Contract-Management Duties as a New Regulatory Device

By Kahler, Lorenz | Law and Contemporary Problems, Spring 2013 | Go to article overview

Contract-Management Duties as a New Regulatory Device


Kahler, Lorenz, Law and Contemporary Problems


I

INTRODUCTION

The question of how to manage contracts is as old as the idea of contracts itself. When contractual obligations are not instantaneously fulfilled, the parties must arrange their decisions in a way that will achieve this aim. In recent years new technical opportunities and new management techniques have emerged that dramatically change the way contracts are dealt with. New information technologies enable companies to create, monitor, and implement their contracts in a new way. This has not only made the management of contracts easier, but it has also changed the impression of what it means to be contractually bound. Contract management has therefore become a dominant theme in the practice of contracting. (1) New concepts like contractual lifecycle, (2) senior responsible owner, (3) and visibility of contracts" symbolize these changes. Contract law scholarship has hardly reacted to these developments. (5) However, these developments do not take place outside the sphere and reach of the law. New opportunities to regulate contracts have emerged hand-in-hand with new technical possibilities and management practices. Legislators have used them in various ways. For example, there are a growing number of regulations worldwide, such as the Sarbanes-Oxley Act of 2002 (6) in the United States or a similar law passed by the European Parliament in 2004, (7) which require the establishment of a risk-management system to which, partially, the management of contracts belongs. Thus, how one manages contracts is not merely a business decision. Besides, even without the interference of the legislator, contract law might adapt itself to these changes and develop new standards of care, such as a duty to establish a risk-management system.

This article examines whether contract management can be a legal issue, that is, an object of regulation. This could be so if contract-management duties were introduced by regulation. To understand the character and repercussions of such regulation, it is first necessary to describe briefly the rise of contract management (8) and the general possibilities to regulate it. (9) Only then is the interplay between a direct regulation of contracts and an indirect regulation via contract-management duties understandable. (10) Furthermore, the advantages as well as disadvantages of such duties then become visible. (11) These advantages and disadvantages show why the regulation of contract management should only cautiously be employed.

II

THE RISE OF CONTRACT MANAGEMENT

In recent years, contract management has developed into a major business phenomenon. (12) In particular, transnational companies increasingly professionalize the negotiation, implementation, termination, and review of contracts by using standardized procedures based on information technology. Contract managers who are responsible for such contracts are now their own profession with its own knowledge, techniques, literature, and vocabulary. (13) A clear sign of the growing professionalization is the rather young International Association of Contract and Commercial Managers (IACCM), which currently comprises more than 10,000 companies worldwide. (14)

Contract management has a variety of aspects and no uniform procedure. Common features are the electronic documentation of contracts and the main events in the contractual life cycle. These include the conclusion, implementation, and review of the agreements, as well as the maturity of the claims. These events are registered and the main documents electronically stored. Digital storage allows contracts to be negotiated, implemented, and changed in a standardized way, while allowing the documents from all branches of a company to be retrieved worldwide. (15) The standardization even extends to dispute resolution and defense. (16) Contract management partially overlaps with other management systems like customer-relationship management, risk management, project management, service-level management, and enterprise resource planning. …

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