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CONTRACT
MANAGEMENT &
CONTRACTS
Vakils Associated
B-3, Mayfair, S.P.Road , Secunderabad
Ph.No. 040-2784 7110 / 2781 9839
Email- invox@vakilsassocaited.com
Effective Contract
Management
Small
Contract Mangement
Systematic
Approach
Effective
Process
1. Efficient People
2. Robust
Procedures
Minimum
Risks
Contract
Management
1. Proper
Technology
2. Repository
Maximum
Benefits
Effective Contract
Managment
Genesis
Retrieva
l
Closure
Contracts
Everyone
later.
Any
Department:
Commercial,
Offer
Accept
Promise
ration
ment
Enforceab
le
Contract
Essentials of Contract
Offer
Acceptance
Consideration
Free
consent.
Capacity to contract
Lawful object
Certainty and possibility of performance
Agreements not declared to be void
CONSIDERATION
No consideration No contract
Exceptions gift and inadequate consideration
A out of natural love & affection promises to gifts his father a house.
Consideration love & affection
A agrees to sell his house of Rs.10 lakhs for Rs. 5 Lakhs. Consideration is
inadequate. If A out of his free will sells his house for Rs.5 lakhs contract valid
else may be considered void.
FREE CONSENT
Y threatens to kill X if he refuses to sell his house to him .
X, a devotee gifted her property to spiritual guru ,Y, to secure benefits to her soul
LAWFUL
AGREEMENT
IN RESTRAINT TO TRADE
X a seller of imitation jewellery in England sold his business to Y
and agreed not to deal for two years-in imitation jewellery-in real
jewellery in certain foreign countries
X after selling the goodwill of his business to Y promises not to
carry the similar business anywhere in the world.
AGREEMENT
TO DO IMPOSSIBLITY
On 1.9.2015, NSRC agrees supply provide information to Iraq.
There is an embargo A dies on 30.09.2015. Impossibility of contract
Drafting Techniques
Use
Money,
Delivery Schedule,
Payment terms,
Performance Bank Guarantee/ Letter of Credit,
Pre-despatch inspection,
Liquidated Damages/Penalty for the delayed
supplies and
Arbitration,
All these clauses are important for safeguarding the
interest of the purchaser and non inclusion of the above
clauses will have indirect financial implications in the
execution of the contracts.
Incoterms International
Transactions
Contracts involving international transportation often
contain abbreviated trade terms that describe
matters such as the time and place of delivery,
payment, passing of title of goods, risk of loss
shifts from the seller to the buyer and who
pays the costs of freight and insurance. The
most commonly known trade terms are called
Incoterms, published by the International Chamber of
Commerce (ICC).
The parties to a contract must expressly indicate the
governing law of their terms.
Decoding Important
Incoterms
Delivery
Schedule
EXW: Ex-works
Ex Works (EXW) is an international trade term that describes an agreement in which the seller is required to make goods ready for pickup at
his or her own place of business. All other transportation costs and risks are assumed by the buyer.
Money,
Delivery Schedule,
Payment terms,
Performance Bank Guarantee/ Letter of Credit,
Pre-despatch inspection,
Liquidated Damages/Penalty for the delayed
supplies and
Arbitration,
All these clauses are important for safeguarding the
interest of the purchaser and non inclusion of the above
clauses will have indirect financial implications in the
execution of the contracts.
for security
Working of BG
ISSUING BANK
Stage 4Recovery
St
a
Custom
er
St
a
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2In
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Pa
tio
ym
n
en
tb
y
Ba
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Beneficiar
y
Bank Guarantee(BG)
The bank is bound to honour the guarantee irrespective of any dispute, subject to
two exceptions :
(i) a fraud or
(ii) encashment resulting in irretrievable harm or injustice
Types of BGs
()
()
()
()
()
()
Performance Guarantees
Financial Guarantees
Bid Bond Guarantees
Advance Payment Guarantees
Shipping Guarantees
LC - Letter of Credit
A written commitment to pay, by a buyer's or importer's bank (called the issuing bank) to the
seller's or
exporter's bank (called the accepting bank, negotiating bank, or paying bank).A letter of credit
guarantees
payment of a specified sum in a specified currency, provided the seller meets precisely-defined
conditions
and submits the prescribed documents within a fixed timeframe.
Elements of a Letter of Credit
A
On
To
On
Within
Documents
must conform to terms and conditions set out in the letter of credit
Documents
Opening
Bank
4- L/C
Beneficiar
y/
Exporter
3L/C
8- Documents
9- Payment
7Payment
5 - Goods
11 - Debit
10 Documents
2- L/C Application
Applicant
/ Importer
6 - Documents
1 - Contract
Advising
Bank
Distinction
BANK
GUARANTEE
LETTER OF CREDIT
No invocation its a
direct undertaking by
banker and should be
paid
Primary responsibility is
on banker
Government Contracts
Art
Tender
Tenders Comply
Some
Important
Clauses
Categories of Contracts
Some of the contracts regularly entered are:
Supply,
Memorandum of
Understanding
MOU
Basic Distinction
AGREEMENT /CONTRACT
MOU/LOI
Legally enforce
Agreement is final and
binding
and
has
definitive terms and
conditions
Grants substantial rights
to parties
Binding on parties
Parties
Effective date
Signatories/
Authorization
Objectives
Scope Of Work (Technical
Specs)
Term
Payment (Price Variation)
Payment Terms
Deliverables
Delivery Schedule
(Project Schedule)
Obligations of Parties
Training (costs /per diem)
Supply & Installation
Contd.
Commissioning Test
Approval Certificate
Indemnity
Warranty
Security /Guarantee
Liquidated Damages/
Damages
Modification
Confidentiality
Termination (cause,
convenience and force majeure)
Consequences of
Termination
Governing Law
Jurisdiction
Arbitration
Notices
Independent Parties
Force majeure
Dispute resolution
Waiver
Governing Law
Assignment
Confidentiality
Entire agreement
Severability
Counterparts
Jurisdiction
Drafting of Contract
SESSION II
Proforma of Purchase
Order
PO Number
Name of the Company
Vendor Details
Price
Specific conditions
& Acceptance
2. Scope
8. Change
of Work
9. Delay
and Payment
4. Delivery
(Timelines, Supply,
Commissioning and Installation)
5. Title
6. Pre-
7. Shipping
Terms
Order
10.Liquidated
11.BG
Damages
/ PBG
12.Stop
Order
13.Warranties
14.Taxes
& Indemnification
& Insurance
15.Termination
PO
WO
Civil Contracts
SESSION III
Item
supplier projects.
Liquidated Damages
It
Benefits
Assures
fulfilled
Facilitates calculation risks
Alleviates difficulty in providing actual
damage (even when damage is
ascertainable)
We
Contd.
Cost
1.
2.
3.
Seller incurs all costs during the project are charged back to the buyer and thus the
seller is reimbursed costs.
Cost plus fee (CPF) or cost plus percentage of cost (CPPC)
Cost plus fixed fee (CPFF)
Cost plus incentive fee (CPIF)
)Time
)
)
Reimbursable Contracts
Some egs:
EXAMPLE :-FIXED FEE CONTRACTS
VSH Ltd was awarded a tender /contract by a PSU for construction of an
amenities building at Shadnagar for an amount of Rs.10 crores. The
terms mentioned said that the amount will be paid upon completion of
construction and will not have any revision in the amounts for any
reason whatsoever.
EXAMPLE :- COST PLUS CONTRACT
VSH Pvt Ltd is awarded a tender/contract by a PSU to construct a missile.
Since it is a new technology, the PSU could not be ascertain the costs at
the time of floating a tender. Therefore, VSH Pvt Ltd quoted a cost plus
5% as its offer price.
Case Study
of Contract Management
Multi-layered hierarchy
Lack of sufficient knowledge of General
Financial Rules and procurement manual
procedures (Govt.)
Unforeseen delays
Lack of resolution /decision making
authority
Common Irregularities
Non recovery of liquidated
damages
Expiry
of
validity
of
Bank
Guarantee due to lack of timely
review.
Delayed payment
Non-adherance to Central Vigilance
Commission(CVC) guidelines;
Lack of provisions for modification
8
(iv) of the Right to
Information Act pertains to commercial
confidential information.
Any information which is commercial
confidential information need not be
provided.
THANK YOU
Vakils Associated
Advocates
B-3, Mayfair, S.P.Road , Secunderabad
Ph.No. 040-2784 7110 / 2781 9839
Email- invox@vakilsassocaited.com
COMPLIANCE
Technical terms
Specifications
Expertise of Vendor
Delivery Timelines
Commercial terms
Payment terms
Delay and LD
Competence of Vendor
Possess requisite
Approvals /License
Execution &
Implementation
EXECUTION
IMPLEMENTATION