Contract Development

Contract Development

P. Gottschalk (Norwegian School of Management, Norway)
Copyright: © 2006 |Pages: 16
DOI: 10.4018/978-1-59140-760-7.ch006


According to Graham (2003), one of the games lawyers play in negotiation meetings relating to outsourcing is to bet how long it will be until one party describes the outsourcing as a “partnership.” Nothing could be farther from the truth: the parties’ interests overlap, but they are not congruent, and neither party will put its existence on the line for the other. A relevant approach in contract negotiations is to see the outsourcing as the creation of a long-term, flexible relationship, but one that exists within a framework of rules that support its success while addressing failures practically. The contract, therefore, has a sophisticated role not only as the passive record of the parties’ agreement, but also as the guidebook for the evolving transaction. This chapter considers the structure of the contractual documents and the key issues that need to be reflected in them. Elizur and Wensley (1998) apply game theory in their study of IS outsourcing contracts. They find six typical issues arising in an outsourcing situation: the transfer of IS assets, risk sharing, technology upgrading, contract duration, relationship management, and fee arrangements. In addition, we have added the important topics of due diligence and dispute resolution. We will consider each of these issues separately after our discussion of contract structure.

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