Supply Chain Management

PRINCIPLES OF CONTRACTING

In common law legal systems, a contract (or informally known as an “agreement” in some jurisdictions) is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them. The elements of a contract are “offer” and “acceptance” by “competent persons” having legal capacity who exchange “consideration” to create “mutuality of obligation.” Do your contracts and customer/supplier agreements have “teeth” or are they nothing more than a collection of legal jargon that nobody reads, much less understands; until there is a legal issue? This course is twofold. First, the basics of contracts are covered. Second, based on SCE’s Founder’s experience with major corporations and the development of meaningful contracts, “teeth” type clauses will be analyzed. Although most agreements are typically one-sided in favor of the author, the students will learn how to structure language in the intent of partnering, to still maximize customer expectations, but to benefit the supplier as well.

In common law legal systems, a contract (or informally known as an “agreement” in some jurisdictions) is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them. The elements of a contract are “offer” and “acceptance” by “competent persons” having legal capacity who exchange “consideration” to create “mutuality of obligation.”  

 Do you work with contracts on a regular basis?  If you are saying to yourself “no,” are you sure? How about purchase orders?   It is interesting, when SCE’s Founder asks the first question to an audience, about half of the folks raise their hands.  Then when he asks the second question, all of the audience raise their hands. Then he asks the first question again, and they (you?) get the point.   A purchase order is a contract!

 Do your contracts and customer/supplier agreements have “teeth” or are they nothing more than a collection of legal jargon that nobody reads, much less understands; until there is a legal issue?  This course is twofold. First, the basics of contracts are covered.  To start, all contracts will have four basic elements:  (1) an offer and acceptance, (2) consideration, (3) competent parties and (4) a legal purpose. Next the course will differentiate between Price contracts (typically issued for a product) vs. Cost contracts (typically issued for a service).

 There are also a number of terms and conditions (Ts & Cs) that should be included in a contract and the boilerplate (standard) ones are compared and contrasted with the ones with “teeth” (such as cost reduction and improved performance).  Keep in mind that the underlying law of any contract is the UCC-Uniformed Commercial Code and this is discussed in detail in the context of this course.

Once the contract is in place, the Supply Manager must perform the role of Contract Administrator.  As discussed in this course, there five key objectives and as part of Work Control, the SM must ensure that both the buyer and seller are fulfilling their roles to maximize the purpose of the contract. Although most agreements are typically one-sided in favor of the author, the students will learn how to structure language in the intent of partnering, to still maximize customer expectations, but to benefit the supplier as well.  The end result is that the contract should not be the relationship but a formalizing of what is being carried out in the relationship.

To support all of the above, this course will be featured in SCE’s virtual classroom with all of the functionality featured in our DEMO and based on our teams working with major corporations in BIC-Best-In-Class practices.  It will be a blend of educational topics, pertinent case studies, and practical stories based on past practices.  You will learn vital skill sets but also have fun!

Upon completion of the Principles Of Contracting course, the participant will:

  • review the four key elements of a contract which are:  offer and acceptance (the buyer offers to buy and seller accepts or “counteroffers”), consideration (what is given up by each party to make the contract), competent parties (of legal age, not under the influence) and a legal purpose (example: not for drugs, firearms)
  • define the UCC-Uniform Commercial Code and how its language should mirror the contract
  • review a key UCC provision:  The Statute of Frauds and how it applies to written vs. oral contracts
  • establish the relationship between the purchase order and the contract
  • review the two types of Letters of Intent
  • compare and contrast Price type contracts including Firm Fixed Price, Fixed Price with Adjustments and Fixed Price with Incentives
  • compare and contrast Cost type contracts including Cost with Fixed Fee, Cost with Award Fee and Cost Plus Incentive Fee
  • define Indefinite Delivery type contracts and where they would be applicable
  • define Service Level Agreements (SLAs) and where they would be applicable
  • review key T’s & C’s including Intellectual Property, Indemnification, Limitation of Liability,  Reservation of Rights and Force Majeure
  • compare and contrast UCC provisions on buyer’s remedies vs. seller’s remedies in the case of a breach
  • develop the teeth clause:  Price Change,
  • develop the teeth clause:  Volume Rebates Based On Business Growth,
  • develop the teeth clause:  Mutual Cost Reduction Programs,
  • review the five key objectives of Contract Administration: (1) supplier meets its obligations, (2) customer meets its obligations, (3) problems are promptly and fairly resolved (4) cost overruns are managed and (5) all actions are documented
  • understand the role of Work Control including compliance and contract closeout based on Suspension (temporary), Conclusion (for cause or convenience) or Termination (natural life)
  • compare and contrast the methods for dispute resolution including mediation, arbitration or litigation
  • understand how to roll out these great techniques to your supplier including the use of Reverse Marketing and the Customer/Supplier Symposium

Depending on the learning style of the participant, this course is designed to be approximately 15 hours in the e-Learning – virtual classroom. Additionally, at the end of the course – you will take an on-line quiz to make sure you have grasped the key points.

Upon completion of the Applications In Cost Modeling course, the participant will receive a certificate of completion with 15 ceus of credit.

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