Commercial contract management involves the negotiation of formal agreements for business between two businesses. Contracts are negotiated by contract management professionals, who oversee the process and ensure that everyone is aware of their rights, and obligations. Due to how these contracts are agreed, legally binding contracts, those who work in this field must be highly knowledgeable and proficient in every aspect that deals with commercial contracts.
There are many phases involved in managing commercial contracts starting with the initial proposal, through negotiations over details of the contract before deciding to terminate or renew the contract at the expiration date. Professional contract managers aren’t only accountable for the creation and renewing of contracts and oversee, interpret, and ensure compliance with existing contracts.
Based on the business, the contract manager can manage all aspects of commercial management of contracts. At the same time, an entire team of experts could collaborate on different aspects within the course of action. The duties of these professionals are different depending on their job and the degree of experience they’ve achieved. Despite the intricate nature of their work and the considerable cost involved, most businesses prefer investing in a reliable contract management software, or hiring certified contract managers for even low-level jobs.
What are the Different Types of Commercial Contracts?
A contract can cover any issue in which the parties have to reach an agreement, but here are a few of the most commonly used kinds of commercial contracts:
Letter of Intent (LOI)
An LOI provides a method for the parties to discuss the possibility of a working arrangement at a higher level and ensure that everyone is in the same boat when it comes to the bigger picture before they begin to work out the finer details. It’s entirely likely that the agreement will not be able to go through; beginning with an LOI aids the parties in deciding if it’s worth continuing the conversation before they waste time and money in a transaction that’s likely to fail.
Non-Disclosure Agreement (NDA)
NDAs can help protect the company’s trade secrets as well as other confidential information. When a company hires external contractors or employs new employees, it is essential to make sure that the employees do not leak information that could cause harm to the company in any way, for example, by divulging information to competitors regarding the products that are in development or the specific procedures it employs.
Purchase and Sale Agreement (PSA)
It is a contract that entitles the purchase of a specific product or service for the price of a fixed amount. This contract is ideal for large-scale, single purchases or the large number of purchases from the exact supplier throughout.
Service Level Agreement (SLA)
Setting clear expectations regarding the quality of work is usually just as crucial as defining the vendor’s services. An SLA includes terms such as the quality standards, delivery times, and the time for response to support and service.
How to Manage Commercial Contracts
The contract lifecycle management ranges from creating templates, the negotiation and writing of new agreements, to reviewing contracts to ensure compliance and monitor the performance of business partners concerning their commitments and, ultimately, renewing or ending contracts before the expiration of their term.
As we have discussed previously, commercial contracts are contracts between two firms. Naturally, there will be lots of money to be spent in the process. If there is a significant sum of cash involved, businesses take extra precautions to avoid any accidents. In the absence of this, it can lead to legal problems concerning contractual agreements. This is the reason why businesses tend to employ only professionals who are certified.
A business with a small deal volume and no internal legal team could delegate some of its contract management tasks to an outside law firm to maintain a record of drafted contracts. But, this approach is not feasible for a business that has a lot of contracts that are in effect at any time, considering the time-consuming and cost of having external counsel to examine agreements every time a person in the company needs to know the contents of the contract.
In-house procurement and counsel managers require efficient, quick, and secure systems to streamline contract drafting and management at large. The most effective cloud-based contract management software can increase the team’s efficiency in closing deals and improve the precision of reviewing contracts and data extraction and the security of your company’s sensitive data.
The management of contracts for commercial use is an essential procedure for enterprises. If you don’t have proper oversight and plan for delivery, the company may be in danger. This is why it’s crucial to choose the right people handling these contracts. They should be certified professionals. When certified professionals are equipped with the appropriate tools, you can make the most of the contract management process. Commercial contract management does not have to be a nightmare. Select the best method tools, equipment, and people who will manage the contract and let go of the worry and anxiety.