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28 Cards in this Set
- Front
- Back
Outline FIVE examples of contractual terms that might be used in a commercial agreement |
* Limitations
* Force majeure * IPR * Sub-contracting * Duration * Price variations * Insurance * Indemnities * Liquidated damages * Title an risk * Dispute resolution |
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Suggest conditions that may be included in a contract to ensure a supplier complies with recognised ethical and labour standards |
* Adherance to fair-trade rules
* Bans use of child-labour * Health and safety requirements * Compliance to CSR * Compliance to International Labour Organisation standards ILO * Ethical Trading initiative (ETI) |
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Explain THREE sources of contractual terms for contracts between purchasers and suppliers. |
- expressed terms - standard terms - model form contracts |
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Outline TWO types of insurance that a buyer might require a supplier to have as part of a commercial contract |
* Employers insurance:
* Professional indemnity: * Public liability: |
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Explain THREE areas where a supplier’s and a buyer’s terms may differ prior to the agreement of a contract. |
* Delivery
* Payment terms * Pricing * Force Majeure or Liabilities |
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Explain the following express contract provisions commonly used in outsourcing contracts: (a) Confidentiality (b) Indemnities (c) Performance management (d) Liquidated damages (e) Dispute resolution. |
Confidentiality:
Indemnities:
Performance Management:
Dispute resolution: |
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Explain what is meant by an indemnity clause and provide an example of how such a clause may be used. |
- similar to guarantee - indemnifer assumes primary liabiltiy either for itself or third party - may include costs or debts from breach |
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Explain the differences between these pricing arrangements: (i) Cost plus arrangements (10 marks) (ii) Target costing arrangements. (5 marks) |
Cost plus arrangements: * Buyer agrees to cover all direct costs to perform the contract* Plus an agreed fixed fee or percentage for suppliers profit * Pioneered by Japanese firms * The supplier estimates the max selling price and works backward from there to calculate what production cost must be achieved to the deliver the product * Requires close cooperation between supply chain |
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Explain FIVE types of pricing arrangements that may be used in contractual agreements. |
* fixed price
* lump sum * firm price * the various methods of ‘cost plus’ arrangement * market penetration * Market skimming |
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Define the term ‘total lifecycle costing’ |
An economic assessment which considers all projected cost flows over the operating life of an asset, expressed in monetary terms.
cost/price iceberg |
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Describe FIVE costs that should be considered when calculating the lifecycle cost of an item, apart from the purchase price of the item. |
* maintenance costs
* operational costs * disposal costs * fuel costs * servicing costs * training costs * disposal costs |
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Explain the following types of pricing arrangement and their use:
- Cost plus fixed fee - Cost plus incentive fee - Cost plus award fee |
Cost plus fixed fee: costs are covered in full; and the extra fixed fee is based on a pre-determined fixed amount on successful completion of the contract. The costs are unknown, although they can be capped; but the fixed fee remains constant. e.g. for some Research and Development contracts
Cost plus incentive fee: costs are covered as for ‘fixed fee’; but then an additional incentive fee is offered if the supplier should meet or exceed predetermined KPIs. Both parties may then share the cost savings. This pricing arrangement may be used particularly where there is plenty of scope for cost reductions
Cost plus award fee: costs are covered as for ‘fixed fee’; but then an additional incentive award fee is offered if the supplier should meet, or exceed, some predetermined aspects of contractual performance that are not easy to measure quantitatively. The award fee may be paid to the supplier in recognition of qualitative assessment of the supplier's application of effort to meet the buyer’s needs, probably on a subjective evaluation |
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What are expressed terms? |
inserted into a contract by agreement of the parties. |
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What are implied terms? |
automatically included in contract by relevant statute e.g. goods of sale act |
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What are the two types of 'importance' for contract terms? |
Conditions: deal breakers, failure to perform result in repudiation of contract and damages claim
Warranties: non-vital terms, breach entitles claim to damages |
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What are the implied sections of the Goods of Sales act for all goods contracts? |
Sections 13-15
13: Sale by description 14: Quality and fit for purpose 15: Sale by sample |
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What secions of the Goods of Services act are implied to all services contracts? |
Sections 13 - 15
13: Care and skill 14: Time of performance 15: Consideration |
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List a general contract structure |
1. definitions 2. general terms: changes, notice period 3. commercial provisions: rights obligations, passing of title/risk, payment terms, delivery 4. secondary commercial provisions: IP, indemnity, termination 5. standard clauses: force majoure, jurisdiction |
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What is 'Battle of the forms'? |
T&Cs on docs differ, last shot wins |
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How do you prevent battle of the forms? |
1. Agree terms in contract 2. send acknowledgement on POs for buyer to send back 3. stamp delivery notes |
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What are model form contracts? |
- published by third party experts for specific industries - fair balance for buyers and suppliers - mostly used in engineering and construction |
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Describe: Passing of title/risk terms |
- when the ownership of goods passes - as a rule, passes when parties intend it to - if intention not made clear section 18 of SGA rules - Romapla clause is when title passes on payment not delivery |
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Describe liquidated damages: |
- purpose is to put injured party to the the poistion it would have been if contract had been performed correctly |
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Describe unliquidated damages: |
- if no liquidated damages are specified in contract, in the exent of non-perofrmance and claim for damages the court will decide |
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What is a penalty clause? |
Where the LD clause is framed as a deterrent or disincentive.
not enforcable in law and will go to court as unliquidated damages |
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What is Force Majeure? |
- Releases parties from liability in circumstances beyond thier control which could not have been avoided or overcome e.g. flood, war, tax |
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What is a Guarantee? |
- included in most contracts - guarantee to make good any decfects or failures - or gurarantee the liability for debt or non-perofrmance - e.g. guantor on a loan |
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Exclusion clauses? |
- exclude liability - restrict or limit liability - to be valid must pass common law test: 1. must be included in contract 2. must be clear and precise - cannot exlcuse liability for negligence resulting in death or personal injury |