A management contract is a legal document which binds together two business firms as parties where one party outsources its managerial functions of a single or multiple departments to the other party. This contract is signed between two parties for a specific time period and then it can be renewed with the consent of both the parties. This kind of contract highlights the terms and conditions of the contract like, the time duration of the contract, the services expected from the other party, and its managerial role. Following are some points which should be considered while signing such documents:
Points to be kept in mind while preparing a management contract:
- The contract should clearly specify the contract duration and the termination clauses.
- One of the mandatory requirements is the date and place of the agreement of the management contract, along with the representatives of both the parties.
- The management contract should mention that any of the parties are free to terminate the contract in case of breach or treachery.
- The management contract should also include the legal actions that can be taken by the contractor company, in case of any delays or blockage of payments due.
- The methodologies which the contractor company will follow should be approved by the customer organisation and Contractor Company should be held responsible for any loss or damage during its managerial activities.
- The rights and responsibilities of both the parties of the management contract is an essential requirement. Henceforth the compliance to the management contract would be guided under the written clauses in the management contract agreement.
- One of the important segments of the management contracts is the specification of the fields in which the management contract should be applicable and field in which applying the management contract can be termed as violation the contract.