The following paper is an analysis of the contract between the State of Oregon’s Department of Human Services (henceforth DHS) and the company ‘Professional Data Exchange’ (henceforth the contractor). The contract takes the form of a service agreement for the contractor to provide system design and programming services for DHS with three specific tasks annexed to the work agreement. The proceeding analysis of this contract will focus on three specific topics that relate to the contract, namely the responsibilities of both the parties, the potential damages and liability that may arise from the non performance or breach of the contract, and general conclusions on the merits of the contract. In order to achieve this objective this analysis will also discuss some more general aspects of contract law such as enforceability, the business impact for a potential breach of contract as well as how contracts in general can impact both small and large businesses.
In the United Sates, and other similar common law countries, for a contract to be enforceable certain elements of a contract must be present, specifically mutual consent (the offer and acceptance element of a contract) consideration (something of value must pass from both of the contracting parties) as well as subsidiary issues such as the competence of both of the contracting parties and the whether or not the contract stands up to legal purpose.
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Returning to the contract under analysis, both parties have a listed number of contractual responsibilities they must adhere to. Within the contract, the contractor has three specific tasks which must be met by set deadlines and a maximum cost. Essentially the contractor has to deliver specific software components through three stages of implementation (these stages can be referred to as ‘Testing’ ‘Implementation’ and ‘Post Implementation’). As well as this the contractor is obligated to follow the directions of the DHS project manager throughout all of the stages of the contract and provide a service that does not exceed a certain number of hours per task and to follow established DHS project criteria (specifically DHS established methodologies and the Information System Standards and Procedures manuals).
The contractual responsibilities of DHS are first and foremost to provide payment for the successful completion of each stage of software implementation. As well as this however the contractor is obliged to work closely with the DHS project manager which places a contractual obligation for DHS as an entity to provide regular feedback and direction for the contractors on each stage of the contract.
As the contract in question is highly specific on both the date of completion and the maximum costs for each subcategory of tasks the most likely possibility when it comes to damages and liability would be overruns and over cost of the work in question. As well as this, as a large part of the contractors obligations are to follow the direction of the DHS project manager, there could be a potential scope for damages for breach of contract if the project manager begins to request excessive amounts of work which fall outside the original contract agreement. A point not discussed in any great depth within the contract is the potential that the contractor may damage or lose vital data during the implementation of the new data exchange system. This could cause considerable loss for DHS and make the contractor liable for any loss that would flow from such unintentional damage that could occur during the implementation of the new software.
In general a breach of contract can be disastrous for both parties to a contract. In the first place the breach of a contract can cause a company to loss valuable resources as well as potentially place them in a position where they are unable to fulfill other contracts with other parties. Furthermore, the breach of contract can also damage businesses reputation within the business community which can have dramatic effects on future contractual relations. At the same time however when considering the strict rigorous nature of contract law (for example technically any modification or change to a contract, no matter how small or trivial, requires an entire new contract), with the flexibility of business relations there is a clear difference between the law and company relations. For example, long term supply contracts will often result in minor breaches which are to be expected, however business often would prefer to maintain a close relationship to the contracting parties rather than always rely on resorting to strict enforcement of the contract.
In conclusion the Personal/Professional Services Contract between the State of Oregon and the Professional Data Exchange is very specific on the completion dates and costs associated with each aspect of the contract but negates to a large degree the potential damages and liability that could arise through the operation of the contract. From a general perspective, while contract law is essential for developing business relationships through providing a legal guarantee between parties the strict nature of contract law can often hamper the flexibility needed between contracting parties. Indeed, the reliance of strict contractual measures could be seen as bad business practice as it dissolves the trust between the contracting parties. This can thus effect both large and small business relations which are often designed to last on a long term period.
- Contract 100795. State of Oregon – Personal/Professional Services Contract
