Tài liệu tiếng Anh thương mại quản lý Chapter 17 Contract formation and legal issues

17-1
Chapter 17
Contract
Formation and
Legal Issues
17-2
Key Concepts
•
Litigation Prevention
•
Dispute Resolution
»
Negotiation
»
Mediation
»
Litigation
»
Arbitration
»
Courts
•
Development of Commercial Law
•
Basic Legal Considerations
•
The Purchase Contract
•
Letters of Intent
17-3
Key Concepts

•
Special Legal Considerations
»
Inspection Rights
»
Rights of Rejection
»
Title and Risk of Loss
»
Warranties
»
Evergreen Contracts
»
Order Cancellation and Breach of Contract
»
Liquidated Damages Provision
17-4
Key Concepts
•
Special Considerations (cont’d)
»
JIT Contracts
»
Honest Mistakes
»
Patent Infringement
»
Restraint of Trade Laws
•
International Considerations

»
Contracts for the International Sale of Goods
»
Foreign Corrupt Practices Act
17-5
Litigation Prevention
•
The best way to deal with legal disputes is
to avoid them in the first place!
•
Daily activities of supply managers are
subject to two major areas of the law:
»
Law of Agency
–
Supply professionals act as agents for their firms
»
Law of Contracts
17-6
Why Most Business Firms Utilize Litigation Only
as a Last Resort
•
Contractual disputes are usually resolved
more effectively using negotiation
•
A lawsuit almost always alienates a good
supplier
•
The outcome of any court case is usually
uncertain

•
Litigation is expensive
17-7
Dispute Resolution
•
When attempting to resolve a dispute, it
pays to keep in mind six considerations:
1. Time
2. Money
3. Complexity/Formality of Method of Dispute
Resolution
4. Stress
5. Visibility
6. Damage to the Relationship
17-8
Dispute Resolution
•
Five Options exist to resolve a dispute:
»
Negotiation
»
Mediation
»
Litigation
»
Arbitration
»
Courts
•
Most disputes are best resolved through

negotiation and compromise
17-9
Mediation
•
If negotiation fails, the disputants can
consider mediation
•
Mediation involves introducing a third-
party into the discussion
•
The mediator’s role is to listen,
sympathize, empathize, coax, cajole and
persuade
•
One thing the mediator may not do is
decide anything
•
If the disputants confer decision-making
authority on a third-party, we are now
talking about arbitration
17-10
Litigation
•
Some maintain that if a commercial
dispute reaches litigation, the disputants
regardless of the outcome have
already lost
•
In litigation, costs tend to be maximized
»

Recall: time, money, formality of method,
stress, visibility, and relationship damage
17-11
Arbitration
•
Arbitration vests the decision-making
authority with the arbitrator
»
Purchase orders often have arbitration clauses
»
It is critical to employ an impartial arbitrator
»
A good source in the U.S. is the American
Arbitration Association
•
The arbitrator will hear testimony and
study evidence from both sides, then
make a decision based on the facts
17-12
Courts
•
Litigation may be brought to state or
federal court.
»
Lawsuits heard by judge or jury.
»
Relevant court rules govern procedure.
»
Relevant rules of evidence prescribe what may
or may not be presented.

•
Best to avoid destructive legal disputes
whenever possible.
17-13
Development of Commercial Law
•
National Conference of Commissioners on
Uniform State Law (NCCUSL)
»
Uniform Sales Act
»
Uniform Commercial Code (UCC)
–
Determines rights on basis of fairness and
reasonableness in light of accepted business
practices
–
Topics treated throughout the rest of the chapter
reflect the provisions of the UCC where applicable,
as well as the provisions of earlier laws not
displaced by the code
17-14
Basic Legal Considerations
•
Status of an Agent
»
Agent - a person who, by express or implied agreement,
is authorized to act for someone else in business
dealings with a third party
»

A “purchasing agent” is not a legal party to his or hers
business transactions, but rather serves as an
intermediary.
»
Law requires the agent to be loyal to the employer
»
Law permits the employer to hold its purchasing
agent(s) personally liable for any secret advantages
»
A buyer operates under two types of authority
–
actual authority
–
apparent authority
17-15
Basic Legal Considerations
•
The Purchase Contract
»
Agreement
»
Consideration, or mutual obligation
»
Competent parties
»
Lawful purpose
»
“The Written and the Spoken Word”
17-16
Offer and Acceptance

•
Purchase order constitutes a legal offer
•
Supplier’s quotation usually constitutes
an offer
»
Agreement does not exist until the supplier
accepts
–
Called a “meeting of the minds”
•
Uniform Sales Act law requires
acceptance of an offer in terms that were
identical with the terms of the offer
»
Mirror image concept
17-17
Battle of the Forms
•
Occurs when the terms of acceptance
differ from the terms of the offer
•
Terms of Acceptance are automatically
incorporated into the contract, unless one
of three conditions exists:
1. They materially alter the intent of the offer
2. The offerer objects in writing
3. The offer explicitly states that no different terms
will be accepted
17-18

Consideration
•
A valid contract must also contain the
element of obligation
•
Most purchase contracts are bilateral
•
Important point is the “mutuality of
obligation”
•
Statements regarding material quantity,
price, delivery, and so on must be specific
enough to bind both the buyer’s firm and
the supplier to definable levels of
performance
17-19
Competent Parties
•
A valid contract must be made by persons
having full contractual capacity
•
A contract made by a minor, an insane or
intoxicated person is usually entirely void
or voidable
17-20
Legality of Purpose
•
A contract whose purpose is illegal is
automatically illegal and void
•

A contract whose primary purpose is
legal, but whose ancillary terms is illegal,
may be either void or valid
17-21
The Written and the Spoken Word
•
A contract is not a physical thing
•
It is a relationship which exists between the
parties
•
A written document is evidence of the contract
•
Oral contracts are more difficult to prove facts
•
Law requires some agreements to be in writing
•
Written evidence supercedes all prior oral
evidence
•
All data to be included as part of the contract
should appear above the agent’s signature
17-22
Letters of Intent
•
Letters of Intent and Memorandums of
Understanding – precontracts to cover
informal agreements.
•
LOI’s can be used as a planning document

to order materials with long lead times,
special tooling, or unique design work.
•
A preliminary agreement with open issues
to be resolved.
17-23
Special Legal Considerations
•
Inspection rights
•
Rights of rejection
•
Title
•
Warranties
•
Order cancellation
•
Breach of contract
•
JIT contracts
•
Honest mistakes
•
Patent infringement
•
Restraint of trade laws
•
Product liability
17-24

Inspection Rights
•
The law gives a reasonable period of time
to inspect material after it is received
•
If the buying firm raises no objection to
the material within a reasonable period of
time, he or she is deemed to have
accepted it
•
Industry practice usually sets the standard
for “reasonable” time
17-25
Rights of Rejection
•
A buying firm has the right to reject material
that:
»
Does not conform with the terms of the contract
»
Is an overshipment
•
Rejection requirements:
»
Notification must be sent to the supplier
»
The nature of the defect or default must be
specified
»
The buying firm is not legally bound to return

the material
»
The buying firm is obligated to protect and care
for the material in a reasonable manner