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Comparison of Contractual Payment Terms and Conditions

 

STUDENT PAPER

By Lore Paganet

SKEMA Business School

Paris, France

 



ABSTRACT

Payments between two parties have always existed, and for many centuries this information has been gathered into contracts. A contract is an agreement between private parties creating mutual obligations enforceable by law. The Terms and Conditions (T&C) are here to explain every level of details in each clause, in order to avoid conflicts between the parties.

This paper is important because we will focus on the payments terms and conditions, a risky clause because this is one of the main source of conflict. There is a huge amount of contract written every day, and they all have this clause included. The matter of this paper is to show how many differentiations we can find about this clause, and which scientific document can help a lawyer to write perfectly the payments clause.

Three scientific documents have been compared, two have been eliminated thanks to the use of Multi-Attribute Decision Making (MADM method). The final most completed document that has been kept is the Engineers’ Joint Contract Document Committee (EJCDC) document.

This paper helps us understand how many information this clause should contain, and may help the owner of an organization to understand how to write the perfect payments terms and conditions without forgetting any details.

Key words: Contract, clause, price, cost, owner/contractor, reimbursement, Engineers’ Joint Contract Document Committee

INTRODUCTION

Nowadays, a conflict can easily arise between two parties, before or after the signature of the contract. A contract is the first document that links the two parties together, so this is the opportunity to add as much details as possible.  The Terms and Conditions (T&C) are written in order to be clear between the Owner and the Contractor but sometimes some elements are missing, and create conflicts.

This topic is based on the payment clause of a recruitment agreement contract from a Sydney-based start-up. The scope of this paper is a specific situation because it’s a comparison between contractual payment term & conditions from an existing contract and a baseline such as the American Institute of Architects (AIA), the Engineers’ Joint Contract Document Committee (EJCDC) document and the International Federation of Consulting Engineers (FIDIC). The comparison will help the reader to understand that some main points can be forgotten in a contract, and it’s important to add a lot of details to avoid future eventual conflicts about payment terms.

  • Problem definition

This paper is important but difficult as well because there are not two similar contracts. The T&C are all the time different from one to another, and especially the payment terms since it depends on what is the work that needs to be done, how it will be delivered, and how much does it cost to be done. It is also an important part of the contract because it includes the reimbursement of the work if it hasn’t been delivered. This paper aims at, first defining the “contractual payment terms and conditions” clause, then to identify this clause in three different documents and analyse them, and see what’s the preferable solution to be sure the clause is perfect from the owner and contractor’s perspective.
Once this analyse done, we will be able to answer the question:

  • How is “contractual payment terms and conditions” defined in three professional documents?
  • What is the best document that will help as a support to perfectly write this clause?

METHODOLOGY

This paper is using the Multi-Attribute Decision Making, also referred as MADM, which is a tool that evaluates several conflicting measures in a decision making. This will help us to understand which is the most favourable solutions between three different documents that will be used as a comparison baseline.

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected]



About the Author


Lore Paganet

SKEMA Business School
Paris, France

 


Lore Paganet
is a business school student specialised in Project and Programme Management & Business Development. After a Higher National Diploma (HND) in Hospitality and Catering, she decided to level up her knowledge at SKEMA Business School, one of the Top Ten French Business School. With several previous activities in Human Resources and Contracts Management, she gathered a lot of information about contracts of any type. She is now fully dedicated to her Project Management studies and has just been certificated (AgilePM and Prince2, and more to come) in this field.

She will work as a Transformation Project Manager at AXA Partners in Paris, starting in January 2018, and remain available for any enquiries. Lore can be contacted at [email protected]