1、Intro/ObjectivesContract and NegotiationWhat is a Contract?What is a Contract?A promise or set of promises which the law will enforceThe performance of which the law recognizes as a dutyThe breach of which the law will remedyWhat influences the Contract?The Element of a ContractOfferMutual Assent In
2、tention to create legal relations Offer/acceptance Genuine ConsentConsiderationCapacity to ContractProper FormSubject matter must be legal What is an OfferProposal made by one party(offeror)to another(offeree)manifesting a willingness to enter into a bargainAn offer must:have clear intent be definit
3、e be communicated(oral,written or by conduct)Mutual AssentIn commercial agreements,presumption is that contracting parties intend to be legally boundBoth parties must willingly agree to the terms of the contractOne party cannot be coerced or put under duress or threatsContract cannot be obtained by
4、fraud or mistakeWhat is an Acceptance?Acceptance is where the offeree indicates a consent to be bound by the terms of the offerAn acceptance must Be unconditional Be unequivocal Be legally communicated to the offerorAcceptanceNo particular form required so long as intention is clearOnly the recipien
5、t of the offer can acceptAcceptance effective when it is sentMust accept the entire offer as made-”acceptance”proposing different terms is a counterofferConsiderationExchange of promises or things of valueGratuitous promises may not be enforceablePromise may be to do something or to refrain from doi
6、ng somethingA proposal must be sufficiently definite to be enforceableCapacityA party may lack the capacity to enter into a legally enforceable contract Minors Mental Incompetence Impairment drugsCorporations very few instances where a corporation my lack capacityForm of contractOral contracts Not a
7、ll contracts must be in writing to be enforceable Beware of making an oral contract(intentionally or unintentionally recognize the risks involved)Although courts may uphold an oral contract,court interpretation can be very risky As a general rule,always document contracts in writing-Form of contract
8、Requirement for writing Some contracts must be in writing to be enforceable Subject matter(e.g.interest in land)Surety(answering for the debt of others)Period for performance(e.g.greater than 1 year)Submission to arbitration Statutory requirementsFormality Affixing of seal Witnessing deedsContract F
9、ormation ElementsOffer+Acceptance+Consideration=Legally Enforceable ContractPractice TipsContracts do not have to be in writing or follow any special form to be enforceable but at GE must use GE Legal Template Be careful what you write and sayBe careful of e-mailKnow what you are buyingKnow facts ab
10、out what you are buying Sites,quantity,price,parties,delivery,how purchasedMake sure contract you write reflects theseCase StudyPurchase order sent to one supplier requesting for performance,and not require supplier to confirm;but supplier delayed to perform,is there a contract between two?A deliver
11、y accepted by one factory,although the delivered quantity is exceeding the PO requirement;but in the payment stage,the factory declined to pay the extra quantity.Business Aspects of A Written ContractIntroductionMaterials/design/scope of workPeriod of AgreementQuantitiesPricePrice ChangesTerms of Pa
12、ymentFreightRetention of Title ClausePrice ProtectionSpecial TaxesPackagingAdministrative IssuesCertificate of Analysis(COA)=address for receiptDelivery TermsTax Exempt InformationContract AdministratorInvoice AddressRight to Know RequirementsKey commercial termsLOCTerminationContinuous ImprovementB
13、asic Elements of Effective AgreementsPERFORMANCENON-PERFORMANCEHOLD HARMLESSTerms and Conditions-PerformanceClaimsWarranty Materials Property Rights-patentsLiabilityForce MajeureTerms and Conditions Specific to Service AgreementsInsuranceSafety&HealthSubstance AbuseIndependent ContractorIndemnificat
14、ionRisk AllocationWarrantiesIndemnitiesLimitation of LiabilityInsuranceAlternate Dispute Resolution(ADR)Cannot change any of these without S&L Legal agreementWhat is a Warranty?A promise that something is trueFive type of contractual warranties Warranty of title(you own it and no one else does)Warra
15、nty against infringement(no third party can make any claims against it)Express warranty(by description or sample)Implied warranty of merchantability(fair,average goods)Implied warranty of fitness for particular purpose(usable for a defined or understood purpose)Express WarrantyProduct brochure that
16、describes the product and its performanceSample of the product to evaluate and tryVerbal description of productWarranty of MerchantabilityImplied in contracts for sale of goods“Merchantable”means Passes without objection in the trade Of fair average quality within the description Fit for the ordinar
17、y purposes for which the products are used Even kind,quality and quantity within each unit and among all units Adequately contained,packaged,and labeled as the contract specifies Conforms to the representations made on the container or labelWarranty of Fitness for a Particular PurposeImplied in cont
18、racts for sale of goods between merchantsIf supplier knows or“has reason to know”a particular purpose for which the product is required and that buyer is relying on suppliers skill or judgment to select a suitable product,there is an implied warranty that the product will be fit for each such purpos
19、eWarrantyEXPRESSEDWritten in the agreement Specification Scope of work EngineeringIncidental DamagesReasonable expenses incurred in the inspection,receipt,transportation,care and custody(could extend to disposal if not returned)for non-conforming goods,along with expense or purchasing from a third p
20、arty Freight Costs Disposal CostsConsequential DamagesIndirect damage such as lost profits or cost of shutting down the plantCOMMON FOR BOTH PARTIES TO WAIVEObtain by language in our warranty,liability,negligence,and indemnification provisionsWhat Is An Indemnity-/hold HarmlessAlways a“hot button”Pr
21、omise to reimburse a party for a future monetary loss under certain conditionsIf supplier gives an indemnity,whenever buyer gets a claim covered by the indemnity,the supplier will take care of it(represent buyer in suit,hire and pay for lawyers and court costs,and pay and damages)GE requires supplie
22、rs to indemnify against fines and civil penalties,personal injury,and property damage caused by the suppliers negligenceGEs indemnity when buying is mutualWhat is Limitation of Liability?Limitation on the damages you would otherwise pay for breach of an agreementLaw presumes that commercial supplier
23、 of products or services is prudent and has done whats needed to place goods and services in“commerce”safelyStatute and the common law place liability on the supplier through negligence,breach of contract and warranty,strict liability for causing damage(property or personal injury or death)to buyer
24、and third parties Unless supplier limits its liabilityLimitations of LiabilityGE sales contracts contain explicit limitations of liability as to amount,type of damages and time to bring a claimGE purchase contracts rarely provide supplier a limitation of liabilityLimiting liability depends entirely
25、upon the negotiating power and ability of the partiesResist giving one when purchasing If must give one,carve outs important negligence,3rd party claims,confidentiality,privacyInsuranceEnsure money available in the event product causes harmGE sets low limits generally$1MMHowever,must address risk in
26、 transaction and set out coverage to meet needDo not limit liability to amount of insuranceGE is self insured except for excess liabilityThis means GE(i.e.,SUB)pays no central fund downtownType of Insurance RequiredWorkers compensation own employee hurt on jobEmployers liability coverage if employer
27、 sued by own employeeCommercial general liability includes a wide range of damages from suppliers operations or products bodily injury and property damage most important coverageAutomobile goes with vehicleInsurance IssuesAlways ask what the contractors insurance limits areBuild those limits into th
28、e insurance clauseInsurance requirements apply to subcontractorsAgreement governs liability exists even if cant pay it with insurance do not give this upConfidential informationAgreements require that suppliers Protect our information as supplier protects its own but no less than reasonable degree o
29、f care Only necessary personnel should have access No use of GE name or Oval US export laws/regulations govern export of technical data/products Disclosing party may need license prior to export Receiving party cannot export to proscribed countries unless authorized by US governmentConfidential Info
30、rmationConfidentiality agreements are not joint development agreements If development will take place,must contact business patent attorney Sourcing does not draft joint development agreementsIntellectual property created for and paid by GE should be owned by GE Need appropriate assignment No suppli
31、er markings on GE documentsNegotiation SkillsBargainingScenario:buy a brass dish in Xiang Yang Market.Open position from buyer is$15,While the seller counter offer$75.CustomerHow much do you want for this brass dish?Oh come on,its dented.Ill give you$15Well,I could go to$20,but I would never pay any
32、thing l like$75.Quote me a realistic price$25$37.5.Thats the highest I will go.Shop KeeperThis is a beautiful antique,isnt it I guess I could let it go for$75Really!I might consider a serious offer,but$15 certainly isnt seriousYou drive a hard bargain,young lady.$60 cash,right now.It cost me a great
33、 deal more than that.Make me a serious offer.Have you noticed the engraving on that dish?Next year pieces like that will be worth twice what you pay todayWhat Sets the Skilled Negotiator Apart?Skilled negotiators follow certain rules that novices do not understand or that they do not implement.Funda
34、mental Elements of the Negotiation ProcessNegotiations commonly follow a four step path:Preparation Information exchange Explicit bargaining CommitmentNegotiation is,in short,a kind of universal dance with these stages or steps.And it works best when both parties are experienced dancers.PlanningA fl
35、exible negotiation plan.Skilled negotiators develop strategies for each phase of the negotiation Process:opening,bargaining,and closing.What do I want?Where do I start?When do I move?How do I close?Pre-bargaining PhasePreparation and information exchangeInformation and Analysis:What are the issues?L
36、earn as much as you can about the issue.What information do you need from the other side?Leverage Evaluation:Evaluate your leverage and the other partys leverage to the outset.May be a number of things you can do to improve your leverage or diminish the leverage of the other side.Goals and Expectati
37、ons:Goals are one thing;expectations are something elsePre-bargaining PhasePreparation and information exchange Type of Negotiation:What type of negotiation do you expect?Will this be highly competitive,cooperative,or something unusual?Will you be negotiating face to face,by fax,through a mediator,o
38、r in some other manner?Budget:Every negotiation has its costs.What is going to be most cost effective?Plan:Whats your negotiation plan?Explicit Bargaining PhaseLogistics:when,where,and how will you negotiate?Opening Offers:What is the best offer you can justify?Should you make it,or wait to let anot
39、her party go first?Subsequent Offers:How should you adjust your negotiating plan when responding to unanticipated moves by the other side.Explicit Bargaining PhaseTactics:What sort of tactics will you employ?What sort of tactics is the other side using on you?Concessions:What concession will you mak
40、e?How will you make them?Resolution:What is the best way to resolve the problem?Is there an elegant solution?Be on constant lookout for compromise and creative solutions.Bargaining SkillGood man,Bad manStart with high stand and expect to achieve middle grandUse hard negotiation typeUse boss as excus
41、eWork-OutDevelop a Negotiation PlanScenario:Sourcing was notified by the Engineering Team that one of the construction supplier already spent$100,000 on the revised scope of work without the proper execution authority granted.Now our company holds their payment due to their incompliance,but the supp
42、lier threat to go to court for the$100,000 payment.You need to develop a Negotiation Plan on the upcoming negotiation meeting for$100,000Hard Negotiator“Take it or leave it.”“This proposal is non negotiable.”“Dont ask me go back to my boss on this.This is all we are going to do.”“This is it.If you d
43、ont want to accept it at that price,forget it.”Soft NegotiatorIt seems already reach the bottom-line of the other party-intends to trust othersOK.I acceptDisclose the self bottom-lineIf we dont agree here,we will lose this deal-insist on agreementFor long term interest,lets agree this time-make conc
44、essions to cultivate the relationshipBreak the Tie-Getting to YESDont bargain over positions my position,your position Every negotiator by fact has two kinds of interests In the substance In the relationship Harm to the relationship and may not achieve any agreement Be careful to start negotiation w
45、ith blaming otherBreak the Tie-Getting to YESFocus on Interests,not positions How do you identify interests?Ask Why and Why not to clarify the other partys interest The most powerful interests are basic human needs Security,recognition,economic well-being,Make your interests come alive Put the probl
46、em before your answer Fighting hard on the problem increases the pressure for an effective solution Soft to the human being on the other side to improve the relationship and increase the likelihood of reaching agreementBreak the Tie-Getting to YESInvent Options for Mutual Gain Problem of only seeing
47、 a fixed pie The mentality of solving their problem is their problem Solution:Separate inventing from decidingBuild the Lines of Communication“To ease the stress of negotiating and improve the chances for a successful result,establish rapport with your opponent,and build on that foundation.This is e
48、specially important in cases where the parties will have a long-term relationship after closureBreak the Tie-Getting to YESListen“It is hard to overstate the importance of listening skills in bargainingthe best negotiatorsask question,test for understanding,summarize discussions,and listen,listen,li
49、stenYou often get more by finding out what the other person wants then you do by clever arguments supporting what you need.”G.Richard Shell-“bargaining for Advantage”In large groups identify and“isolate”the decision makers“No matter how many people are involved in a negotiation,important decisions a
50、re typically made when no more than two people are in the room.”Roger Fisher and William Ury-“Getting to YesBreak the Tie-Getting to YESWork-OutRole PlayScenario:Paul Shoolmaker rented an apartment in March from John Realty for$300 a month.In July,when he and his roommate,John,wanted to move out,Sho
