Contracts

Lesson 24: Performance Standards

Performance standards in contracts define the criteria that the parties must meet to fulfill their obligations. These standards ensure that the agreed-upon work, services, or products meet a minimum quality threshold.

Performance standards can include:

Quality levels
Specifications
Completion deadlines
Service levels

Performance standards must be clearly defined to prevent ambiguities and potential disputes. For more information on avoiding ambiguities, see Lesson 10: Avoiding Ambiguities.

Types of Performance Standards

Performance standards can be classified into various types, including:

Absolute Standards
Relative Standards
Output Standards
Input Standards

Absolute Standards

Absolute standards set a definitive criterion that must be met. For example, a construction contract may specify that a building must be completed by a particular date.

Relative Standards

Relative standards are based on comparisons or industry norms. For instance, a contract may require services to be performed in accordance with "best industry practices."

Output Standards

Output standards focus on the results of the work performed. For example, a software development contract may specify that the software must have zero critical bugs.

Input Standards

Input standards specify the resources or efforts that must be used. For example, a contract may require a certain number of hours to be dedicated to a project.

Mermaid Diagram: Performance Standards Framework

graph TD A["Performance Standards"] A --> B["Absolute Standards"] A --> C["Relative Standards"] A --> D["Output Standards"] A --> E["Input Standards"]

Importance of Performance Standards

Performance standards are crucial for several reasons:

Ensuring Consistency: They help maintain a consistent level of quality.
Preventing Disputes: Clear standards can prevent misunderstandings and disputes between parties.
Facilitating Measurement: They provide a basis for measuring performance and outcomes.

Drafting Performance Standards

When drafting performance standards, keep the following in mind:

Be Specific: Clearly define the standards and criteria.
Be Measurable: Use quantifiable metrics whenever possible.
Be Realistic: Ensure the standards are achievable and reasonable.

Example of Performance Standard Clause

The Service Provider shall perform the Services in accordance with the specifications set forth in Exhibit A. The software developed shall have no more than 5 non-critical bugs upon delivery and must be delivered by December 31, 2023.