Fundamentals of Contract and Commercial Management (eBook)

International Management (Autor)

eBook Download: PDF | EPUB

2013 | 1. Auflage
272 Seiten
van Haren Publishing (Verlag)
978-90-8753-811-8 (ISBN)

Infos

This ground-breaking title from the world’s leading authority on contemporary contracting best practices, the IACCM (International Association for Contract and Commercial Management) delivers a lively and practical complete insight into the contracting process which is useful in both business and personal life. Contracts are the language of business, and this book gives readers the essentials that can make a difference to any deal, no matter how big or small. Designed for the non-contract business professional, this book takes project managers and other professionals through the basic process and gives them a road map to improved results, increased value, and successful outcomes In this book you’ll find sensible guidance and approaches to ensure business success. Case studies showing you what can go wrong – and what can go right -- bring theory into the real world. Checklists give confidence and enable you to be certain that you have asked and answered the right questions as you go through any deal. This real-world approach demonstrates the value of effective contracting. This is not dry, academic prose. It is compelling and dynamic advice and tools to manage business relationships for both buyers and sellers.

Inhalt

Colophon 3
Acknowledgments 6
Foreword 8
Introduction 10
PART 1 ESSENTIALS 14
CHAPTER 1 COMMERCIAL RELATIONSHIPS: BUILDING A FOUNDATION 16
CHAPTER 2 ESSENTIAL ELEMENTS OF A CONTRACT 30
CHAPTER 3 BEYOND THE WRITTEN WORD 46
CHAPTER 4 COST, PRICING, AND PAYMENT 56
CHAPTER 5 NEGOTIATION PRINCIPLES 76
CHAPTER 6 OVERVIEW OF THE CONTRACT MANAGEMENT LIFECYCLE—A STRUCTURED APPROACH 96
PART 2 THE CONTRACT MANAGEMENT LIFECYCLE 106
CHAPTER 7 INITIATE PHASE: REQUIREMENTS 108
CHAPTER 8 BID PHASE: BID AND PROPOSAL MANAGEMENT 120
CHAPTER 9 DEVELOP PHASE: SELECTING A CONTRACT TYPE 136
CHAPTER 10 DEVELOP PHASE: PRELIMINARY AGREEMENTS 140
CHAPTER 11 DEVELOP PHASE: SELLING GOODS AND SERVICES 152
CHAPTER 12 DEVELOP PHASE: LICENSES AND LEASES 172
CHAPTER 13 DEVELOP PHASE: OTHER BUSINESS RELATIONSHIPS 184
CHAPTER 14 DEVELOP PHASE: COMPLEX AND SPECIALIZED AGREEMENTS 198
CHAPTER 15 NEGOTIATION PHASE: UNPLANNED NEGOTIATION 206
CHAPTER 16 MANAGE PHASE: TRANSITION TO A NEW CONTRACT 222
CHAPTER 17 MANAGE PHASE: MANAGING PERFORMANCE 242
CHAPTER 18 MANAGE PHASE: MANAGING CHANGES AND DISPUTES 252
CHAPTER 19 CONCLUSION: PUTTING THE PIECES TOGETHER 272
Appendix A: Countries that have ratified or accepted the CISG Convention 278
Appendix B: Case studies 280
Appendix C: Glossary 286
Index 294

Textauszug

CHAPTER 2

ESSENTIAL ELEMENTS OF A CONTRACT

Simplicity is the ultimate sophistication.

Leonardo da Vinci

2.1   Overview: what is a contract?

What is a contract and when does a domestic or international contract actually come into being? The answer is not always simple.

A contract is a binding legal obligation between two or more parties. It is enforceable in a court of law. All contracts involve the principles of offer, acceptance, and consideration, but the rules and principles vary from one country to another.

Basically one party makes an offer and the other party accepts it. The offer and the acceptance have to match for the contract to be formalized. In the simple snow-shoveling example the young man’s act of raising his snow-shovel with a questioning look constitutes his offer. The older man nods his head as acceptance after establishing the price, or consideration.

Offer

When a potential customer puts out a request for tenders or alternatively, a Request for Proposal, he or she is inviting a seller to make an offer. When a seller issues a tender or proposal document in response, which is an offer to the customer. This tender could become the contract if it is accepted by the customer ‘as is’ and either:

•   The customer signs it, or

•   The customer places an order on the terms of the seller’s offer

This is a straightforward and intentional exchange to create a contract, but many other customer interactions have the potential of becoming a contract. Requirements for a valid contract vary from one country to another. It does not necessarily have to be in writing to be considered a contract. In some countries, a contract may be established via a series of faxes, an exchange of messages between computers, or simply an oral agreement during contact at a trade fair—or even through the actions of the parties as if a contract is in place, often referred to as ‘through performance’.

Acceptance

Acceptance is voluntarily agreeing to the terms of an offer and results in the creation of a contract. Perhaps the most common business scenario is the exchange of standard forms. The seller will submit standard terms of sale to the buyer who will respond with a pre-printed purchase order containing conditions. Both parties agree that they want a contract, but they do not agree as to what terms should govern. This sets up what is known as the ‘battle of the forms’. If a dispute arises when there has been this type of exchange and there is no clear agreement, courts will generally rule that the last form exchanged before performance is the governing contract.

Looking at another example on the principle of acceptance, a customer sends in an order for a tractor, including its own purchase order terms and conditions. This is the customer’s offer to buy. The seller may either ship the goods, in which case the seller has accepted the customer’s offer, or they may send back a confirmation of the order, referencing the seller’s own terms and conditions, in which case they have made a counter offer. Offers and counter offers may be exchanged any number of times until an agreement is reached.

Scenario

A salesperson is staffing a booth at a trade fair. He tells a potential customer that his company is offering a special price on a solar powered gadget if it is ordered before such and such a date. He gives the customer a brochure. Later the salesperson finds out that the price he told the customer was wrong. The brochure had the correct price, so he doesn’t worry about it. The customer sends the company an order at the price the salesperson stated, referring to their conversation at the trade show.

Is there a contract?

Maybe, maybe not. Under some legal systems, the salesperson had made an oral offer and the customer had accepted the offer under the conditions stated. If the salesperson had called the customer to withdraw (take back or correct) the offer before the customer sent the order, there would not have been a contract. In Eastern European countries, contracts must be written documents in order to be valid. Other countries require written documents for contracts over a certain monetary value. For example, in the US, contracts worth over $500 must be in writing to be enforceable. Under most legal systems, the offer (written or oral) must be clear, definite and specific enough so that a court of law could determine the intention of the parties.

Consideration

The third element in forming a valid contract is the principle of consideration. This means that a valid contract must provide value to both sides. One party provides the goods and the other party pays, or offers to pay. Consideration can also take the form of some other value. In forming a joint venture agreement, one party may provide technology and a patent license. The local partner may provide land and office space, local influence and personnel. The consideration is the value that each party is providing.

If the elements of an offer, acceptance, and consideration are present it is likely a contract has been formed, whether intended or not.

2.2   Different types of agreement

This section outlines the commonly used agreements relating to a contract:

•   Non-disclosure agreements (NDAs)

•   Preliminary agreements

•   Sale of goods only

•   Sale of services only

•   Sale of goods and services

•   Licenses

•   Leases

More complex and specialized agreements are discussed in the subsequent section.

Case study: The right contract saves time

One global provider of services and technology has identified eight core relationship types, ranging from a commodity sale to a joint venture. As soon as a new opportunity is identified, the sales team enters details into the Customer Relationship Management system, which automatically identifies the most appropriate contract model. The system also identifies whether internal experts will be required to support the bid and automatically alerts them to its existence. This process has resulted in an average reduction to the bid and negotiation cycle time for complex agreements of more than a third; it has also resulted in an improved project success rate of almost 25 percent.

Non-disclosure agreements

Non-disclosure agreements (NDAs) are often the first formal contractual relationship between two parties and their use has become far more extensive in the last ten years. They govern the protection of information that is shared and fall into two general types, unilateral and mutual. A unilateral form protects the information of one party and places obligations on the other. A mutual form protects the information of both parties and places the same obligations on each.

The nature and type of NDA should reflect the business needs and information sensitivities and not simply reflect the respective market power of the parties or a “we always do this” attitude. Key questions to consider include:

•   What do we want/need to do with the information received?

•   What do we need the recipient of the information to be able to do with it (for example, talk with potential subcontractors)?

NDAs are discussed in more detail in Chapter 10.

Mutual non-disclosures are generally seen as more fair and balanced than unilateral forms simply because the same obligations are imposed on both parties.

Preliminary agreements

It is often wrongly assumed that the individuals involved in preliminary discussions are free to negotiate without having to worry that their actions, written communications or phone calls may have legal consequences. In fact, legal obligations can take effect in pre-contract situations when the elements of a contract are present. Similarly, these interactions may be deemed part of any eventual contract that is created. If there is an eventual dispute, all communications can become material in its resolution.

Preliminary arrangements can take many forms. From the time the initial customer contact is made until the moment a contract is signed by both parties, there are many different preparatory or preliminary arrangements that take place. These can be:

•   Oral discussions or agreements

•   Exchanges of information, marketing materials, product descriptions

•   Price estimates

•   Exchanges of letters, emails, text messages

•   Memorandums of Understanding/Letters of Intent

It is important when having these preliminary discussions for both sides to be upfront and honest about their intentions, their authority or lack of authority, and whether these are exploratory discussions only. Contractual liability can arise whenever suppliers and...

Produkt-Details

• Erscheint lt. Verlag: 1.1.2014
• Verlagsort: Hertogenbosch
• Sprache: englisch
• Themenwelt: Schulbuch / Wörterbuch ► Schulbuch / Allgemeinbildende Schulen
• Themenwelt: Mathematik / Informatik ► Informatik ► Programmiersprachen / -werkzeuge
• Themenwelt: Mathematik / Informatik ► Informatik ► Software Entwicklung
• Themenwelt: Sozialwissenschaften ► Pädagogik
• Themenwelt: Technik ► Architektur
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Marketing / Vertrieb
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Personalwesen
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Planung / Organisation
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Projektmanagement
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• Schlagworte: Business Management
• ISBN-10: 90-8753-811-1 / 9087538111
• ISBN-13: 978-90-8753-811-8 / 9789087538118