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Contract management and administration
Practical Law ANZ Toolkit w-018-4498 (Approx. 10 pages)
Contract management and administration
by Practical Law New Zealand
| Published on 26 Sep 2019 • New Zealand |
A toolkit to guide users through legal, practical and commercial issues relating to the management and administration of contracts, including drafting and varying contracts, transferring rights and obligations, breach of contract and disputes and terminating contracts.
About this toolkit
This toolkit is a guide to Practical Law New Zealand's resources relating to the legal, practical and commercial issues raised by contracts and their management and administration.
Contract formation
A contract is an agreement between two or more parties that is enforceable by law as a legally binding agreement.
What makes a contract binding?
For guidance on the essential elements that must be satisfied for an agreement to be treated as binding on the parties, including offer, acceptance, consideration, an intention to create legal relations and certainty of terms, see Practice note, Formation of contracts.
Who can enter into a contract?
For an outline of the rules that govern the capacity of organisations or individuals to enter into a contract, see Practice note, Contractual capacity.
Electronic contracts (or e-contracts)
For information on the issues relating to contracts entered into using electronic communications, see Practice note, Electronic contracts and transactions.
Contract template
For a skeleton agreement or deed containing standard boilerplate contractual provisions for corporate and commercial contracts, including execution blocks, see Standard documents:
Contract execution
For a guide to Practical Law's resources relating to the execution of deeds and documents, see Toolkit, Execution of deeds, agreements and documents.
Contract management
For an overview of contract management, including practical information on management processes relating to contract initiation, drafting, negotiation, approval, execution, retention, performance and tracking, amendments, renewals, terminations and audits, see:
For a template contract management spreadsheet to track and record key information about an organisation's business-to-business contracts in one place, see Standard document, Contract management spreadsheet.
Understanding common contract terms
During the term of the contract, it is common for issues to arise such as not knowing what the parties originally intended or not understanding the effect of a particular clause. This may happen, for example, where the personnel involved in negotiating and entering into the contract no longer work for the organisation and new personnel are required to understand the effect of the contract terms.
For guidance on issues that commonly arise, see Practice notes:
Variation of contract terms
The parties often agree to vary the terms of the original contract. This may reflect, for example, a change in market conditions or the parties' circumstances.
For guidance on the rules governing variation of a contract, including a summary of the requirements for an effective variation and compliance with necessary formalities, including the need for consideration or execution as a deed, see Practice note, Variation of contracts.
The parties may anticipate the possible need for a future variation in their original contract and include a clause that prescribes how variation may be undertaken. For an example of this type of clause, see Standard clause, Variation.
Where the parties have agreed to vary the terms of a contract, and depending on the level of formality required, a variation can be documented by using one of the following Standard documents:
Transfer of contractual rights or obligations
The parties to an agreement may wish to enter into a subsequent arrangement under which a third party will take the benefit of the contract or become responsible for performance of contract obligations. The most common methods of transferring contractual rights or obligations are novation, assignment or subcontracting.
What is novation?
Novation is a process by which rights and obligations under an existing contract are extinguished and new rights and obligations are created. For information on the concept of novation and an outline of the key issues to consider when entering into a novation arrangement, see Practice note, Novation of contracts.
For a standard form deed to transfer rights and obligations by way of novation, see Standard document, Deed of novation.
Transfer of contractual rights by assignment
For information on how contractual rights may be transferred to third parties by means of assignment, see Practice note, Assignment of contractual rights.
The parties may anticipate the possible need for assignment and include a clause that prescribes whether and how an assignment may be undertaken. For an example of this type of clause, see Standard clause, Assignment.
Where consent is required for the assignment, the assignor must approach the assignee to obtain that consent. For the assignment to take effect as a legal assignment, the assignor should also give notice to the other party that the assignment has taken effect.
For a standard form deed to transfer rights by way of assignment, see Standard document, Deed of assignment.
Transfer of contractual obligations by subcontracting
For information on how contractual obligations may be transferred to a third party by means of a subcontract, see Practice note, Subcontracts.
For a standard form back-to-back subcontract to be used to pass through, or flow down, obligations to a subcontractor, see Standard document, Back-to-back subcontract.
Breach of contract and disputes
Some contracts end up in a dispute between the parties. A dispute may arise, for example, where one party alleges the other failed to perform its obligations, either at all or to the requisite standard.
For a template letter requiring the other party to remedy a breach of contract, see Standard document, Notice to remedy breach of contract. For a template letter to respond to such a notice, see Standard document, Response to a notice to remedy breach of contract.
Disputes may also arise due to circumstances outside the parties' control. For a template notice of frustration of contract, see Standard document, Notice of frustration of contract. For a template notice that a force majeure event has occurred, see Standard document, Notice of force majeure event.
For information on the principles of causation, remoteness, mitigation of loss and methods of assessing damages in the context of a breach of contract, see Practice note, Damages for breach of contract.
Terminating a contract
For information on the legal and practical issues that arise when terminating a contract, see Practice note, Termination of contracts.
Where one party wishes to notify the other party of its intention to terminate the contract, use Standard documents:
The parties may define in their original contract when early termination will be permitted (for example, for default or without cause). For a standard termination clause, see Standard clause, Termination.
For a clause that defines the ordinary term of an agreement (including providing for one or more renewal terms), see Standard clause, Commencement and term.
If the parties wish to document the terms on which a contract is brought to an end, including how the parties' accrued rights and liabilities should be dealt with, see Standard document, Deed of termination of contract.