Purchase Contract 16. 3. 2010 Radka Chlebcova Aims of this class n Information you need n Structure of purchase contract n The most important provisions n Tips for drafting n Evaluation of HW (Feedback) n Summary Negotiating & Request for Draft The most typical one: „Hi, I need a draft of purchase contract for Gravel pack Equipment, Quotation No. 08-24175rev.1 dtd. 07. October, 2009, Seller Baker Hudges, ASAP. Br, James“ n Do you have all info you need to draft? Info Check-list: n Contracting parties (details) n Goods specification – purchase order reference n Payment terms n Delivery details n Passing of risks, passing of title n Warranties n Use of standard terms? - Integration, battle of forms n Risks you have to deal with? Eg. Contractor’s delay, subcontractor delay, the buyer won’t be able to pay n Sanctions and remedies n Hardship, force majeure Let’s start! Ok, but how? The Contracting parties n Which info should be / must be in the heading? n Where to get and verify them? n http://portal.justice.cz/Justice2/uvod/uvod.aspx n http://ec.europa.eu/taxation_customs/vies/lang.do?fromWhichPage=vieshome&selectedLanguage=EN n http://wwwinfo.mfcr.cz/ares/ares.html.cz Preamble n What is it good for? n What shall be written there? n How to formulate it? Subject of the Contract n Describe as precise as possible! n Reference to other documents? Eg. Purchase order? n Dangers of such reference? n Battle of forms n How to minimise? Price & payment terms n How much, with or without VAT? n In words? n Payment terms, cash, bank deposit, letter of credit, documentary collection n Term of payment n In advance, hire purchase n Invoicing details Terms of delivery n Delivery dates n When is the shipment delivered? n Passing of title & passing of risk n International terms? n Shipping documents Handover/ takeover & quality n Quality requirements n Packing requirements n Handover and inspection n Content of the handover certificate Warranty n Contractual warranty or implies terms? ¡ Length ¡ Content? Responsibility for…. ¡ Warranty claims? Notification requirements ¡ Duty to remove defects Liquidated damages, penalties n Differences? n Amount? n Choose the better one? n Which duties are essential? n Be careful with the translation of terms like “liquidated damages” or contractual penalty Force majeure Other & Conditions n Validity of contract n Confidentiality n Changes n Jurisdiction n Choice of law n Predictability of damages n Ineffective provision n Signatures Feedback n Deadline!! n Is the contract as whole compatible? n Are you sure that every clause in the contract has its sence? Do NOT just copy provisions! n Have you evaluated the impact of the provisions you have included into the contract? n Either protect your client or formuate balanced provisions n Parties definition n Define the purpose n Stipulate precise the payment terms n Passing of risk and title must reflect the need of the parties Frame Purchase Contract Partial Contracts Regulation n Partial Contracts or purchase orders? n Would you describe the way of negotiation in the FC? n How can you be sure that the partial contracts are governed by the FC? Frame Contract Clauses Consider each situation as unique! n The way of negotiation of partial Contracts n Price & Payments n Delivery & Packing n Passing of risk and title n Warranties n Liquidated Damages n Confidentiality n Force majeure n Governing law & Arbitration Other Useful Clauses n Entire Agreement Clause n Withdrawal or Cancellation of the contract n Restriction of validity n Transfer of rights and duties Contract for Work Contract for Work v. Purchase Contract: n What are the main differencies? n How do you recognise this Contract? Performance - Work n Do NOT forget the aim of the contract! ¡ Describe the work! Expressly or by reference ¡ Specify the applicable technical standards (CSN, ISO, result you expect etc.) ¡ Use plans, pictures Other Useful Clauses n Advisable not to use Entire Agreement clause n Right of inspection and/or right to correct the way of performance n Santions for delays in performance n In case of repair: n Handover and takeover of the goods n Transportation costs n Spare parts Price for Work n Additional work – how you deal with it? ¡ Fixed price - no adjustment allowed ¡ Ammedment to contract or at least approval of Client ¡ % acceptable and included in the price for work Similarities with Purchase Cont. n Payment terms Delivery details n Passing of risks, passing of title n Warranties n Risks you have to deal with? Eg. Contractor’s delay, subcontractor delay, the buyer won’t be able to pay n Sanctions and remedies n Hardship, force majeure n Final provisions Thank you for your attention!