Monday, February 7, 2011

Negotiation – Does your agreement represent what you want and agreed?

Before you start the Negotiation

1.     From the first draft, place the document under revision control and keep copies of all revisions until the contract is signed.
2.     Save each version of the document as a different file on your PC until the contract is signed so you can use the “compare” feature to compare the current version to prior versions to show what changes were made, when and by whom.
This helps ensure that all changes are identified. If you are exchanging documents with the Supplier, you do this to ensure that things can’t be added or changed without you seeing and agreeing to them.  

Before you sign the Agreement:
Here’s a number of things to check before you sign a contract to make sure you get what you agreed and that you have good, enforceable contract.
1.     Make sure all representations and promises that motivated you to make the purchase are included in the agreement and they are in the document with the highest priority.
2.     Make sure the order of precedence provides you with the priority you want as between the documents.
3.     If you need to establish priority between individual sections of a document, did you use appropriate “trumping” language to establish the priority?
4.     Check the actual Supplier entity signing the contract has sufficient resources and assets to stand behind their commitments. Commitments are of little value if they don’t!
5.     Use the correct legal names of the parties to the contract.
6.     Check for consistent use of names or nicknames in all contract documents.
7.     Make sure all documents that are intended to be part of the agreement are correctly incorporated by reference into the contract.
8.     Make sure your contract has an effective date for when it starts and a term.
9.     If you have an exhibit, make sure it is correctly incorporated into the specific document where it is intended to be an exhibit.
10.  For all documents make sure they have a page number on every page that also identifies the document name and the total number of pages in the document.
11.  If there are any pen and ink changes, did both parties initial them?
12.  Check the agreement for the defined terms to make sure that when the defined term is called for it is capitalized, and when it’s not, the word is written in lower case.
13.  With dates, did you spell out the date so that the intended date is clear?
14.  With numbers did you spell out the number both alphabetically and numerically?
15.  Did you define days so it’s clear whether you mean calendar or work days. If you use workdays, did clarify whose workdays you mean?
16.  To avoid confusion on currency, did you spell out the currency being used?  
17.  If you have used an example, did you consider all meanings of the example so it can’t be misinterpreted?
18.  For each supplier commitment did you use the proper standard of commitment for the performance you need? (When possible always require firm commitments.)
19.  If you used formulas, did you double-check the formula to ensure that it provides what you intended in all instances? Check it in real numbers to ensure that it does. 
20.  Have you avoided using words that have multiple meanings?
21.  If you used lists in the contract, where you clear whether the list is all-inclusive or just and example. For example it its just and example did you include a clarifying statement such as: “This includes, but is not limited to”
22.  Check spelling with your word processor's spelling and grammar checker.
23.  Check paragraph numbering, and all cross references to other sections to ensure that the reference is correct.  A tip is when you agree to delete a section or subsection from a contract one way to avoid having to re-number is to include the Section or Subsection and Include the statement “This Section is intentionally deleted” or “This Subsection is intentionally deleted”. By doing that it shouldn’t impact cross-references, but you still should check them.   
24.  Manage compatibility between documents. Do all documents use the same terms?
25.  Check to ensure that all commitments are established. If the contract points to another section or document to establish key terms, did you make sure that document completes the commitment and uses the same terms.
26.  If you are using and incorporating the terms of an existing agreement, did you check to make sure that your agreement is compatible with the other agreement?  Do both use the same terms? Are there any areas that the existing looks to the other document to complete?  Are those areas included in your agreement completing the commitment?
27.  Before incorporating any Supplier documents, have you read them and made sure that they do not conflict with, reduce or modify any of the contract commitments or add new obligations for the Buyer that may be problematic. If they do have you excluded those sections or terms from the incorporation?
28.  Is the Product or Service to be provided clearly defined?
29.  Are all commitments written in the active voice? Do they establish the 4 W’s and an H?  Who, What, Where, When and How.
30. If you have a checklist of standard terms to be included, did you check to make sure they were included? This is especially important if you are working off the Supplier’s agreement.
31. For all the risks with the Supplier and their Product of Service or for any risk you agreed to assume, do the contract terms provide you with the tools needed to manage those risks?
32. For all cost that you have agreed to assume, do the contract terms provide you with the tools you need to manage those costs?
33.  Have someone else read it.

At the Signing
1.    Make sure the party that will actually sign the contract for the Supplier has the authority to sign. When in doubt, ask for a Secretary’s certificate.
2.     Sign the contracts in a color other than black ink to differentiate the original.
3.     If you question the Supplier’s integrity, have both parties initial all pages to the agreement.
4.     Identify the parties and witnesses who sign by providing lines below their signature lines for their printed names and addresses.

On-going Management:
Keep record copies of all versions of the documents, amendments etc. so you know what terms were in effect at a specific date or period. In a claim or lawsuit you may need to prove what was in effect at a specific time or period.