Contract management from a litigation perspective

Contracts are usually entered into with the expectation of a productive and cooperative relationship. In practice, however, performance issues, commercial pressures or changing priorities can place that relationship under strain. From a litigation perspective, many disputes are shaped not just by the wording of the contract, but by how it has been managed day to day.

In this insight we consider how you can manage contracts more effectively, reduce risk, and help protect your position should a dispute arise.

Understanding your obligations and Key Performance Indicators

Effective contract management begins with a clear understanding of contractual obligations. While this may appear straightforward, disputes often arise because operational teams are not fully aligned with what the contract actually requires.

Particular attention should be paid to any key performance indicators (KPIs). KPIs are often central to the contract and are commonly linked to specific contractual remedies if they are not met. These may include service level credits, price reductions or other financial consequences. Where KPI failures persist, contracts may provide for more serious remedies, including damages claims and termination rights.

KPIs should be monitored regularly and consistently. Importantly, some contracts also impose obligations on the party failing to meet a KPI, such as a requirement to notify the other party of the failure or provide a remediation plan. Where remediation plans are required, contracts often impose strict timing and content requirements, which must be complied with, failure of which can itself have legal consequences, including the risk of waiving rights or remedies.

Best practices for effective contract management

Strong contract management is not just an operational issue; it is a key risk management tool. Many disputes turn on what happened during the life of the contract rather than the wording agreed at the outset.

A number of best practices can significantly improve an organisation’s position if a dispute later emerges:

1. Contracts, variations and side letters should be stored centrally and be easily accessible to legal, commercial and operational teams. Disputes frequently escalate because parties are unable to locate the correct version of the contract or are relying on outdated documents.
2. Operational teams should be aligned with contractual obligations, particularly KPIs, service levels and notice requirements. A common litigation risk is that obligations are breached in practice without anyone appreciating the contractual significance of what has occurred.
3. Performance should be monitored carefully and issues documented contemporaneously. Internal records, meeting notes and correspondence often become key evidence in later disputes, particularly where the parties disagree about when problems arose or how they were addressed.
4. Informal workarounds should be treated with caution. While pragmatic in the short term, informal departures from the contract create legal risk. Where changes are agreed, they should be assessed properly and documented in accordance with the contract’s variation provisions.
5. Finally, parties should be disciplined about enforcing their rights. Repeated failures to do so can lead to arguments that those rights have been waived. Even where a cooperative relationship is maintained, it is sensible to reserve rights expressly when issues arise.

Variation and waiver: knowing the difference

When problems occur, the starting point is to assess whether there has been a contractual breach. This requires careful reference to the contractual terms, rather than assumptions based on how the relationship has operated in practice.

If the position is unclear, it may be necessary to consider whether the contract has been varied or waived. Contract variations require mutual agreement and must comply with any formalities set out in the contract. Many contracts require variations to be in writing and signed by all parties, and those requirements should be followed strictly.

Variations must also be supported by consideration unless executed as a deed. While consideration does not need to be substantial, using a nominal payment can help avoid uncertainty. Parties should also consider whether changes are truly a variation of the existing agreement, or whether they are so significant that a new contract has been created.

Contracts can be varied by conduct, but this is often difficult to prove and carries risk.

Waiver presents a further risk area. A waiver arises where a party does not insist on strict performance of a contractual right. Repeated inaction or inconsistent enforcement can give rise to waiver by estoppel, potentially preventing that party from enforcing its rights later.

Remedies, dispute resolution and termination

If you consider a term has been breached, the contract should be reviewed carefully to understand the available remedies. These may include damages, contractual interest, step-in rights and termination.

Most commercial contracts also include a dispute resolution procedure. This often requires escalated discussions firstly between account managers, then individuals from senior leadership teams, followed by a mediation or another form of alternative dispute resolution (either of which may be stated to be mandatory), before court proceedings can be commenced. These provisions should be treated as mandatory rather than procedural formalities.

Notice provisions also require particular care. Dispute and termination notices often have strict requirements as to timing, content and method of service. Technical errors in notices are a common and avoidable source of dispute.

Understanding your termination rights is vital, but it is often viewed as the final remedy. Termination rights may arise under the express terms of the contract, at common law for sufficiently serious breaches, or by agreement. Not every breach justifies termination, and a wrongful termination can itself amount to a repudiatory breach. Termination is a significant risk if exercised incorrectly, so legal advice should generally be sought.

Key takeaways

1. Understand and actively monitor contractual obligations, particularly KPIs.
2. Embed strong contract management practices across legal and operational teams.
3. Record variations formally and avoid informal workarounds where possible.
4. Be alert to the risk of waiver through inaction or inconsistent enforcement.
5. Follow dispute resolution and notice provisions strictly.
6. Treat termination as a step requiring careful legal analysis.

A disciplined approach to contract management can significantly reduce risk and place organisations in a far stronger position if matters escalate. If you are experiencing issues or need assistance on contract management, contact us for bespoke advice and support.

Watch Sam and Matt share their best practice tips for effective contract management in the video below

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2026. Specific advice should be sought for specific cases. For more information see our terms & conditions.