Legal review of an SOW: Why it is a good idea
Prudent businesses usually take professional help to draft and review their contractual arrangements with their customers, vendors, partners, and other counterparties. These arrangements could be contained in master agreements or one-off contracts. In either case, the main contract – let us call it the ‘MSA’ – with all its legalese is a dormant piece of work. It is awakened and becomes coherent only when coupled with a statement of work or similar document that sets out the techno-commercial aspects of the relationship (‘SOW’) unless the MSA itself covers such aspects in detail.
However, SOWs are usually not reviewed by legal advisors. This is especially true if the business does not have an in-house legal team. The usual reasons given for not getting a legal review done of the SOW are:
- ‘Non-legal’ nature of the SOW
- Lawyers cannot add value to the SOW
- Saving of legal fees
- Saving of review time
Whatever be the reason for not having a pair of legal eyes review the SOW, the result is the same: a document that is drafted in loose English, is peppered with misplaced legal jargon, and very often either tends to miss entirely what the MSA wants the SOW to cover, or ends up contradicting the MSA in many places. For example, the MSA may have laid down the rules governing the acceptance of deliverables. But if the acceptance criteria are not mentioned in the SOW, then the acceptance clause in the MSA may remain inoperative.
The consequences of such an SOW are painful. At best, even if the parties are willing to cooperate with each other, there is a lot of back and forth on email and calls to understand what a particular term in the SOW means. All this affects the smooth execution of the project and timely payments. At worst, parties begin to suspect one of them has tried to be too clever in the SOW. The end result is a dispute that affects not merely the health of the project but the larger relationship.
It is therefore prudent for the business to build a process where the SOW is also reviewed by the legal team. A few days of review time may help avoid serious problems downstream.