That what we allow our employers to commit to - by way of procurement or sales contracts, shareholder agreements, employee agreements or regulatory licences - are all a series of one off, repeat or "if/when [x] happens then [y] must happen" type of conditional obligations to give or to receive something - which then must actually be done (or be prepared for doing) by someone in practice.

This basic - that an agreement, codified into writing as a contract, is about a promise between two legal parties to give something of value to each other in return for receiving something of value from each other - is all about actions - 3 Dimensional things that happen as a result of the 2 Dimensional flat sheet of paper being signed.

And for those actions to happen the legal person - whether one human, or identified people within a corporate person - needs in respect of each action to pass the "6C"s test:

Comprehension: does someone within your legal person understand that they will be actually be expected to do something or to receive something? When? with what frequency? With what preceding actions from others? With what other actions from others then following on?

Competence: does each person actually have the technical skills, the tools, the resources, will they be in the right place at the right time? 

Capacity:
there is only so much cash in the bank, so many hours in the day, so many parts in the store, so much simultaneous processing capacity in the system.

What might be possible in the abstract needs to be validated in the context of what is possible in reality given other existing contemporaneous calls on the same resources over the life of the obligations.

So do you have enough capacity of the right kinds at the right times?

Commitment: Who? Me?! Oh wow! I did not realise that you actually wanted me to do it! But my diary is full. I am on holiday. I had planned to use the rest of our banking facility on another project... If I had realised that this was a "real" enquiry and not just an "abstract exercise" then, of course, I would have said no! We have all heard that far too often. So have we ensured (or got someone else to ensure) that it is all diarised, committed, planned, funds, resources, stock reserved etc?

(Bear in mind that if it is not clearly owned by someone else then it will normally ends up becoming legal's problem in some form or other at a later date)

Checking: do we know how to check things are working or to spot when they are not early and then have ways to correct them? How do we keep records of this to show to others?

Culpability: is it clear who is accountable all the way up the organisation for the relationship that is being created? To commit. To monitor performance. To celebrate success. To deal with escalations. To be culpable for failures.

Bearing in mind that there is a primary contractual relationship owner with overall accountability for deliver and culpability for failure (such as the sales director on a sales contract) and a lot of mandatory stakeholders who have obligations that the primary owner will be committing them to (finance, HR, legal, risk, insurance, compliance, logistics, security, compliance etc.) - all need to pass the preceding Cs ...otherwise the Culpability test will be failed...and who will be culpable for that failure?

So when should these 6Cs happen? Well, logically, it is immediately before you make that contractual commitment by signing. Because otherwise you will be allowing your employer to make promises that it may not be willing, able, or even aware that it needs to fulfil.

And of course, if the relationship matters to you (which, presumably, it must otherwise why would you be contracting with them?) then if would be prudent to have an informed view about the other party's 6C readiness too.  

So how does your organisation stack up on its 6Cs?

Perhaps you could start your assessment with your NDAs and your policies around when they should be used and how they are operated? 

After all if  a proposed series of interactions are important enough to commit to writing on an NDA in the first place (and often use up large amounts of legal resource in the process) then they should also be important enough to ensure that the 6Cs are being followed to turn the ND contract from 2D to 3D.

If the 6Cs are being followed for your NDA - great.

If your 6Cs are not being followed then are you either:

  • wasting resources through engaging in "pointless papering" of something which does not actually need to be done (and probably will not be); or
  • creating an illusion that the business is running fewer risks than it actually is?

And what does the answer to your NDA assessment make you think about your other contract types?

Should a "3D Contracts project" be appearing on your team's project plans? 

Print Email Tweet LinkedIn