MOST FREQUENT SOURCES OF CLAIMS AND DISPUTES
One way to recognize risky terms and issues (and reduce the probability that things will go wrong) is to learn from previous experiences involving claims and disputes. In its tenth Annual Survey, 2011 Top Terms in Negotiation,1 the international Association for Contract and Commercial Management (iACCM) asked negotiators—both sell-side and buy-side— from around the world what terms are considered the most frequent source of a claim or dispute. Table 5.1 summarizes the core findings:
The results show that delivery and acceptance issues constitute the most frequent source of claims and disputes. Experience tells us that this is probably due to confusion about requirements, either through ambiguity from the beginning or through the implementation (or lack) of change management procedures (number 3 on the list).
There is a major difference between these results and those listed among iACCM Top Terms of Today describing where negotiators spend most of their time in negotiating deals today. in the latter, year after year, terms such as liability limitations and indemnities top the list.[1] [2] on the other hand, the iACCM Top Terms of the Future indicate that negotiators see more value in negotiating terms relating to change management, scope and goals, and the parties' responsibilities. The survey results present an opportunity to shift the focus of contract negotiation. Chapter 4 examined negotiation strategies and mindsets that can help make this shift happen, and Chapter 6 will introduce further ways in which mindsets and ways of working can be changed to enable a new focus, better decisions, and better results.
Table 5.1 IACCM 2011 most frequent sources of claims and disputes
|
Issue |
% reported |
|
Delivery/acceptance |
41 |
|
Price/charge/price changes |
38 |
|
Change management |
32 |
|
Invoices/late payment |
30 |
|
Performance/guarantees/undertakings |
27 |
|
Service levels and warranties |
27 |
|
Payment |
25 |
|
Responsibilities of the parties |
22 |
|
Liquidated damages |
22 |
|
Scope and goals |
21 |
|
Warranty |
16 |
|
Limitation of liability |
16 |
|
Indemnification |
14 |
|
Service withdrawal or termination |
14 |
|
Intellectual property |
12 |
|
Audits/benchmarking |
10 |
|
Assignment/transfer |
8 |
|
Dispute resolution |
8 |
|
Data protection/security |
7 |
|
Communications and reporting |
7 |
- [1] iACCM (2011a) 2011 Top Terms in Negotiation. international Association forContract and Commercial Management, available at https://www.iaccm.com/members/library/files/top_terms_2011_1.pdf. See also Chapter 3 of this volume, Table 3.1.
- [2] See the left-hand column "Top terms of today" in table 3.1 in Chapter 3 of thisvolume.
