Abstract

Contractual risk management, preventive law, and quality improvement are intertwined concepts. When contracts and the contracting process are used as planning tools, the organization prevents problems while taking advantage of opportunities. Preventive law is the concept that legal opportunities must be identified early to take proper advantage and that legal problems must be detected early so that there are no negative surprises. Contracts can be used as preventive tools that avoid most such surprises. A vital contractual tool is the contract review, which the ISO 9000 standards identify as a device for ensuring that a supplier has the knowledge and capability for meeting a customer's requirements. ISO 9000 also indicates that contract review covers not only items labeled as contracts but also orders, offers, quotations, bids, and verbal communications. Verbal communications fit into the category of camouflaged contracts: those contracts that are not readily identified as such. In addition to verbal communications, this includes purchase orders, letters of intent, and even some work conducted without supporting paperwork. To be contractually literate, members of an organization should be aware of such laws as CISG, the international uniform sales law. They also should embrace proactive contracting activities that use contract review checklists and other such tools to identify gaps, problems, and traps.