Question

Explain the importance of including Payment provisions in a contract and list and explain the risks that may arise if it is not included in the contract. (16 marks)

Answer 1

Answer - Payment is a crucial component of a contract that guides the payment schedules and penalties for payment delays or failures. Typically large projects require a mandatory disclosure od payment provisions in their contracts to prevent any ambiguity at both party's ends. Word of mouth agreements can often lead to financial loss and disagreements leading to even court cases. Hence a written contract, whose terms are agreed and signed by both parties in what holds true in case of any disagreement between parties.

However, the payment terms must be very clear and precise of the timelines, schedules, modes, and conditions of payment. Absence of payment terms mentioned in contracts or even the presence of ambiguous payment terms in the contract may lead to unnecessary harassment, court cases and most importantly loss of goodwill due to confusion and misunderstandings between parties. Both parties might be prone to get cheated in the absence of a contract to support their demands.

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