- A title
- An introductory paragraph that identifies the parties
- Recitals that describe the intent of the parties entering the contract
- Definitions of terms
- Key conditions for the contract
- Representations, Warranties, Covenants, Indemnities, Guarantees and Releases
- Events of Default and Remedies for default
- Boilerplate terms
- Signature blocks
- Exhibits and attachments
- You always have representations and warranties that you ask the supplier to provide with respect to their product or service. The main difference between a representation and a warranty is if the representation is untrue, they party receiving the representation may cancel the agreement without liability, whereas the breach of a warranty allows both the right to cancel the agreement without liability and collect damages for the breach of the warranty.
- A covenant might be added to a contract if you want the other party to act or nor act, A good example of a covenant would be a covenant not to compete where in consideration for your business the Supplier agrees that they will not compete against you for a specific period.
- The types of Guarantees that are most common in Procurement agreements are “Parent Guarantees” where the parent assumes financial responsibility for the acts of their affiliate.
- Indemnities for both personal injury and property damage (the General Indemnification) and Intellectual Property Infringement are common in Procurement Agreements. .
- Releases are not common in procurement contracts but could occur in situations where one of the parties is receiving extra consideration under that agreement in return for releasing a right or claim or privilege they have with the other party as a result of prior dealings. More commonly releases occur when there is a negotiated settlement of a claim between the parties.
- Failure to perform and obligation
- Failure to pay monies when due
- Failure to maintain a certain status or condition
- Breach or inaccuracy of a representation or warranty
- Bankruptcy or insolvency
- Default under another agreement
- A party who has a “right” does not need to exercise the right. For example, either party may terminate the agreement as a result of a “Material Breach” by the other party. The right, expressed by “may” means its permissive and can be exercised and their sole option. If they elect not to exercise their right, they will be deemed to have waived that right. To ensure that a single waiver of a right does not waive the right to exercise that option on the future, contracts will normally require that for a right to be waived it must be waived in writing by the parties to the agreement, so in most cases a single waiver by an employee would not constitute a waiver of that right.
- Duties are mandatory and the language used to describe duties needs to affirm that the action is mandatory. For example for future acts will or shall are used. “Shall” states a future obligation. “Will” states a future fact that must exist. A variation of this when the duty requires another action to occur in advance. That other action is called a “condition precedent”. The duty only will exist if the condition precedent has occurred.
- For example, “if Buyer purchases 100 machines prior to December 31, 2012, Supplier shall pay a ten percent (10%) rebate on the purchase price of all machines”.
- The duty is to pay the 10% rebate on the purchase price.
- That condition precedent to that duty is the required level of purchases must have been made by the specified date.
- Requirements for making Amendments to the Contract.
· Rights of Assignment by the parties
· Choice of the Law that will be applied and jurisdiction for any litigation
· Jury Trial rights
· When actions must be brought (Limitation of Action)
· Where and how notices must be provided
· Enforceability of Counterparts (separately signed documents)
· Exchange of Information
· Freedom of Action
· Force Majeure
· Obligations of Affiliates
· Merger of Prior Communications
· Order of Precedence between documents
· Record Keeping and Audit Rights
· Severability of the terms (in the event one term is found illegal or unenforceable)
· What terms” survive” the termination or expiration of the Agreement
· Requirements for a Waiver to occur
John C. Smith, as its President