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1、CONTRACT LAW AND MANAGEMENT FOR BSUINESS,DUBAI November,2013,Course Objectives,How to be more effective in contract management and activitiesLegal systems Contract law(legal entity)Appropriate type and form of contracts for different situations Contract strategies(assignment prices)Contract Types Ve
2、rsus RiskContracts management processes and proceduresUnderstanding the Legal Principles Behind ContractsCommercial Impact of Particular ProvisionsBest means of handling disputes and performance issues How to administrate the contract Provide Strategies&Tactics For Negotiationhow to anticipate probl
3、ems and manage risks Review Acceptance and Contract Close out Issues,INTRODUCTIONS,A brief introduction to the team about yourself Tell us:1-Your Name2-Your Role3-How long you have been in the organization4-Good/bad experience with contract management5-Your goals of attending this course,Introductio
4、nType of companies and legal systems Way of commitment Contract meaning in the law Contracting principles(general)Principles of good contracting Contract management out line processes Essential elements of a valid contract contracting strategies contract management responsibilitiesStructure of contr
5、act,Interesting questions A-What does contract mean and what are the practical reasons to have a written contract?B-Is it right to have a certain service or material without contract?why?C-What are the common types of contracts?D-Do we have a general condition applicable for contract procedures?E-Is
6、 it possible to include incentive clause in the contract?F-What is the difference between guarantee and warranty?G-What is different between penalty and liquidate damages?H-Why insurance and liability?,IMPORTANT,IN ORDER TO KNOW HOW TO WRITE A CONTRACT AND ADMINISTRATE,FIRST YOU MUST KNOW THE CONTRA
7、CTING MANAGEMENT PROCEDORES WHICH WILL HELP YOU TO:1-WRITE A GOOD CONTRACT 2-ADMINISTRATE THE CONTRACT 3-OBSERVE THE PHILOSOPHY OF THE CONTRACT ARTS.,Who Is Responsible To execute The Contract Management,Attitude SKILL Knowledge(1)AttitudeVision,Mission,GoalsGood relation with the staff.Good relatio
8、n with company departments.TRAINING Reducing sarcasm.(2)SKILLsWell Qualified.Skills for classification.Contractual Skills.Negotiation skills.Good communications(3)Knowledge ofScope of work applications and technology.Market circumstances&organization procedures.General knowledge,ESPECIALLY IN THE FI
9、ELD OF CONTRACT WRITING AND ADMINISTRATION,MODEL OF LEADERSHIP,HI WILLINGNESSLOW READINESS,LOW WILLINGNESSLOW READINESS,LOW WILLINGNESSHI READINESS,HI WILLINGNESSHI READINESS,HI RELATION,LOW TASK,HI TASK,LOW RELATION,STYLE CHEER(support),STYLE GEER(delegate),STYLE TELL,STYLE SELL,Willingness=confide
10、nce levelReadiness=knowledge level,OVERVIEW OF THE LEGAL SYSTEMS,The legal system means:a system for interpreting and enforcing the laws.The legal system of each country is shaped by its unique history and so incorporates individual variations.The legal system applied all over the world is based on
11、one of the following systems:,THE LEGAL SYSTEM APPLIED,CIVIL LAW which is called FRENCH LAW Set of laws governing relations between individuals,whether natural or moral COMMON LAW which is called ANGLO-AMERICAN LAW this law is a structure and actions of sovereign states and international organizatio
12、n,INTERNATIONAL TREATIES,A treaty is an agreement under international law entered into by actors in international law,namely sovereign states and international organizations.A treaty may also be known as an international agreement,protocol,covenant,convention or exchange of letters,among other terms
13、.Regardless of terminology,all of these forms of agreements are,under international law,equally considered treaties and the rules are the same.Treaties can be loosely compared to contracts:both are means of willing parties assuming obligations among themselves,and a party to either that fails to liv
14、e up to their obligations can be held liable under international law.,TYPE OF COMPANIES(AS PER THEIR LEGAL ENTITY),Companies law,according to the legal entity LIMITED PARTNERSHIP PARTNERSHIP COMPANY JOINT STOCK COMPANY/SHAREHOLDING COMPANY COMPANY PARTNERSHIPS LIMITED BY SHARES LIMITED LIABILITY COM
15、PANY()INDIVIDUAL COMPANY(PER PERSON)HOLDING COMPANY JOINT VENTURES INVESTMENT COMPANIES,HOLDING COMPANYIts a joint stock company or limited liability company or a company of one person.The financial and administrative control of the company is carried out by the party or parties that owes at least(5
16、1%)of the shares of that company or companies,whether of joint stock companies or limited liability companies JOINT VENTURES These Companies are established under the agreements concluded between a government and the other countries represented in their companies.,PETROLEUM COMPANIES,WHAT IS CONTRAC
17、T MANAGEMENT,Contract management is the process that enables both parties of the contract to meet their obligations in order to deliver the objectives required by the contract.It also involves building a good working relationship between customer and provider.It continues throughout the life of a co
18、ntract and involves managing proactively to anticipate future needs as well as reacting to situations that arise.,STANDARD FORMS OF CONTRACTS,Day to day personal contractingWhy,when&how we need to draft a contractDrafting Contract is Science or Art?Balanced Terms Vs CostUsing Standard FFederation In
19、ternational des Ingenieurs Conseils International Federation of Consulting Engineers www.bimco.orgThe Baltic and International Maritime Council(BIMCO)www.iadc.orgInternational Association of Drilling Contractors International Chamber of Commerce,WHAT IS A CONTRACT?,What is a contract?Why have a Cont
20、ract?Forms of a ContractsContract Elements,*Common law once required all contracts to be in writing.*Mutual promises became enforceable in the 1600s.*By the 1900s,courts began to consider the fairness of contracts before enforcing them.,CONTRACT IN THE LAW,CONTRACT LAW PRINCIPLES,An agreement,upon m
21、utual consideration,has an obligation on its parties and enforced by lawContract contains parties rights and obligationsContract mitigate risks on both partiesContract object must be possible,descriptive,and legible,CONTRACT LAW PRINCIPLES,Parties agree on respecting public systemObliged party shall
22、 perform with best trying Contracting party should assure the capability of the obligatory partyForce majeure and hardship should be considered,GENERAL REASONS:Preserve the rights of both buyer and seller.Define roles and responsibilities of each party.Reference to use in case of any disagreements b
23、y Providing a system or procedures for settling disputes.Apportioning liabilities between the parties(who provide what?)and Clarifying the agreement(price,term,specs,.)Stating applicable law,NEED FOR A CONTRACT/WHY?,SPECIAL REASONS:Contracts help to build relationships between buyers and sellers.Con
24、tracts attempt to allocate risks and responsibilities between the parties.The professional purchasing/contract manager can build a bridge with supplier.The purchasing/contract manager must understand and balance the needs of the contracting parties.,The contract has three functions:Evidentiary funct
25、ion(in case of any dispute)Cautionary function(before giving promise or accept an obligationChannelling function(legal frame to the intention of both parties to make the contract binding on them),FORMS OF CONTRACT:It may be called an agreement,letter of intent,fax of award,a purchase order,memorandu
26、m of understanding,word of mouth or price list,THE REVIEW-AND-APPROVAL OF CONTRACTING PROCESS SHOULD:ensure that the contract language describes a product or service that will satisfy the need identified.,DOES THE FOLLOWING CONSTITUTES A CONTRACT?,Letter of IntentAnswer:A letter of intent or LOI is
27、a document outlining an agreement between two or more parties before the agreement is finalized.LOIs resemble written contracts,but are usually not binding upon the parties in their entirety.Many LOIs,however,contain provisions that they are binding,such as non-disclosure agreements.An LOI may also
28、be interpreted as binding the parties if it is closely resembling a formal contract.,Letter/fax of Intent,Date:February 15th 2013TO:CONTRACTOR With reference to the exchanged correspondence regarding the drilling unit ended up with your letter dated February 3rd 2013;this is to confirm our intent to
29、 hire the drilling unit for a period of two years at a daily operating rate of$60,000.Final commitment will be forwarded upon granting shareholders approval.We appreciated the flexibility you demonstrated in the subject contract.Best regards,COMPANY,DOES THE FOLLOWING CONSTITUTE A CONTRACT?,Memorand
30、um of UnderstandingAnswer:A memorandum of understanding(MOU)is a legal document describing a bilateral agreement between parties.It expresses a convergence of will between the parties,indicating an intended common line of action,rather than a legal commitment.It is a more formal alternative to a gen
31、tlemens agreement,but generally lacks the binding power of a contract.MOU can be as powerful as a contract depending on the wording used in its context.,DOES THE FOLLOWING CONSTITUTE A CONTRACT?,Non-Disclosure Agreement Answer:A non-disclosure agreement(NDA),also called a confidential disclosure agr
32、eement(CDA),confidentiality agreement or secrecy agreement.This is a legal contract between at least two parties which outlines confidential materials or knowledge that the parties wish to share with another one for certain purposes,but wish to restrict from generalized use.,DOES THE FOLLOWING CONST
33、ITUTE A CONTRACT?,Purchase Order,Answer:A Purchase Order is a commercial document issued by a buyer to a seller,indicating the type,quantities and agreed prices for products or services that the seller will provide to the buyer Sending a PO to a supplier constitutes a legal offer to buy products or
34、services Acceptance of a PO by a seller usually forms a once-off contract between the buyer and seller so no contract exists until the PO is accepted,DOES THE FOLLOWING CONSTITUTE A CONTRACT?,Master(Framework)Agreement Answer:The purpose of a master or framework agreement with suppliers is to establ
35、ish the terms governing contracts to be awarded during a given period,in particular with regard to price and quantity.A framework agreement is a general term for agreements with providers which set out terms and conditions under which specific purchases(call-offs)can be made throughout the term of t
36、he agreement.,DOES THE FOLLOWING CONSTITUTE A CONTRACT?,Answer:Price lists and rate tables constitute a provision of information not a contract to supply.The only obligation of the seller is if you were to request product at a given price then as long as you had met any other criteria such as volume
37、 or requested delivery date then that price must stand.Again it acts as an Invitation to Treat,inviting you offer!,PriceList,Price Lists and Rate Tables,DOES THE FOLLOWING CONSTITUTE A CONTRACT?,Answer:Contracts can be formed verbally i.e.Verbal agreements can constitute legal binding contracts in m
38、any situations.,however without a witness it IS difficult to prove that a contract has been formedIn most cases a“verbal”contract would not be adequate“My word against yours”is a defence commonly relied on,Word of Mouth,ESSENTIAL ELEMENTS OF A VALID CONTRACT LAW REQUIREMENTS,Offer and AcceptanceAn o
39、ffer is a proposal from a party to perform a service for another party.The offer needs to be clear,firm and final.It wont be a proper offer if it is too vague or if important information,such as the price,is missing.When one party makes an offer,and a second party accepts the terms and conditions of
40、 this offer,then an agreement has been reached.,ESSENTIAL ELEMENTS OF A VALID CONTRACT-CONT.,Legality of PurposeContracts for illegal purposes are not valid.,ESSENTIAL ELEMENTS OF A VALID CONTRACT-CONT.,Signature and capacity to contractFor a contract to be valid it must be signed by all the parties
41、 involved.Signing parties should have the legal capacity to sign for the organization they are representing.Verbal contracts may be valid,but good luck in proving it.,38,ESSENTIAL ELEMENTS OF A VALID CONTRACT-CONT.,Offer,Acceptance,Legal Purpose,+,+,=,Agreement,+,Signature,=,ESSENTIAL ELEMENTS OF A
42、VALID CONTRACT,LAW REQUIREMENTS,The absence of an essential,above mentioned,element will render the contract void,voidable or unenforceable.Valid:Satisfies the laws requirements.Unenforceable:When the parties intend to form a valid bargain but some rule of law prevents enforcement.Voidable:when the
43、law permits one party to terminate the agreement.Void:one that neither party can enforce,usually because the purpose is illegal or one of the parties had no legal authority.,EXAMPLES OF RISK CONTROL MEASURES,Personal Protective EquipmentHousekeepingInspectionsTools and EquipmentPolicies,Procedures,P
44、rocessesSupervisionContract Management and AdministrationPerformance ExpectationsTraining,THE CONTRACT MANAGEMENT PROCESS,STRATEGIES AND POLICIES,Process is at risk if ANY infrastructure component is deficient:-,PROCESS,ORGANIZA-TION AND PEOPLE,INFORMAT-ION FOR DECISION MAKING,INFORMAT-ION METHODO-L
45、OGY,*process vision mission,goals and strategies*Information and strategy for process*contract organizing objectives&plans*contractsing policies,*Integrated with sourcing process*Contract&negotiation planning*Negotiation process*Terms&conditions process*Contract administration*Contract audit,skills
46、and competencies*contracting training and development*roles&responsibilities*Organization design,fulfillment to contract*Expiration&renewal*terms and conditions*Scope or other change,contract risk analysis*measurement&control*Contract alerts management*audit tools*library management,Contracting proc
47、ess is not designed to achieve strategy or comply with policies,Personnel are unable to perform necessary contracting activities&process effectively,Reports do not provide information for effective management of contracts and risks,Contract analysis methodology do not adequately produce relevant inf
48、ormation,Reliable Relevant and timely business data is not available for analysis and reporting,GENERAL PRINCIPLES,The Principle of indemnity for Contractors injury when the tangible imbalance ocurres in the contractual process.tangible Error resulting from the mistake of the pen when submitting the
49、 offer.The General Assembly of the State Council advised that the tangible errors pen or computational errors are inadvertent errors which have to be corrected in addition to the consequences of the correction from its effected date.,GENERAL PRINCIPLES,Knowledge of the responsibilities of each depar
50、tment participate in the contractual process and the reflection of this responsibility in terms of their inputs in the drafting of the contract and items that must be included to achieve the greatest possible efficiency.Prepare the contract in clear language not subject to interpretation.Authority o
