New Report Confirms that Many Contracts are not ‘Fit for Purpose’

A new report released today by World Commerce & Contracting (WorldCC), in collaboration with Deloitte, reveals a concerning gap between the intended purposes of contracts and their actual effectiveness in today's business environment. The report, titled ‘The Purpose of Contracts,’ highlights a growing disconnect between the traditional roles of contracts and the evolving needs of businesses in an increasingly complex and interconnected global market.

Key findings from the report include:

• Declining effectiveness: Contracts are failing to fulfil their core purposes, with a significant decline observed across various measures since a similar study in 2017. They are failing to foster collaboration, support business relationships, or reflect corporate values.
• Misalignment and lack of clarity: Contracts are frequently criticized for being overly complex, hindering understanding and usability. They often lack the flexibility to adapt to changing business needs and market conditions.
• Inefficient processes and fragmented responsibility: The contracting process itself is often plagued by inefficiencies, including fragmented authority, resource constraints, and misalignment between stakeholders.

"The findings of this report serve as a wake-up call for organizations worldwide," said Tim Cummins, President of WorldCC. "Contracts are more than just legal safeguards; in many situations, they should be dynamic tools that support collaboration, mitigate risk, and create value. This report underscores the urgent need for fresh thinking in how businesses approach and manage contracts."

To achieve this transformation, the report advocates for a shift towards a more strategic and collaborative approach to contracting. It urges stakeholders to prioritize clarity, flexibility, and alignment with business goals in contract design and management. It also emphasizes the importance of investing in training and technology to streamline processes and improve decision-making.

"There is a real opportunity for organisations to rethink some of the ingrained contracting habits. By treating contracts as critical business assets that reflect and keep in step with today’s complex trading relationships, we reveal their primary role, i.e. economic instruments designed to support the delivery of commercial value.” added Peggy Pauwels, Partner Deloitte Legal.

The report concludes that contracts have the potential to be powerful tools for driving business success, but only if organizations are willing to rethink their traditional approaches and embrace a more holistic and adaptable mindset. It calls for a fundamental shift in how contracts are perceived, drafted, and managed, emphasizing the need for collaboration, clarity, and strategic alignment.

The ‘Purpose of Contracts’ report is available for download: https://info.worldcc.com/purpose-of-contracts