Outsourcing: How to Avoid Contract Disputes

23.06.2011

"You need to prove what promises the parties intended by the agreement, whether those promises were kept, and who is responsible for failures," Peterson says. "The more you think about problems of proof as you are drafting the contract and governing the relationship, the fewer costly factual disputes will arise after the contract is executed."

In other words, think like a litigator at the negotiating table. Here are six tips for buttoning up your outsourcing contract.

Outsourcing contracts may state that the parties can recover only "direct damages," not "consequential" ones. But case law is unclear about what constitutes direct versus consequential harm, says Peterson. Outsourcing customers should provide specific examples of what they consider direct damages, such as the cost of having the work performed by another provider, and what they consider consequential damages, such as lost profits.