D4 - 1.0 Legal Issues Formation Of Contracts

• places risk on suppliers
• cheaper quicker to draw up
• large number of suppliers

• Has to fit a specific spec
• Chemical formula
• A specific brand must be used

• Offer
• Acceptance
• Consideration
• Intention
• Capacity
• p.18-21

• contract is set up between buyer and seller to purchase a given qty for over a period.
• Similar to a standard offer
• terminiology not consistently used in procurement
• often reffered to as a purchase order agaisnt the framework agreement
• simply an order placed once the contract has been set up
• p.38-39

• Set up a contract agreement
• Stamp delivery note
• Butler v Excel

• Delivery
• Price
• Quality
• Processing time
• On time deliveries
• Reject rates
• Relate to a specific service for example

• Services are intagible
• Goods are uniform, services are variable
• Service performance can be subjective
• p.5 - 7

• Offer: legally binding if accepted, willingness to be contracted, use of terms.
• Treat: could be merely an advertisement or enquiry, terms not binding but inviting an initial offer.

• an alternative to arranging a number of similar contracts
• often used in the public sector
• Framework itself is not a contract, the framework establishes basic T&Cs that will apply to subsequent call off contracts
• Three options when a framework exists:
  • issue call off to selected supplier in the framework
  • run mini competition between suppliers in the framework
  • ignore framework and do a new tender

• p.3
• contact details
• reference numbers
• qtys
• descriptions
• T&Cs
• Terms of payment

1. Prepare spec
2. Advertise the requirement
3. Send out pre-qual questionnaire and Issue ITT
4. Analyse responses and seek clarification if needed
5. Award contract

• Define the requirement
• Communicate the requirement clearly
• minimise risk and cost associated with doubt
• provides a means of evaluating conformance
• supports standardisation and consistency

• framework agreement
• call off contracts
• catalogues
• price lists

1. contact details of buyer
2. refernce number for reply
3. qty and description required
4. place and date of delivery
5. buyers T&Cs
6. terms of payment

1. Open tendering: for any potential bidder
2. Selective tendering: suppliers are pre-qual then 8-10 are shortlisted for ITT
3. Restricted tendering: advertising of the tender is restricted e.g. trade journal

• not ethical if there is no intention to purchase
• or if you have already decided who will be awarded the contract e.g. to motivate a current supplier to perform better
• Potential suppliers are being misled by hope of work

ITT is widely advertised and open to any potential bidder

suppliers are pre-qualified and 3-10 suppliers are shortlisted for ITT

suppliers are partly pre-qualified by advertising of the tender being restricted e.g. to appropriate technical journal

1. prepare detailed specifications and contract
2. advertise the requirement
3. send out pre-qual questionaires
4. issue ITT
5. receive ITT responses then analyse
6. post tender clarification if required
7. award contract

A statement of the requirments to be satisfied in the supply of a product or service

1. define the requriement
2. communicate the requirement clearly
3. minimise risk associated with ambiguity and doubt

Output specifications are:

* Easier, quicker, cheaper, shorter
* Places risk on supplier
* Little technical knowledge needed
* Allows for innovation

– Clear and unambiguous
– concise and comprehensive
– compliant with laws/regs
– unbiased
– free from jargon
– logically structured
– proper version control

ensuring that a good response can be obtained from a competitive market, by e.g. providing an independent review of the content and quality of the specification

* Products are tangible, easier to assess for compliance to spec
* Products are more uniform, services are variable
* Assessment of services is more subjective
* Service contracts are longer duration so spec needs to accommodate for future change

– Too detailed
– missing important detail
– Poorly structured
– Not version controlled
– Lacks clarity
– Uses vague language

– dimensions and weights are critical
– an exact match to specifications is required
– when level of quality or safety is paramount
– need to fit into existing assemblies
– must match a chemical formula or a recipe
– a particular brand is required
– buyer has the most technical knowledge, or holds IPR

Advantages:
• experience
• knowhow
• innovation

Disadvantages:
• lock–in
• Bias in the specification, favouring one supplier
• IPR issues

– convenience
– reduced time and effort
– specifying common and agreed levels of quality
– facilitating comparison of bids on a like–for–like basis
– reduction in the costs associated with bespoking
facilitating international trade/communications; and variety reduction

* Delivery
* Lead times
* Quality
* Prices
* Risk management
* Flexibility
* Responsiveness
* Technical support
* Compliance
* Environmental impacts
* Timeliness of invoicing

* Compare suppliers
* Make suppliers aware of their responsibilities
* Identify underperformance by supplier
* Identify good suppliers for future work

* opening hours
* service and food availability
* numbers of customers served
* customer feedback from surveys or other channels
* reports from a ‘mystery shopper’ on quality of service
* portion control
* breadth of menu
* opening hours
* numbers of customer complaints and/or plaudits
* health and safety record; food quality
* venue cleanliness

* delivery
* lead times
* quality, prices
* risk management
* Flexibility
* Responsiveness
* technical support
* Compliance
* environmental impacts
* accuracy and timeliness of invoicing and other administrative and financial procedures

Procurements five rights;
1. Quantity
2. Price
3. Product
4. Quality
5. Place/timing

1. technical drawing
2. chemical formula
3. brand
4. sample
5. market grade
6. standard

1. identify critical success factors
2. identify measures of each factor
3. develop and agree KPI

inserted into a contract by agreement of the parties.

automatically included in contract by relevant statute e.g. goods of sale act

a vital term of the contract, breach results on terminating the contract and damages

a non-vital term of the contract. Breach can result in claim for damages

- published by third party experts for specific industries

- fair balance for buyers and suppliers

- mostly used in engineering and construction

1. abiding by the law is not optional
2. requirments are constantly changing
3. purchasing activities involve the law
4. ignorance of the law is no excuse
5. if you understand how complex the law is you will seek advice

1. offer and acceptance
2. consdieration
3. intention
4. capacity

1. must have value but need not be adequate (Thomas v Thomas: £1 rent widow house)
2. must be sufficient and recognised by law (Stilk v Myrick)

Mistake, misrepresentation, duress, undue influences or illegality

no legal effect on either party as though no contract was ever formed

either party can make the contract void

a false statement of material fact made before or at the time the contract is formed which was intended to induce the other party into the contract

when pressure is placed on the party to agree to a contract which doesn’t represent their true intentions or wishes. Since the party did not freely consent to the contract, it is voidable by the coerced party

1. it must be a definite statement of willingness to be bound in a contract 2. The offerer intends to be bound by 3. must be communicated successfully to the offeree 4. offer must still be 'open' when accepted

1. liability of risks and costs 2. cost uncertainty 3. poor quality goods 4. disadvantageous payment terms 4. no power in supplier management

1. when the parties are from different nations and the goods are being transported from one nation to antoher. OR 2. offer and acceptence is made in a different nation to where the delivery will occur

1. there are plenty of suppliers in the market offering same goods 2. purchase costs are low 3. price advantages can be obtained through competition.

1. an alterative to a one-off purchase 2. where there has been a general invitiation to supply a series of things as and when they are needed. 3. The supplier has won a tender 4. such an offer is open to a series of acceptances whenever an actual order is placed. 5. if a buyer places fewers orders and stated in the tender he is NOT inbreach of contract

An agreement to handle reoccuring purchases. Avoids having to go through the procurement cycle for every order. Typically for low value high volume. E.g. stationary

a contract where a commitment is given to purchase a given qty over a period. Operates similar to a standing offer.

a borader agreemnt for reoccuring procurement. Requires high level of trust between parties. No commitment of qty given.

A way of arranging a nuber of similar contracts efficently. Reccomended for public sector. Most times the framework is not a contract, but sets basic T&Cs which apply for call-offs.

formal statements of performance management requirements specifying the exact level of service to be provided

The owners allows the hirer to have possession for a specific period. Not a contract of sale as no intention to transfer ownership. They are often standard contracts.

The hirer has the option to purchase once all the agreed installments have been made. Often used if the need for an asset is ongoing.

a long-term financed-based agreement. The lessor acts as middle man to purchase the asset and lease out to the lessee. Once all pre-determined payments are made the lessee gains posession. Until possession transfers the lessee the lessor maintains ownership to use as collatoral incase of non-payment