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Another kind of integration

06 October 2009

Say the word "integration" to a control engineer and you may quickly find yourself ensconced in the realm of DCS and SCADA. But there is another type of integration that can be equally important to the success or failure of a project—contract integration.

Like Russian nesting dolls...
Like Russian nesting dolls...

Mark Voigtmann -- Control Engineering, 9/1/2009

What is contract integration? It is, quite simply, knowing the boundaries of the "deal." Take it from a lawyer who spends considerable time navigating within the automation world: it is amazing how many companies neglect this most basic of legal principles—to the point where the process may be integrated but the legal requirements are not.

There are two typical ways in which contract integration can get off track.

The first is the lack of an "integration clause" in the project documents. This is the paragraph of the contract where it says (and I am colloquially paraphrasing): "This document that we have just signed is the only document that matters. None of the other documents that we previously exchanged or oral promises that we previously made mean a darn thing. In fact, please feel free to take any other documents (including both the RFP and accepted proposal) to your backyard and burn them. They are empty promises."

In case you are wondering, such a paragraph (even as overblown as I have made it) is binding throughout North America. But the larger point is that if there is not such a paragraph, it can be exceedingly unclear which terms apply to the project and which do not.

The other typical way that a contract's integration becomes unraveled is through what lawyers call "incorporation by reference."

Like Russian nesting dolls
You know those Russian nesting dolls where one painted wooden doll can be pulled apart to reveal another figure of the same sort inside—which itself can then be pulled apart to reveal yet another—and so on? That image probably is a pretty decent stand-in for this legal concept.

Let's say that before you sign a contract or a purchase order, you check it quickly for any problematic terms. Nothing jumps out at first glance, except there does seem to be a list of items identified as other contract documents. You pass that by and sign.

Check other obligations
Guess what? You may think you have reviewed the whole agreement, but you have not. Every one of those other listed items—each likely with its own "nested" terms— are also a part of what governs your company's performance. Better get your hands on each and every one of them and figure out how they relate. Otherwise, you may be on the hook for obligations that you have never even talked about—let alone reviewed ahead of time in written form. (In perhaps the most common version of this, a related contract to which your company is not a party, with all of its specs, is incorporated by reference.)

Surprise
Now for a surprise ending: There are those situations (quite a few of them actually) where a lack of integration—in the legal sense of the word—can be advantageous. The essential question to ask is "in whose interest is clarity—ours, theirs, or everyone's?" While I would argue that in most cases the answer is "everyone's," there are exceptions. And if that is the lay of the land, you are hereby granted permission to go forth and make the contract less integrated—and more confusing.


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