Unfulfilled contract obligations can create a post-award contract management nightmare that can escalate to stressful legal action – such as issuing a cease and desist or suing your counterparty.
So, how can you avoid this?
By clearly defining the obligation of contracts between you and your counterparty and leveraging contract management software tools to receive timely alerts for each obligation of contracts, you can retain contract obligation accountability instead of meddling with unnecessary disputes.
Obligation of Contracts
Obligation of contracts refers to the legally binding promises made between contract counterparties to fulfill agreed-upon duties. Parties agree upon exchanges of value that will be fulfilled – including services, money, and products. For the exchange to be considered legally completed, each obligation of contracts must be fulfilled.
Breaking Down Obligation of Contracts
Contract obligations can take on various forms – such as payment, task fulfillment, inaction, action, and delivery expectation. While contract obligations can appear differently across ranging contracts, they boil down to a legally binding exchange of value within a specified amount of time.
If each obligation of contracts is not fulfilled within the party agreed timeframe – including in perpetuity, the responsible counterparty would be noncompliant and could face legal action. However - in some instances, contract obligations can be transferred to a newly-introduced external party. This can happen after carefully evaluating if the originally responsible party proves reasonably unsuitable to fulfill the expected legal obligation under dispute.
Obligation of Contracts - Examples
Aside from implicit ethical obligations when creating a contract, such as implementing fair and noncoercive behavior in its establishment, the examples below showcase explicit obligations that can vary across contractual subject matter – including payment, delivery, and responsibility.
Obligation of Payment
Payment obligations are usually leveraged within sales contracts between buyers and sellers by setting legally binding expectations of payment totals and timelines for the exchange of goods or services.
Obligation to Deliver
Obligation to deliver establishes the depositing expectation – including timeline and method – between the recipient and the deliverer, such as physical logistics or digital processes.
Multiple responsibility obligations can comprise an exchange of goods or services. For instance – in selling your computer, you would be responsible to transfer your computer’s ownership while the purchaser would be responsible for paying for it. If this is an online exchange, the seller would likely need to fulfill the following responsibility obligations.
- Product Quality
- Delivery Date
- Delivery Location
If the seller does not fulfill all of the obligations within the contract, the breaching party would be considered in breach of contract – which could entitle the purchaser to receive an award of damages, such as a refund.
Transfer an Obligation of Contracts
Under certain circumstances, you can transfer an obligation to a third party. In the form of contract delegation, for instance, if one party is responsible for fixing the other party’s sink, they might be allowed to hire a third party to complete the job.
However, more specialized contracting parties – such as A-list Hollywood actors with niche artistic abilities – usually cannot delegate obligations. In this instance, usually, only the initial contract party is permitted to fulfill the legal obligation. Contract laws, obligation types, and other variables usually cannot be delegated.
Bonus Tip: While transferring contractual obligations refers to contract delegation, transferring rights refers to contract assignment.
Track Contract Obligations With Contract Lifecycle Management Software
Robust contract lifecycle management software streamlines and simplifies contract obligations management. Obligations in a contract can be a breeze to oversee with the help of contract lifecycle management software that provides detailed oversight.
Contract Obligation & Task Management
Contract value does not need to dissipate when the contract has been executed. The life of a contract and its crucial relationships can be managed pre- and post-execution with automated alerts, intelligent workflow automation processes, intelligent risk assessment, comprehensive spend management, robust compliance monitoring, and advanced reporting metrics.
Better Spend Management
Organizations can take advantage of user-friendly contract pricing and budget tracking. Contract management software users can track and monitor vendor-related costs, line item reporting, financials reporting, and receive advanced budget alerts.
Intelligent Obligation & Task Events
Workflow processes for obligations and tasks do not need to be relegated to organizations' pre-execution time frame. With contract lifecycle management software, these workflow processes can be targeted to execute when configured criteria are met, prior to execution, post-execution, and more. This flexibility virtually ensures that the proper approvals, notifications, and alerts will be initiated for every contract at precisely the right time - according to organizations' needs.
Obligations Notifications & Alerts
Automated email and calendar alerts can be configured and delivered by a future-minded contract lifecycle management software system. These alerts can notify key stakeholders of obligations assignments, information, requirements, and deadlines.
Contract Obligations Oversight & More With CobbleStone®
If you are impressed with the contract obligations features and functionality mentioned above, you will be excited to know that CobbleStone Software offers so much more than contract obligations management.
CobbleStone Contract Insight® offers user-friendly features to manage the contract lifecycle from requests though renewals - not just contract obligations. Your organization can efficiently unify the contract lifecycle, seamlessly author and negotiate contracts, easily collaborate, manage compliance, keep track of costs, receive alerts and notifications, streamline approvals, take processes into the future with VISDOM® AI and machine learning, quickly sign with IntelliSign® electronic signature software, increase productivity, and reduce contractual expenses.It’s no wonder why Quadrant Knowledge Solutions recognizes CobbleStone as a CLM Leader in the Spark MatrixTM Report.
CobbleStone's long-acclaimed and seamlessly integrated contract management, vendor management, eProcurement, and eSourcing software solution has been trusted for over 20 years by organizations from around the world looking to automate contract lifecycle management. Get started today by booking your free contract management software demo.
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.