You may have seen a clause in a contract you’ve signed similar to the one below. While the exact language and standards will vary based on the industry, the goal is to ensure one or both parties are working to industry standards.
Standard of Performance. The Consultant shall perform the Work in accordance with all standards of care and diligence consistent with recognized and sound consulting practices, procedures, and techniques.
These clauses are great catchalls to prevent the need to be overly explicit when stating the scope of work. You’re saying that the work should be performed to industry standards meaning code should be documented, accounting ledgers should balance, and management consultants should use the best data and methodology available, among other things. A performance standards clause serves the dual purpose more generally of preventing the inclusion of a higher standard than you may be able to hold or a warranty clause. Your goal with a performance standard clause is to set a level that is reasonable for you to meet and not one that is impossible or holds you to be responsible for even reasonable mistakes. This is especially important in industries where there is some objectivity in the creation and some unknown in the application (such as the practice of medicine or law).
In manufacturing, you make a part to meet very specific guidelines and for each part, there is a certain tolerance for error. Of course, the tighter the tolerance, the slower the lines run and the more parts are rejected by quality control, leading to higher costs. Similarly in other professions, there are standards that a project can reasonably expect and higher standards which generally result in accordingly higher pricing, especially if someone is expected to provide a warranty of their work.
As a consultant or provider of any service, it is important for you to pay attention to the language of these clauses and understand the performance standards you are comfortable meeting. It’s also a good idea to have an idea of what standards you aren’t comfortable meeting and make sure the performance standard in the contract doesn’t go beyond this level.
It’s also important to make sure you’re clear with clients where you can’t provide assurances of your work. In software, for example, despite extensive testing, you can only guarantee the health and functionality of a product for a short period of time without keeping up with a maintenance agreement. In other professional services, you may provide a high level of work and still find issues.
For help drafting or negotiating contracts, look to Virtus Law Firm. Call 612.888.1000 or email info@virtuslaw.com today. We have negotiated hundreds of contracts and can help both sides draft an agreement that is fair and covers everyone’s concerns.