Contract management failings put Scottish firms at risk

29 June 2015

Almost two thirds of Scottish businesses are not managing their contracts effectively, according to a survey.

The study by law firm Brodies said 66 per cent of businesses surveyed were putting themselves at risk of missing deadlines, wasting money on outdated commercial agreements, or being forced into expensive litigation, as a result.

The study surveyed 138 organisations across Scotland, and found that 22 per cent had no system in place to manage contracts with suppliers and customers.

Of those that do, 57 per cent relied on spreadsheets, online calendars or paper-based filing systems to keep track of business-critical agreements.

Some 94 per cent of respondents said they believed their organisation managed contract risk ‘very’ or ‘reasonably’ well. Just over a third said they reviewed the terms of their commercial contracts once a year or less frequently, while 10 per cent said they did not know how often they reviewed them.

Brodies said the findings suggested many organisations were failing to properly monitor agreements, risking financial penalties attached if legal obligations are not met.

Failure to keep on top of contracts can put businesses at risk of missing deadlines, weakening their bargaining position or tying them into more costly terms, it said.

Grant Campbell, head of Brodies’ commercial division, said it was dangerous to think a good contract was one that could be put away once it had been signed.

“Contracts contain important legal rights and obligations, and a failure to adhere to them can have serious consequences, including costly litigation,” he said. "All too often the failure to meet contract terms is not deliberate, it is a result of people not knowing what is in the contract, or not having the complete picture.”

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