Which phrase best describes the effect of "conflict of interest" in contracts?

The phrase that best describes the effect of "conflict of interest" in contracts is that it can lead to biased contract decisions. When a conflict of interest exists, individuals may have personal interests that can impede their ability to make fair and impartial decisions regarding the contract. This personal stake can influence their judgment, leading to outcomes that favor their interests rather than promoting fairness and objectivity in the contractual relationship.

Recognizing that conflicts of interest can distort negotiation processes and decision-making is essential for maintaining the integrity of contractual agreements. By understanding this effect, parties can take steps to manage potential conflicts, ensuring that all decisions align with the best interests of the parties involved and uphold ethical standards within the contracting process.

In contrast, the other phrases do not accurately capture the reality of conflicts of interest. While ensuring absolute impartiality and establishing clear boundaries for personal gain are desirable outcomes in contract management, they are not guaranteed in situations where conflicts exist. Additionally, stating that a conflict of interest prevents any negotiation of terms oversimplifies the issue, as negotiations can still occur; however, their outcomes may be compromised due to the conflicting interests at play.