Understanding and Managing Formal and Informal Offers in Contract Management and Negotiation

Communications are central in almost every part of the contract lifecycle management. Having a platform that allows for clean, visible, and accessible communications from multiple parties in connection with a contract can help simplify, reduce errors on, and speed up the contract management process. Negotiations should be well thought-out though, and carried out with deliberateness. In some situations, the formal negotiations alone can establish a contract that is enforceable under the “Statute of Frauds”, regardless of whether a final formal contract was actually signed (For more information see here).  

A contract can be considered created when several conditions have been satisfied, the first of which is “a meeting of the minds.” A court can verify that a meeting of the minds has taken place by looking at the parties’ intent. While there is no set formula, if the writing and correspondence clearly establishes an offer by one party and the other party accepting that offer, the court can rule that there has been a meeting of the minds. The second condition is for the offer to contain terms and conditions that are necessary to make the agreement enforceable.

In this article we’ll discuss some of the most frequent types of communications with contract management, and best practices for how to manage and understand the difference between formal and informal communication.

 

Formal Communications 

The elements of a legally binding contract include an offer, consideration, and acceptance. Once an offer is made, it moves into the consideration phase. If both parties meet the legal requirements to enter into a contract, consideration represents the proposed exchange of value for the proposed offer. After negotiations are complete, the proposed terms can either be accepted or rejected.  

Things frequently included with formal communications are technical direction to the contractor, correspondence instructions, and correspondence controls and tracking systems. This section should reference contract requirements regarding formal communication. Formal communications are where you should be most deliberate when choosing what offers to make and accept, as they can be pointed to as evidence of meeting of minds.

Informal communications

Non-formal communications are non-binding, and meetings with parties such as the contract management team and integrated project team members are where they typically take place. These do not require a record or a signature, but can be verbal negotiations and rely on mutual trust that whatever is talked about will be carried out. Informal communication can occur between members of the contract management team, integrated project team, any contractor employee, and should be considered non-binding for both the government and contractor and will not constitute contract direction.

Understanding the Differences between Formal and Informal

The key differences between formal and informal communications are whether or not an offer has been made, if there is a written record, terms and conditions, and a signature and date. These elements are associated with a formal communication, while an informal communication may be missing these features, and instead rely on mutual trust and be for the purpose of leading both parties towards formal negotiations. A formal communication can be binding, so it is important to make sure that things intended as informal communications do not come across as formal.

Concord’s Communications and Negotiation Platform

When the stakes are high, it is crucial to be able to simply and easily view all communications that have taken place in connection with a contract. With Concord’s online Contract Success Platform, you can easily view communications that occur vis–à–vis a contract as it moves through the contract management lifecycle. All documents stored in Concord are connected to a chat feature that cannot be edited or deleted, keeping a permanent record of all written communications that have occurred for that contract. This allows for ease of management and smooths negotiation as there is only one document with all changes tracked and all offers recorded. To learn more about how Concord can help you manage contract communications, call us at 844-693-7446.