The contract represents the agreement between the parties and governs their legal and business relationship. It is a legally binding document and provides the framework for the management and operation of the outsourcing project. The contract defines the services to be provided and the respective responsibilities of the parties.
The contract has a number of important functions:
it is the backdrop against which negotiations are conducted;
it is a potential risk management tool which provides for methods of avoiding and resolving disputes;
it provides the organisation with rights and remedies when required against a supplier; and
it is an overriding framework which governs the conduct of the parties.