Why companies don’t sign contracts by Tom Moore

Posted on October 29, 2014


Editor’s Note: Are contracts really necessary?

Procurement Insights EU Edition

It is surprising how often contracts between companies are not signed or executed properly. Case law is full of examples of disputes occurring between organisations who are both working to an unsigned contract. These usually centre on ‘contract by performance’ issues, i.e. there was a contract sort of agreed but it was never actually signed. One company is claiming that its version of the contract is the correct one and the other is relying on a different version. This unfortunately can end up in the infamous ‘money for lawyers’ scenario.

So, based on the premise that a signed contract is a good thing, why don’t companies sometimes sign contracts? I would speculate that the principle reason for this is bureaucratic inertia. It is often more difficult to sign a contract than to start working without anything signed-off. For example, in the following scenario:

In Big Company Ltd, the business process…

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