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OPINION: Understanding the law around how contracts work is a key business skill

Friday 27 August 2021

David Christie
David Christie, Academic Strategic Lead at RGU’s Law School, writes about the importance of understanding the law around how contracts work and why it is a key business skill for all organisations, especially as things may change.

Understanding the law around how contracts work is a key business skill and it is something which people should work to acquire.

Project managers, or Human Resources professionals, or those involved in marketing and sales (to name just a few obvious examples) develop a host of specialist skills and techniques which help them to work with others. More generally, a lot of business time and energy goes into managing relationships.

That is fundamental to getting things done. However, if relationships break down it is often the contract, which is integral.

At that point, though, the terms of the parties agreement can almost be treated like a magical document which only lawyers can understand. The focus on jargon and abstract ideas like rights and duties can mean that the actual words written in the document get lost. The contract is that tool because it is the most tangible evidence of the business relationship, what it is and what its aiming to achieve. Contracts should be tools for planning work and contracts can be a roadmap for managing change.

Even though understanding what the contract says and what it does is central to working out how to move a project forward, there is much less focus on the skills needed to use a contract as the tool to do so.

As with any business skill, contract law can be difficult to master and as with many business skills there are specialists (in the form of lawyers) who can help out when matters become complicated. That said, the ability to understand the role and terms of a contract, even if somewhat basic, can be very helpful to businesses in working out when and how to engage with their lawyers and other advisers. It is for that reason that the ability to have a grasp of the legal framework of contract law is such an important business tool.

This can be seen in the following ways, in particular. Firstly, understanding how a contract comes about, and what goes into is is useful in terms of working out how to make sure that the parties relationship is built on a solid platform. It provides a venue for planning and discussing what the project outcomes are going to be. It provides a place for the shared understanding of the parties aims. All of that needs to understand the way a contract is formed and how it is to be understood when it has been formed.

Secondly, the idea that ‘things change’ has never been so obvious as it has in the last year or so. It is when things change that the shared understanding and relationship can break down. A well drafted contract can provide a mechanism to help parties manage change processes and prevent things breaking down. That level of understanding – if not certainty – helps for planning and working through consequences. So, knowing the relevant legal principles is so important for both managing change and dealing with and understanding the consequences.

Thirdly, the contract and the wider legal relationship help in working out the consequences if there is a breakdown. At the point when a commercial relationship breaks down completely, there is only so much that other business skills can help. In the end, the law of dispute resolution will help and the law around dealing with losses will help in terms of unpicking what has gone wrong and bringing matters to a close.

Again, these are complex issues – as all skills acquisition is – but having some of the tools is important in so many business jobs. It’s a useful skill to acquire as you move through an organisation. To some extent the move from an operational outward facing role to the more strategic role is a tale of moving from a focus on individual relationships to the more general and abstract understanding of a relationship based on a contract.

So understanding the law around contracts is an important part of your skills toolkit. For this reason, we at RGU have developed an online Upskilling course on the subject which aims to cover the legal frameworks in those three categories set out above.

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