys and Project Manager Inputs
Contract templates and contract management software are good investments for project companies. These hasten the creation of drafts which in turn saves time and money for contract lawyer inputs. Contract lawyers specializing in projects typically bill by the hour and their time are better utilized in the review of the more important points of the contract.
Likewise, project manager inputs are necessary in any project contract as project managers know about the facts of the project that contract attorneys or legal consultants will never know unless verified. Thus, it is essential that project managers should have a fundamental knowledge of contract law concepts to better manage potential project risks and save time.
Recommended Readings:
- Contract Administration in Project Management – Concepts
- Contract Management Basics of Operations in Project Management
- Luxury Vacation and Honeymoons in Asia
Melvin Tandoc - Melvin currently works for the project management software company that makes 2-plan Desktop and 2-plan Team.
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