Technology Contracts

Survey Objectives

Questions in this section were intended to provide an understanding of how ICT contracts were sourced or drafted and to what extent they contained ADR clauses.

The presence of a Dispute Resolution clause in a contract is typically a prerequisite for ADR.

As this is a key step in the Dispute Resolution process it was decided to investigate whether dispute resolution clauses were prevalent in ICT contracts, and, how ICT contracts were sourced or drafted.

If necessary, the results from this section would be used to affect the drafting of contracts to encourage the inclusion of dispute resolution clauses.

Key Findings

Type of Contract

This section examines relationships between the types of contracts and the level of disputes.

Noting that the survey focused on those contracts which resulted in some form of dispute, Figures 10 and 11 delivered some key messages:

1. The survey is a reasonably representative sample of commercial arrangements (Figure 10)

2. No particular contract type stood out as being more or less prone to dispute (Figure 10)

3. Time & Materials and Fixed Price contracts were the most prone to dispute. (Figure 11)

It was expected that development contracts would form the bulk of the disputes. The results of the survey did not support this anecdotal hypothesis. In fact, the opposite was demonstrated – that no one contract type was more or less prone to dispute.

Contract Value

The majority of contracts were of a relatively small value. This suggests that lower cost dispute resolution procedures would be more applicable. (Figure 12)

Contract Sources

The bulk of the contracts were “standard” contracts – that is, contracts which were mandated by government or which were standard form contracts from buyers and suppliers. This suggests there is a greater uptake in the use of ADR clauses. (Figure 13)

Jurisdiction

The survey found that 35% of contracts involved an international party. This is reflective of the Australian ICT industry where most of the major suppliers are international firms. The good news is that despite this, the majority of contracts provide that the law of the contract is Australian Law.

Contract Disputes

The survey revealed that over 40% of contracts had no dispute resolution clause; however, more than 50% of the contracts undertaken required some form of dispute resolution.

Of those with dispute resolution clauses, the majority provided for either mediation or arbitration. (Figure 14)

Legal Advice

Inclusions of various types of clauses in contracts are usually due to one or more of the following reasons:

1. The client requested the clause.

2. The legal advisor recommended the clause.

3. The clause is required by statute or regulation.

Having determined the level of respondent awareness and education, the survey then asked respondents whether their legal advisers recommended Dispute Resolution clauses, and, if so which types.

Mediation was the most popular recommendation. However, the fact that there were so many “Don’t know’s” suggests that either the client didn’t ask or the advisor didn’t recommend.

This highlights the need to raise awareness of the effectiveness of ADR techniques and make them a mandatory inclusion in contracts.

The same question was asked of those respondents who were legal practitioners or advisers. The results were surprising and were consistent with the results of the question to non legal practitioners. This highlighted a need to extend the awareness and education programme to legal practitioners in the ICT industry as well. (Figure 15)

The survey would not be complete without exploring why some contracts were performed successfully (i.e. without disputes).

The reasons varied, however it is no surprise that strong management of the project contributed to successful outcomes. (Figure 16)