1、Contract TrainingPrivileged and ConfidentialIntro/ObjectivesContract and NegotiationContract TrainingPrivileged and ConfidentialWhat is a Contract?Contract TrainingPrivileged and ConfidentialWhat is a Contract?A promise or set of promises which the law will enforceThe performance of which the law re
2、cognizes as a dutyThe breach of which the law will remedyContract TrainingPrivileged and ConfidentialWhat influences the Contract?Contract TrainingPrivileged and ConfidentialThe Element of a ContractOfferMutual Assent Intention to create legal relations Offer/acceptance Genuine ConsentConsiderationC
3、apacity to ContractProper FormSubject matter must be legalContract TrainingPrivileged and Confidential 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 definite be communicated(oral,written or by
4、 conduct)Contract TrainingPrivileged and ConfidentialMutual 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 obta
5、ined by fraud or mistakeContract TrainingPrivileged and ConfidentialWhat 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 offerorContract TrainingPrivileged and
6、ConfidentialAcceptanceNo particular form required so long as intention is clearOnly the recipient of the offer can acceptAcceptance effective when it is sentMust accept the entire offer as made-”acceptance”proposing different terms is a counterofferContract TrainingPrivileged and ConfidentialConside
7、rationExchange of promises or things of valueGratuitous promises may not be enforceablePromise may be to do something or to refrain from doing somethingA proposal must be sufficiently definite to be enforceableContract TrainingPrivileged and ConfidentialCapacityA party may lack the capacity to enter
8、 into a legally enforceable contract Minors Mental Incompetence Impairment drugsCorporations very few instances where a corporation my lack capacityContract TrainingPrivileged and ConfidentialForm of contractOral contracts Not all contracts must be in writing to be enforceable Beware of making an or
9、al 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-Contract TrainingPrivileged and ConfidentialForm of contractRequirement for writing Some
10、 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 TrainingPrivileged and Confid
11、entialContract Formation ElementsOffer+Acceptance+Consideration=Legally Enforceable ContractContract TrainingPrivileged and ConfidentialPractice 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
12、sayBe careful of e-mailKnow what you are buyingKnow facts about what you are buying Sites,quantity,price,parties,delivery,how purchasedMake sure contract you write reflects theseContract TrainingPrivileged and ConfidentialCase StudyPurchase order sent to one supplier requesting for performance,and n
13、ot require supplier to confirm;but supplier delayed to perform,is there a contract between two?A delivery 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.Contract TrainingPrivileged and Co
14、nfidentialBusiness Aspects of A Written ContractIntroductionMaterials/design/scope of workPeriod of AgreementQuantitiesPricePrice ChangesTerms of PaymentFreightRetention of Title ClausePrice ProtectionSpecial TaxesPackagingContract TrainingPrivileged and ConfidentialAdministrative IssuesCertificate
15、of Analysis(COA)=address for receiptDelivery TermsTax Exempt InformationContract AdministratorInvoice AddressRight to Know RequirementsContract TrainingPrivileged and ConfidentialKey commercial termsLOCTerminationContinuous ImprovementContract TrainingPrivileged and ConfidentialBasic Elements of Eff
16、ective AgreementsPERFORMANCENON-PERFORMANCEHOLD HARMLESSContract TrainingPrivileged and ConfidentialTerms and Conditions-PerformanceClaimsWarranty Materials Property Rights-patentsLiabilityForce MajeureContract TrainingPrivileged and ConfidentialTerms and Conditions Specific to Service AgreementsIns
17、uranceSafety&HealthSubstance AbuseIndependent ContractorIndemnificationContract TrainingPrivileged and ConfidentialRisk AllocationWarrantiesIndemnitiesLimitation of LiabilityInsuranceAlternate Dispute Resolution(ADR)Cannot change any of these without S&L Legal agreementContract TrainingPrivileged an
18、d ConfidentialWhat is a Warranty?A promise that something is trueFive type of contractual warranties Warranty of title(you own it and no one else does)Warranty against infringement(no third party can make any claims against it)Express warranty(by description or sample)Implied warranty of merchantabi
19、lity(fair,average goods)Implied warranty of fitness for particular purpose(usable for a defined or understood purpose)Contract TrainingPrivileged and ConfidentialExpress WarrantyProduct brochure that describes the product and its performanceSample of the product to evaluate and tryVerbal description
20、 of productContract TrainingPrivileged and ConfidentialWarranty 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 ordinary purposes for which the products are used Even kind,qua
21、lity 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 labelContract TrainingPrivileged and ConfidentialWarranty of Fitness for a Particular PurposeImplied in contracts for sa
22、le 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 purposeContract Tr
23、ainingPrivileged and ConfidentialWarrantyEXPRESSEDWritten in the agreement Specification Scope of work EngineeringContract TrainingPrivileged and ConfidentialIncidental DamagesReasonable expenses incurred in the inspection,receipt,transportation,care and custody(could extend to disposal if not retur
24、ned)for non-conforming goods,along with expense or purchasing from a third party Freight Costs Disposal CostsContract TrainingPrivileged and ConfidentialConsequential DamagesIndirect damage such as lost profits or cost of shutting down the plantCOMMON FOR BOTH PARTIES TO WAIVEObtain by language in o
25、ur warranty,liability,negligence,and indemnification provisionsContract TrainingPrivileged and ConfidentialWhat Is An Indemnity-/hold HarmlessAlways a“hot button”Promise to reimburse a party for a future monetary loss under certain conditionsIf supplier gives an indemnity,whenever buyer gets a claim
26、 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 suppliers to indemnify against fines and civil penalties,personal injury,and property damage caused by the suppliers negligenceGEs indemnity wh
27、en buying is mutualContract TrainingPrivileged and ConfidentialWhat is Limitation of Liability?Limitation on the damages you would otherwise pay for breach of an agreementLaw presumes that commercial supplier of products or services is prudent and has done whats needed to place goods and services in
28、“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 and third parties Unless supplier limits its liabilityContract TrainingPrivileged and Confid
29、entialLimitations 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 upon the negotiating power and ability of the pa
30、rtiesResist giving one when purchasing If must give one,carve outs important negligence,3rd party claims,confidentiality,privacyContract TrainingPrivileged and ConfidentialInsuranceEnsure money available in the event product causes harmGE sets low limits generally$1MMHowever,must address risk in tra
31、nsaction 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 downtownContract TrainingPrivileged and ConfidentialType of Insurance RequiredWorkers compensation own employee hurt on job
32、Employers liability coverage if employer 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 vehicleContract TrainingPrivileged and ConfidentialInsurance
33、IssuesAlways ask what the contractors insurance limits areBuild those limits into the insurance clauseInsurance requirements apply to subcontractorsAgreement governs liability exists even if cant pay it with insurance do not give this upContract TrainingPrivileged and ConfidentialConfidential inform
34、ationAgreements require that suppliers Protect our information as supplier protects its own but no less than reasonable degree of 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 l
35、icense prior to export Receiving party cannot export to proscribed countries unless authorized by US governmentContract TrainingPrivileged and ConfidentialConfidential InformationConfidentiality agreements are not joint development agreements If development will take place,must contact business pate
36、nt attorney Sourcing does not draft joint development agreementsIntellectual property created for and paid by GE should be owned by GE Need appropriate assignment No supplier markings on GE documentsContract TrainingPrivileged and ConfidentialNegotiation SkillsContract TrainingPrivileged and Confide
37、ntialBargainingScenario: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 anything l like$75.Quote me a realistic pri
38、ce$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 deal more than that.Make me a serious o
39、ffer.Have you noticed the engraving on that dish?Next year pieces like that will be worth twice what you pay todayContract TrainingPrivileged and ConfidentialWhat Sets the Skilled Negotiator Apart?Skilled negotiators follow certain rules that novices do not understand or that they do not implement.C
40、ontract TrainingPrivileged and ConfidentialFundamental 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 b
41、oth parties are experienced dancers.Contract TrainingPrivileged and ConfidentialPlanningA flexible 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?Contract T
42、rainingPrivileged and ConfidentialPre-bargaining PhasePreparation and information exchangeInformation and Analysis:What are the issues?Learn 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
43、 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 Expectations:Goals are one thing;expectations are something elseContract TrainingPrivileged and ConfidentialPre-bargaining PhasePreparation and information exchange Type of
44、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,or in some other manner?Budget:Every negotiation has its costs.What is going to be most cost effective?Plan:Whats your ne
45、gotiation plan?Contract TrainingPrivileged and ConfidentialExplicit 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 another party go first?Subsequent Offers:How should you adjust your negotiating
46、plan when responding to unanticipated moves by the other side.Contract TrainingPrivileged and ConfidentialExplicit 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 make?How will you make them?Resolut
47、ion:What is the best way to resolve the problem?Is there an elegant solution?Be on constant lookout for compromise and creative solutions.Contract TrainingPrivileged and ConfidentialBargaining SkillGood man,Bad manStart with high stand and expect to achieve middle grandUse hard negotiation typeUse b
48、oss as excuseContract TrainingPrivileged and ConfidentialWork-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 ho
49、lds their payment due to their incompliance,but the supplier threat to go to court for the$100,000 payment.You need to develop a Negotiation Plan on the upcoming negotiation meeting for$100,000Contract TrainingPrivileged and ConfidentialHard Negotiator“Take it or leave it.”“This proposal is non nego
50、tiable.”“Dont ask me go back to my boss on this.This is all we are going to do.”“This is it.If you dont want to accept it at that price,forget it.”Contract TrainingPrivileged and ConfidentialSoft NegotiatorIt seems already reach the bottom-line of the other party-intends to trust othersOK.I acceptDi
