We have moved some of our Procurement & Construction projects from progress based payment to milestone based payments. The major reason was to motivate contractors to expedite milestone achievement, and get paid faster. However, we found that most of the time delay had come from owner, consultant, designer or suppliers (not under contractor). In those cases, contractor resisted to get paid nothing, for not their mistake. We had to amend few contracts to move back to progress payments, or we had to breakdown milestones into smaller units. For few projects, it went smooth and milestone payment were successful. So you may have to see what you can offer and what are your limitations, before introducing this change. A survey feedback from your routine contractors can also be helpful in decision making.
I think people are going to need a bit more information about the situation to be able to give you help with that question.
• Neptune Marine Service Ltd
Yup, will need more info before commenting on the clause.
Key items to consider:-
- Both parties will have this right.
- Notice period.
- Amount payable [fixed termination fees or actual documented cost].
• Regina Airport Authority Inc.
b. "Client" may terminate this Agreement for its convenience at any time upon providing 180 days written notice to the "Supplier". In such case, the "Supplier" shall be entitled to receive full compensation for all the services performed hereunder payment for all Work performed prior to the date of termination. Payment of such compensation is the sole and exclusive remedy of "Supplier" for termination of this Agreement by the "Client" hereunder and "Supplier" shall not be entitled to, and hereby waives, claims for lost profits and all other damages and expenses.
• AL Faris International Co. for General Contracting
We use below clause in our contracts:
"XXX may at any time and at its sole convenience, terminate this Contract, or any part of the WORK, by giving written notice to CONTRACTOR specifying the extent and the effective date of the termination ("Termination Date"). Should XXX terminate the Contract or any part of the WORK in accordance with clause x.x, CONTRACTOR shall immediately stop performance of the WORK, unless otherwise directed by XXX, and demobilize within XXX (XX) consecutive days. XXX shall pay CONTRACTOR all amounts properly due and payable for terminated WORK up to the Termination Date."
• GSPC Group
We use following clause for EPC Contracts of NG Pipeline Projects:
1. Termination for Owner's Convenience:
1.1. The Owner may at any time terminate the Contract either in whole or in part for any reason whatsoever by giving the Contractor a notice of termination specifying the extent to which performance of Work under the Contract is terminated and the date upon which such termination becomes effective. (Note: You can specify the period of Notice as per Contract Requirements)
1.2 Upon receipt of the notice of termination, the Contractor shall either immediately or upon the date specified in the notice of termination
a) cease all further work, except for such work as the Owner may specify in the notice of termination for the sole purpose of protecting that part of the Facilities already executed, or any work required to leave the Site in a clean and safe condition
b) Terminate all sub-contracts, except those to be assigned to the Owner pursuant to paragraph (d) (ii) below
c) Remove all Contractor's Equipment from the Site, repatriate the Contractor's and its Subcontractors' personnel from the Site, remove from the Site any wreckage, rubbish and debris of any kind, and leave the whole of the Site in a clean and safe condition
d) In addition, the Contractor as a condition of receiving the Payment specified in Sub-Clause 1.3, shall
i) Deliver to the Owner the parts of the Facilities executed by the Contractor up to the date of termination
ii) To the extent required by the Owner, execute all papers and take all other steps to the extent legally possible, which may be required to vest in Owner all rights, set-offs, benefits, title and interest of the Contractor to the Facilities and to the Plant and Equipment as of the date of termination to become the property of Owner and in and to subcontracts, purchase orders and other commitments entered into by Contractor for the benefit of the Project.
iii) Deliver to the Owner all non-proprietary drawings, specifications and other documents prepared by the Contractor or its Subcontractors as at the date of termination in connection with the Facilities and the Contract.
1.3 In the event of termination of the Contract under Sub-Clause 1.1, the Owner shall pay to the Contractor the following amounts:
a) The part of Contract Price, properly attributable to the parts of the Facilities executed by the Contractor as of the date of termination
b) The costs reasonably incurred by the Contractor in the removal of the Contractor's Equipment from the Site and in the repatriation of the Contractor's and its Subcontractors' personnel;
c) Any amounts to be paid by the Contractor to its Subcontractors in connection with the termination of any subcontracts, provided that Contract with the Sub-contractors was approved by the Owner prior to the appointment of the Sub-contractors;
d) Costs incurred by the Contractor in protecting the Facilities and leaving the Site in a clean and safe condition pursuant to paragraph (a) of Sub-Clause 1.2.
Hi Bruce - your post and the efforts of Tim, Paula, Christine and Andrew deserve more than zero responses, so here goes.
I do like how the paper encourages us to take a different mindset to the usual "here are our standard contract terms". It's also great that it helps us think about what are the crucial measures / outcomes that we need to think about - like uptime and the remedies. It's great to have some of these issues and risks highlighted so we can include better milestones and measures of success.
As a practitioner, and I've said it before in the forum, I do worry that there's some real thinking missing when I see some of these about whole of like costs involved with data transfer at the end of the contract. There's a lot of great programs that say they can repurpose and reformat the data, but I've found that there's still a lot of cost associated with that, and in the original approach to market, I've seen few demonstrate any real cost in their procurement plans. We can't expect the IACCM team to do it all though !
• Devant Limited
Hi, I've recently been negotiating on the Supplier side and have found that customer's want to pay a low price, benefit from the flexibility of SaaS pricing but then want to negotiate hard on every single detail! A particular challenge has been the demand from Customers to put every new release / update (however small) through extensive UAT. This clearly challenges the agile & flexible nature of SaaS and the one-to-all model. A number of SaaS suppliers are also relatively new and growing businesses - my experience is that many large corporates want to take advantage of this.
Thanks for preparing this paper as it articulates the challenges and benefits of 'as-a-service' well.
I would expand to the inclusion of customer name/logo use in marketing material as there would typically be some sort of agreement prior to such marketing material being used. Maybe strike the language or amend to clarify?
• Philips India Limited
I have had experience when we signed non-binding MoU for JVs. The most likely scenario would be that the JV partner may like to advertise to the greater world that they have signed on a path breaking MOU etc., especially if these partners are listed entities. So its advisable to make it explicit that disclosing the existence of agreement covers not just "verbatim" disclosures, but other modes as well - including social media...unless explicitly agreed between the parties.
I agree with the other replies here, the NDA should cover marketing material. It's common courtesy to check the other party is ok with this being shared and customers I have had have explicitly blocked this as a company policy.
In both cases, you can issue Purchase Orders/Letter of Awards and get the acceptance of the same form Contractors to make them agreements enforceable by law. As long as Contractors are accepting with agreed terms & conditions, I don't think there is a need to sign a Contract by both parties. Purchase Orders/Letter of Awards can be considered legally binding commercial documents in the court of law.
I have seen some of the tenders wherein it is mentioned that the Accepted PO/Letter of Award shall constitute a formation of Contract. Hence, there is no need to enter into a separate Contract Agreement as per tender issuing authority. Although I have seen some Contractors insisting for signing of Contracts for large value Contracts as they believe that Contracts would only be admissible in the court of law in case of any future disputes due to its nomenclature of 'Contracts'.
As a matter of practice, some buyers go for signing of Contracts for large value supply/works/service contracts and go for Purchase Orders for Small value supply/works/service contracts.
As per my opinion, there can't be any thumb rule for this issue. However, it is always better to take a legal opinion to avoid any future disputes.
I suppose this depends on what you mean by a Contract Agreement. If you have a Master Services Agreement in place that contains agreed legal terms and conditions, signed off by both parties, then the RFP process could proceed. However, depending on the types of good or service being sought, i.e a major construction project, then the terms and conditions within the Master Services Agreement may not be appropriate, its always best to consult a legal professional before you issue the RFP to ensure all legal provisions are either sufficient or addressed.
• AJA Global Consultancy Services, LLC
Pallab, I may be missing something from your description of the issue; or what you describe as "execute a Contract Agreement (signed by both parties)..." could be the reason of my confusion.
It is not clear to me if your organization represents the buyer or purchaser side (who is the party making pressure to move ahead). But anyway, the practice you are describing seems to me as the typical recipe for potential claims. As Gary says in his reply: seek in-house legal advice.
Sorry I can not be of much help.
• Bahrain National Gas Co. (B.S.C)
What I mean by the Contract Agreement is the Form of Agreement which is generally the first covering pages of any standard Contact wherein it is stated..
This Agreement is entered into on the xth day of ... by and between ......
followed by the list of documents that together constitute the Contract and showing the precedence of documents in the event of conflict between the documents.
A blank Form of Agreement is provided as a format along with the tender documents which is finally filled up and signed by us and the successful tenderer. The format when filled up and signed, we call it the 'Contract Agreement'. This document is used for tenders (for services, construction works, etc.) having reasonably high estimates where full tender package is used to invite bids.
On the other hand, for small supply orders ( spare parts, plant consumables, etc.) a system generated RFP document is used to invite bids and eventually a system generated PO is issued referring to RFP document and supplier's quotation.
Now let me rephrase my question as - is there any thumb rule ( example- bid estimate) that could be followed as a criterion to determine
• when a full fledged tender document to be used to invite bids and finally a Form of Agreement is signed off to conclude a Contract, and
• when a simple RFP document to be used to invite bids and and just a system generated Purchase Order is issued to the winning bidder, and no Contract Agreement is executed.
• Airbus Defence and Space GmbH
I guess typically companies sign as the risks are possibly manageable ! If that approach is relational or a trust building measure is a very different question ! And I am tempted to say clearly not as imposing terms is quite the opposite to building up a trust based realationship!
• Itron Inc.
In my experience, requests or demands to have suppliers sign NDAs as-is have become the standard. Especially in the case of an RFX pre-requisite, the buyer is in a superior position of leverage, and attempts to negotiate the terms of the NDA may be viewed as an indicator that the supplier will be difficult to negotiate with when the time comes to establish the commercial agreement.
Additionally, most legal departments view NDAs as a strong candidate for click-through or self-help contracting with a strong desire to standardize and remove themselves from what should be a non-complex, straight-forward document. If the NDA provided is not standard for your business, but is reasonable on its terms - review it with your team to ensure everyone knows how to *manage the information and move on to participate in the RFX.
*Standards for management of confidential information used to be fairly straight-forward, with terms indicating that the recipient must protect the discloser's information with the same level of care as it uses to protect its own (but in no event less than a commercially reasonable degree of care). With increasing concerns over cyber-security and data privacy breaches, it's more common to see NDAs carry designated or mandatory safeguards that prescribe processes, controls and other duties that your organization may or may not be capable of providing. Make sure your IT team (or other SME) can confirm you meet the requirements prior to signing.
This is not uncommon but there is always a but. For example, is the NDA 2-way or does it only protect one party's CI. Companies are often willing to make an exception to their "no change requirement" if there is compelling and easily articulated (and understood!) argument why a change to an NDA, or an additional NDA, is required.
Another option is to set a 'small contract cap' at a fixed monetary value. So the cap would be expressed as (for example) "The greater of $500,000 or 200% of the total contract value"
I agree with your thought Unlimited liability means Unlimited exposure irrespective of size of contract.
If there is no way to Limit your liability then atlast include a clause that defines a process of identifying liability. E.g If a Mistake happens by your employee due to some vulnerability in Client/Customer systems/process then is it only your fault or customer is also responsible for it ?.. If both parties agree to jointly decide on mechanism for fixing ownership of issue then you get a fair chance to defend yourself. Just my thoughts...
Thank you for your response. Most of these happen to be government contracts where one is unable to propose any changes. Do organizations that work with government customers usually willing to undertake the risk of unlimited liability? I am also guessing that there may potentially be no risk that will require indemnification, in a product supply contract or am I underestimating?