1、12Holly K.Walker,CPCMCorporate Learning Solutions and Contract Mgmt.ConsultantIntroduction toCommercial ContractsUnderstanding the BasicsSession#:310April 16 1:30 2:30 pm3Commercial Contracts Contracts help to build relationships between buyers and sellers Contracts attempt to allocate risks and res
2、ponsibilities between the parties The professional purchasing/contract manager can build a bridge between the customer and supplier.The purchasing/contract manager must understand and balance the needs of the contracting parties4Elements of a Contract Competent Parties Consideration Lawful Purpose C
3、ertainty of Terms Offer Acceptance5Contracts-Written Vs.OralA contract is a promise between partiesContracts maybe written or oralIf the following are present(on a scrap of paper,or even oral),a contract may exist:The partiesThe goodsTime at which the transaction will occurGaps will be filled in by
4、UCC or UNCISG or civil law6Different Legal SystemsCommon LawCivil LawIslamic LawCommunist law7Laws Governing ContractsTHE PARTIES TO AN AGREEMENT ARE,BY MUTUAL CONSENT,usually FREE TO CHANGE THE RESULT OF THE LAW FOR PURPOSES OF THAT AGREEMENT.Uniform Commercial Code United Nations Convention on the
5、 International Sale of Goods(CSIG)8First Steps-BuyerIdentify Possible NeedsNew service offeringExpand market shareBecome more cost effective9Next Steps-Buyer Identify and Analyze RequirementFunctionalPerformanceDesign10Buyer:Pre Contract Activity Establish evaluation criteriaAttributes of interestPr
6、ice/quality/deliveryReputation of sellerStandardsWeighting11Match customer requirements to applications,assess opportunities and prepare to assist the customer in the development of the RFP.Seller:Pre-RFP Activity Review opportunity Review own capabilities Assess and prioritize opportunities Influen
7、ce design of customer RFP Review need for development work Provide input to customer on how your company can provide assistance Create necessary third party agreements12Pre-Contract Activities-SellerMake Preliminary Bid/No Bid Decision How are we different from competitors Can we make those differen
8、ces strengths?How much will it cost to win?What are the risks?Are the potential benefits,worth the costs?Do we have the product portfolio?Can we meet the needs of this customer?13 Actively participate on the proposal team Identify customer required terms and conditions Identify and assess financial
9、impact of customer terms and conditions Obtain input from all affected organizations Determine customer acceptance criteria Propose sellers terms and conditions of response-if appropriate14Develop contracts that contain clear deliverables and contractual obligations and standard terms and conditions
10、,while identifying and mitigating all risks.Contract Formation 15Contract Formation Prepare negotiation plan Negotiate major issues Prepare draft contract Negotiate minor issues Review and approve contract Obtain contract signature16Contract Standards Most major companies develop standard contract f
11、orms,procedures and clauses These standards allow contracts to be processed more quickly,cost effectively and with reduced risk Standards also help to assure that agreements entered into are aligned with the companys business objectives17Usual Contentious ClausesPricing and Payment TermsLiquidated D
12、amages/PenaltiesLiability/Indemnification TermsWarranties(Scope and Duration)Intellectual Property Ownership18Successful Contract NegotiationInvolves thorough preparation and planningEffective team planningSharp negotiation skillsUnderstanding the other partys goalsDocumentation of agreements19Ensur
13、e that all contractual obligations are met through communication among all necessary parties;manage contract disputes through negotiation/resolution and review lessons learned throughout performance and at contract completion.Communicate Contract AuthorizationPlan Contract AdministrationManage Contr
14、act performanceReview Contract Completion20Communicate contract authorization and necessary informationCreate contract administration plan and distribute as necessaryContract Obligations MatrixResponsibility Assignment MatrixManage contract performance:Correspondence controlManage contract changesPr
15、epare final acceptance package Ensure all contractual obligations have been metMonitor financial and operational performanceReview contract completionClose-out21Buyer and Seller:Managing Contract Performance Anticipate problems and take appropriate action Observe performance and progress and resolve
16、 problems Manage disputes Manage contract changes Resolve payment discrepancies Escalate unresolved disputes Confirm that all contract obligations have been met22Sources of Risk in Contracts Technical Risks Political and Commercial Financial and Economic Contract Terms and Conditions Behavioral Risks Project Organization Scope and Schedule Risks23The ContractA well written agreement answers who,what,where,when,and what to do if.
