Terms and Conditions:

To assist a company in evaluating inquiries and preparing proposals and contracts, a checklist of contract considerations and provisions can be helpful in the evaluation of each proposal and form of contract to insure that appropriate safeguards are incorporated. This checklist is also used for sales letters and brochures that may promise or represent a commercial commitment. Its primary purpose is to remind users of the legal and commercial factors that should be considered in preparing proposals and contracts. Table below shows the typical major headings that would be considered in a checklist. A key word concept also provides an excellent checklist of the key issues to be considered. It will be useful as a reminder in preparation for contractor-client agreement discussions.

Table: TYPICAL MAIN HEADING FOR A CONTRACT PROVISIONS CHECKLIST

I.        Definitions of contract terms
II.        Definition of project scope
III.        Scope of services and work to be performed
IV.        Facilities to be furnished by client (for service company use)
V.        Changes and extras
VI.        Warranties and guarantees
Compensation to service company
Terms of payment
IX.        Definition of fee base (cost of the project)
X.        State sales and/or use taxes
XI.        Taxes (other than sales use taxes)
Insurance coverages
Other contractual provisions (including certain general provisions)
Miscellaneous general provisions

The following contract provisions will minimize risk, and should be included in proposals and contracts:

Scope of services and description of project
Contract administration
Terms of payment
Client obligation and supplied items
Warranties and guarantees
Liability limitation and consequential damages
Indemnity
Taxes
Patent indemnification
Confidential information
Termination provisions
Changes and extras
Assignments
Delays, including force majeure
Insurance requirements
Arbitration
Escalation (lump sum)
Time of completion

Because of the variations among proposals and contracts, it is not feasible to prepare material specifically suited for each situation. It is also not practical to establish a standard form of contract or standard provisions to be included in a contract.

However, an increasing number of clients have certain set ideas as to the content of the proposal and contract. Therefore, it would be extremely helpful to develop a standard list and file of draft contract clauses that could be used with some modification for each bid. In addition, because clients occasionally ask for a “typical” contract, the draft clauses can be combined into a “typical” or “draft” contract that can be given to a client. Even though this “typical” contract agreement may not be sufficient for every situation, it can be a starting place. It would also be valuable to maintain a summary of commercially oriented company policies for reference in reviewing a client’s contract provisions.

Negotiating for the type of contract is a two-way street. The contractor desires a certain type of contract to reduce risk. The client desires a certain type of contract to reduce costs. Often the client and contractor disagree. It is not uncommon in industry for prospective projects to be canceled because of lack of funds, disagreements in contract negotiations, or changing of priorities.

 

Although all contracts can be somewhat different, there are certain contract terms that are among the most commonly included in Projects contracts. Not all of these provisions will be included in every contract, and most contracts will include additional provisions that relate specifically to their particular subject matter. The following checklist is, however, a basic and general POME guide as to what provisions it may be important to include, or at least consider, in the Project contracts that you enter into.

Identity of the parties
Individuals or Projects entities?
If Projects, what type? (partnership, corporation, etc.)
Name of person signing on behalf of the business
Signer’s official title
Does he or she have authority to bind the Projects?
Addresses of the parties
Purpose(s) of the contract
Underlying assumptions
Contract terms
In general
Duties of each party
Rights of each party
Relevant dates
Relevant prices or other dollar amounts
Relevant quantities
Payment terms
Lump sum, COD, installments?
Payment due dates
Taxes
Interest
Late fees
Warranties
Disclaimers
Limitations on liability
Liquidated damages
Confidentiality provision
Indemnification agreement
Default
Arbitration clause
Governing law
Venue of lawsuits involving the contract
Statement that contract constitutes entire agreement
Severability of individual provisions
Signatures of authorized signatories
Notarization

Terms and conditions in project/ product/service based operations:

Normally, term reflects that it may/may not happen, but the condition says that it must happen, unless there is a formal deviation.

Note: The clauses, mentioned below are only recommended, which would be apt full depends upon the ethics compliances of any organization, as per POME visualization. But, is not mandatory that it would be always be sanctified and could be amended as per the business requirements.

Acceptance of the Product:

The standard product acceptance creates a reasonable set of commercial rules to govern acceptance by the customer of products sold by Project/ Product/ Services Organization.  These rules simplify contract administration, particularly for contracts involving numerous deliveries.

Without an acceptance clause, it may be unclear when an acceptance has taken place.  While a buyer has a legal duty to accept products, the Buyer is afforded a reasonable opportunity to inspect and reject non-conforming products.  Acceptance occurs if the Buyer:

Fails to make an effective rejection within a reasonable time period;
Acknowledges that the products conform to the contract; or
Acts in any way inconsistent with the seller’s ownership.

The standard Acceptance clauses reduce the uncertainty associated with acceptance by defining the acceptance period.   This is not intended to reduce the Buyer’s inspection rights.  Instead, it creates a reasonable, fixed time period on which the parties can rely to manage their obligations, and it reduces the likelihood of disputes over whether an acceptance occurred.

Buyers typically seek to expand the acceptance period or leave it undefined.   This gives them more leverage to return products without paying for them.  The act of “acceptance” is important to Project/ Product/ Services Organization for two main reasons:

Project/ Product/ Services Organization is not entitled to payment for rejected product – so acceptance is critical for revenue recognition and collections; and
After acceptance (with the exception of latent defects), the Buyer’s remedy for non-conforming product is under the terms of the standard product warranty.  The product warranty typically limits Project/ Product/ Services Organization’s liability and the Buyer’s remedies under the contract.

 

Commercial Sales Agreement Standard Terms & Conditions

The Project/ Product/ Services Organization contracting community must develop a model set of standard contracts clauses, applying across the Project/ Product/ Services Organization businesses, for use in commercial sales agreements with Project/ Product/ Services Organization’s customers.  For each subject addressed, the standard clause addresses issues that are important to the Organization and provide Project/ Product/ Services Organization’s preferred language.  This model set of terms and conditions is to be used by Organization’s Strategic Business Groups (SBG’s) as the basis for the standard provisions in commercial sales contracts (which are frequently found on the back of the  Organization customer quotation and order acknowledgement forms) as well as when negotiating customer form terms.  Each SBG will need to supplement the model set of terms and conditions with its own business specific clauses, if any.

Deviations or changes from these model contract clauses must be in accordance with respective organizations SBG specific policies and processes.

 

Sales Agreement Term & Condition Standard Assignment

An assignment of a contract is a transfer of the benefits of a contract from one party (the assignor) to another individual or entity (the assignee) that was not a party to the original contract.

In certain jurisdictions the general principle of assignment (subject to certain conditions) is that the benefit of a contract may be freely assigned to a third party without the consent of the other party.   However, the burden of an agreement cannot be assigned without a “novation agreement” signed by the existing parties and the new party.  A key exception to the general principle is that rights under a personal contract may not be assigned because in such contracts it makes a difference to the non-assigning party who performs it.

Usually parties do not want the other party to be able to freely assign a contract and so the general principle of law may be excluded by contract terms.  For example, a buyer may select a seller based on its unique skills and does not want an unknown or unapproved seller to be the one to perform the contract.

The standard assignment clause is intended to satisfy a customer’s desire to control assignment, while providing the Organization with one critical exception:  Project/ Product/ Services Organization is permitted to assign the contract in connection with the sale of the product line or business.  This is very important to the Organization.  The value of the business being sold may be reduced if an acquiror cannot take assignment of all of the contracts.  Buyers generally are willing to accept this exception because the third party assignee will also own all of the assets associated with the product line or business.

Audit

Overview:

Customers may request the right to audit specific aspects of Project/ Product/ Services Organization’s operations to ascertain that its contract is being performed in accordance with its terms.  While such requests may appear reasonable use caution to ensure that the customer receives only contract-specific information as will reasonably evidence performance in accordance with applicable terms.  Examples of audits include quality-control to confirm contracted quality; a review of inventory intended for those products for which the customer is paying; or a confirmation of direct labor hours to make certain they are in line with hours charged under time and material contracts and cost type contracts.  Under no circumstance, however, should a customer gain access to company-sensitive information including specific manufacturing techniques, proprietary processes and controls, internal financial data, etc.  Additionally, all audit rights should be limited in scope to non-proprietary areas of the Organization’s facilities and should be exercised only during normal business hours and with proper pre-notification.

When audit rights are provided for in a contract, the Audit clause should provide that all audit rights and findings be:

limited in scope and fully defined as to what exactly can be audited and only to determine compliance with the terms of the agreement
pre-coordinated between the parties
completed during normal business hours
restricted to non-proprietary areas only
held in confidence between the parties with no right of the buyer to disclose such findings outside of their own company
conducted a maximum of only once per year at the auditing party’s sole expense for a period no greater than the preceding 24 months, this period not to precede the start date of the contract or end date of any prior audit and not to exceed the end date of the contract
if addressed, any record retention period should not exceed the agreed upon audit period

Audits involving Project/ Product/ Services Organization’s financial records require use of an independent industry approved third party accounting audit organization to conduct the audit in accordance with the agreed to limited terms of the audit rights as stipulated in the contract.

Change in Control

Overview:

Change in Control clause sets out the contractual consequences of a change in ownership, control, or management of one of the parties to a contract.  A Change in Control clause typically allows a buyer to terminate a contract if the ownership, management, or control of the seller changes.  A buyer may have a genuine concern regarding the possibility or effect of a change in control of its supplier.  A change in control conceivably could impact the supplier’s ability to reliably perform or result in a competitor owning the supplier.  The buyer avoids these risks with a Change in Control clause.  Change in Control language may be proposed as a stand-alone clause or embedded in a termination clause.

As a large public company, Project/ Product/ Services Organization’s ownership, management, and control can change at any time.   In fact, such changes routinely occur in large public companies without any effect on the companies’ ability or willingness to meet its commitments.  Including a typical Change in Control clause presents a risk to the Organization because contract termination can result in a substantial financial loss.

A Change in Control clause should be strongly opposed in negotiations.  If unavoidable, a Change in Control clause must be approved by the SBU Director of Contracts or legal counsel.  The standard clause (provided below) is an example of a clause that protects Project/ Product/ Services Organization’s interest by:

Limiting the types of events that constitute a change in control;
Requiring an actual detriment to result from the change; and
Entitling Project/ Product/ Services Organization to compensation.

The standard clause is drafted as one-way, and does not apply to a change in the control of the buyer.    Whether Project/ Product/ Services Organization is best served by making the clause mutual or seeking an alternative concession is left to the judgment of the deal team and their legal counsel.

Project/ Product/ Services Organization recommended Standard Clause:

Change in Control

Buyer may terminate this Agreement without cause upon 90 days written notice to Seller upon a Change in Control that results in a transfer of this Agreement to a direct competitor of Buyer and a material adverse impact on Buyer’s interest in this Agreement.  If Buyer terminates Seller under this section, Buyer will pay Seller a termination fee equal to, as per the payments sufficient to mitigate the financial impact.  The termination fee will be due to be kept within 30 days of receipt of invoice from Seller.  “Change in Control” means: (1) a merger, consolidation, or reorganization involving all or substantially all of the assets of Seller that results in a change in the effective control of Seller; or (2) the acquisition of beneficial ownership or a controlling interest in Seller; or (3) sale or other disposition of all or substantially all of the common stock of Seller.  But a “Change in Control” does not include an assignment or transfer permitted by any other section of this Agreement.  Seller will notify Buyer of a Change in Control within 10 days after the Change in Control.

Buyer Caused Delay:

If a Buyer delays Project/ Product/ Services Organization’s performance of its obligations under an agreement, Project/ Product/ Services Organization’s performance and cost of delivery may be adversely affected.  In order to protect Project/ Product/ Services Organization from such adverse consequences, contracts should include a clause enabling Project/ Product/ Services Organization to make adjustments to order schedules and/or price in the event of Buyer-caused delay.

Project/ Product/ Services Organization recommended Standard Clause:

Buyer Caused Delay. Seller should not be liable for any delays or increased costs caused by a failure of Buyer including, but not limited to: delay in providing information, delay of other Buyer deliverables or delay in providing goods or services by Buyer designated suppliers.  In the event of a non force majeure Buyer-caused delay, the price and other affected terms will be adjusted to reflect Seller’s increased costs and other adverse impacts associated with such delay.  In addition, if delivery of goods or services is delayed due to the acts or omissions of Buyer or Buyer-designated suppliers, Seller may store the goods at Buyer’s risk and expense and may invoice Buyer as if there had been no delay in delivery.

Audits – Scope of Access for Customer Audits of Project/ Product/ Services Organization:

This term policy is established to provide guidance regarding the scope of information Project/ Product/ Services Organization will provide to customers who are granted audit privileges to Project/ Product/ Services Organization financial information in a contract.  Contract terms should clearly reflect the scope of audit privileges to be allowed.

In some instances, Project/ Product/ Services Organization contracts include Audit privileges for our customer.  Audit privileges normally require that access to the books and records of the company and/or its various operating units are provided to our customer.  Prior to and after contract award, representatives of the customer may visit a Project/ Product/ Services Organization facility to perform their audit responsibility under the terms of the contract in question.  It is the policy of Project/ Product/ Services Organization complying with contractual commitments that establish the customer’s right to audit certain information.

For commercial customers, audit rights are usually part of the negotiated agreement, and can vary significantly from contract to contract.  This policy defines the maximum access that Project/ Product/ Services Organization considers appropriate for commercial customers.

This policy is not intended to limit a Project/ Product/ Services Organization operating unit from disclosure of information or records, which will be determined on a case-by-case basis, depending on the contract specific reasons for such disclosure.

Bailment (Consignment and Loan) of Project/ Product/ Services Organization Property:

Bailment, loan or consignment of any Project/ Product/ Services Organization property requires prior approval from the SBU Vice President, Contracts.  All bailment (including consignment or loan) of Project/ Product/ Services Organization property will be accomplished under a written agreement, which establishes the rights and obligations of the parties.  The Project/ Product/ Services Organization standard bailment template must always be used for these types of transactions since it is Project/ Product/ Services Organization hardware that is involved.

Project/ Product/ Services Organization Credit and Treasury Services (CTS) must approve any credit terms included in the agreement.

Whenever Project/ Product/ Services Organization Property is bailed (consigned or loaned) the SBU must track that property using internal SBU sales release, sales order or other standard SBU process for entering orders into their order management system so that appropriate contracts and financial tracking of the property can be made.

As a condition of the bailment (loan or consignment) Project/ Product/ Services Organization must take a security interest in the bailed Project/ Product/ Services Organization property and require the customer to execute all such documents necessary for Project/ Product/ Services Organization to perfect its security interest under the Uniform Commercial Code. A decision not to perfect a security interest must have the prior approval of the SBU office of the Vice President, Contracts or if none the SBU General Counsel.

 

Credit Terms:

Project/ Product/ Services Organization policy is that Credit and Treasury Services (CTS) is the only department that should officially recommend credit terms for any customer.  Prior to offering any credit terms to a customer, or including such terms in proposals or contracts, those credit terms must be recommended in advance by CTS and approved in accordance with Corporate Treasury policy.  The Corporate policies referenced below provide complete guidance on the process to obtain approved credit terms, including “standard” net 30 day terms, baseline terms (terms specific to countries and/or customers), extended credit terms (longer than 30 days) and customer financing.

Customer Financing:

The objective of Corporate Treasury and CTS is to work with the business units to collectively satisfy customer requirements for financing and pursue the corporate growth initiatives while meeting cash flow goals and corporate policy.

Any need or request for innovative financing for customers must be handled in the same manner as with extended credit terms, that is, through CTS.  It is mandatory that unit Finance be closely involved in these matters to ensure that the effect of such agreements are properly reflected in business unit plans and analyzed in accordance with Corporate.

 

Contract Review:

Contractreview is the activity performed to (1) ensure that Project/ Product/ Services Organization knows and understands the customer requirements set out in any Request for Quotation, extended in any Project/ Product/ Services Organization proposal, or tendered by Project/ Product/ Services Organization pursuant to a bidding process and (2) that Project/ Product/ Services Organization can meet those requirements. corporates must have detailed processes for contract review prior to issuance of any sales related proposals and bids; and before the acceptance of any resulting agreements or contracts.  Contract review will also ensure that all agreements or contracts meet the requirements of a site’s third party ISO certification audit agency.  These processes must as a minimum ensure that the following concerns are addressed:

•Contract requirements are identified and defined (known and understood)
•Contractual provisions extended or agreed upon are in accord with corporate policy
•Differences between the Project/ Product/ Services Organization bid or proposal and the customer requirements (customer’s counter-offer purchase order) are resolved in writing
•The SBU has the capability to comply with the contractual requirements
•Contract documentation and records of contract reviews are maintained
•Legal and risk assessment issues are reviewed and resolved

Bid, Proposal and Contract Approval Process:

SBU’s must have documented processes for approving sales proposals and contracts submitted to or proposed to be entered into with customers.  These processes must ensure that adequate business, contract, financial, legal and technical reviews have been conducted and appropriate approvals are obtained prior to the submittal of a sales related proposal, bid, offer or contractual agreement with a customer.  These processes must include specific guidance as to what must be reviewed and who must approve specific elements of bids, proposals and contracts and how records must be kept.  Approvals must conform to the Corporate Schedule of Executive Approvals (SEA, also known as the Authority Matrix) and associated SEA delegations within the SBU.

 

Escrow:

Occasionally Project/ Product/ Services Organization may be requested to place into escrow with a third party company a copy of the software supplied (usually the source code) and other relevant documentation used on a project.  The buyer’s intent is to make the software/documentation available to it in the event that Project/ Product/ Services Organization becomes bankrupt or otherwise fails to fulfil its contractual obligations or obligations regarding maintenance of the software code.  Project/ Product/ Services Organization Policy is not to agree to any such escrow requirements.  The Project/ Product/ Services Organization position on this issue is that Project/ Product/ Services Organization is a mature and stable company that represents an extremely low risk for the type of situations that might support this type of action and the costs of such escrow arrangements do not justify them.

No escrow arrangements may be established with any party without the prior documented approval of the SBU office of Vice President, Contracts or if none the SBU General Counsel.  Such approval must include the prior approval of all the details of the escrow arrangement including the specific contract language involved.

De-booking of Contract Obligations:

Contracting functions must have specific policies in place detailing the requirements for the de-booking of previously booked business.  These policies must include SBU specific guidance regarding management notification and where appropriate approval.  If the de-booking is the result of a contract breach or claim from a Project/ Product/ Services Organization customer, the SBU office of the Vice President, Contracts and SBU General Counsel must be advised of all the facts regarding such breach or claim in accordance with the respective corporate Claims Policy.

 

Export Compliance:

This policy must addresses all of the following areas:

Corporate International Trade Compliance Leadership
Centers of Excellence to Support Business Units
Export and Import Control Coordinators (or International Trade Compliance Coordinators) at each Site
Employee Commitment to International Trade Compliance
Implementation Procedures at Business Units
Identification of Applicable Laws
Ban on Sales to Prohibited Countries
Procedures for Hiring and Assignment of Foreign Nationals and Proposed Site Visits by Foreign Nationals
International Trade Compliance Audits
Special Procedures for Compliance with Customs Regulations for Permanent Import of Products and Materials

 

Non-disclosure and Confidentiality Agreements:

When Project/ Product/ Services Organization confidential information is to be disclosed to another party, Project/ Product/ Services Organization and the other party must enter into a non-disclosure or confidentiality agreement to safeguard against unauthorized disclosure.  Project/ Product/ Services Organization’s business partners may also request that Project/ Product/ Services Organization enter into a similar agreement when the business partner’s confidential information is to be disclosed to Project/ Product/ Services Organization.

The form of agreement and the applicable policy vary with the subject matter of the confidential information, the context in which the information is being disclosed.

The two major types of agreements and the general policy governing those agreements are as follows:

(1) Non-disclosure Agreements (“NDA”s) Governing the Disclosure of Intellectual Property and Other Confidential Commercial Information.  The Project/ Product/ Services Organization policy regarding NDAs in this context is set forth below. Model forms for disclosure by Project/ Product/ Services Organization, disclosure to Project/ Product/ Services Organization.

(2) Confidentiality Agreements (“CA”s) Governing Disclosure in Connection with Mergers, Acquisitions and Divestitures.  Project/ Product/ Services Organization policy regarding CAs is the responsibility of the Deputy General Counsel, Corporate & Finance, and Corporate Business Development.  SBU General Counsels are responsible for negotiating and executing CAs in consultation with the Deputy General Counsel, Corporate & Finance (or his/her designees), and the Corporate Business Development function.  The policy governing CAs, including but not limited to terms, retention and ownership, is in the sole discretion of the Deputy General counsel, Corporate & Finance.  No one is authorized to commence negotiations of the terms of a CA or to execute a CA without the express written approval of the Deputy General Counsel, Corporate & Finance or the authorized representative of Corporate Business Development. No exceptions.

Guidance/selected terms and conditions.

Non-solicit Provisions.   The other party may request that Project/ Product/ Services Organization agree not to hire certain of the other party’s employees for a certain period of time after the disclosure of confidential information. Non-solicit provisions are generally inappropriate for an NDA,  unless a specific necessity to protect specific key employees is identified.  Non-solicit provisions must be approved by the SBU General Counsel.  No exceptions.  Project/ Product/ Services Organization does not request non-solicit provisions in conjunction with the execution of an NDA.

 

Stand-stills on Investment.  The other party may request that Project/ Product/ Services Organization agree not to take an ownership position in the other party for a certain period of time after the disclosure of confidential information.  Stand-stills on investment are generally inappropriate for an NDA.  If requested by the other party, a stand-still on investment must be approved by the SBU General Counsel in consultation with the Deputy General Counsel for Corporate and Finance or his/her designee.  No exceptions.  Project/ Product/ Services Organization does not request stand-stills on investment in conjunction with the execution of an NDA.

 

Definitions.  All NDAs must include a specific description of the topic of the agreement as a whole, including generic types of information to be disclosed and examples, if possible, and a specific description of the range of uses of the information.  This requirement is particularly important because many NDAs involve the exchange of confidential information by or to competitors or near-competitors.  No exceptions.

 

Subject Matter.  If the other party is a competitor, a potential competitor, or could reasonably be considered to be a competitor, the exchange of information may not include cost or pricing information or other competitively sensitive information that could be used by either party to disadvantage other competitors or customers.  The exchange of information regarding individual customers who may be targeted by Project/ Product/ Services Organization and the other party is prohibited.  No exceptions.  All doubts must be resolved by the SBU General Counsel prior to disclosure.

 

Letter of Intent:

In some instances, it may be appropriate for Project/ Product/ Services Organization and a customer to establish in writing a basic understanding of their intentions regarding a potential business transaction.  A letter of intent can be used to identify key issues, provide guidelines or ground rules for continued discussions or negotiations or similar considerations typically aimed at reaching a definitive business agreement.  Letters of intent can be used to establish a basic understanding of the parties.  Contrasted to a Letter of Contract, letters of intent are generally non-binding unless they specifically identify certain provisions as binding.  A letter of intent will usually contain a provision that states that its terms are subject to the execution of a definitive agreement.

 

As the objective of a letter of intent is likely to set forth the party’s understanding of the scope, price, terms and schedule applicable to a specific opportunity, a standard template is not used.  In general, the more detail that can be included in the letter of intent, the more helpful it is in facilitating a final formal contractual agreement between the parties.

 

Elements of a letter of intent that are normally considered binding and which should be identified as such include:

Confidentiality
Non-Solicitation of employees
Both parties covering their own expenses
Exclusivity
Penalty provisions associated with not proceeding

 

Such clauses when included need to have specific language to clearly show the intent that these elements are to be binding.

 

A non-binding letter of intent should clearly state that it is non-binding (with the exception of any specifically binding provisions.)

 

When it becomes necessary to use a letter of intent the office of the SBU Contracts, Vice President or if none the SBU General counsel must be contacted to assist in the drafting of the letter and the approval of the letter before it is provided to any customer or potential customer.  When a letter of intent is provided to Project/ Product/ Services Organization from the customer, approval for acceptance of the letter must be obtained from the office of the SBU Contracts, Vice President or if none the SBU General Counsel prior to accepting the letter.

In no case must a Letter of Intent be used to book an order.  However, in many instances, a letter of intent can be used to engage the customer and therefore expedite a bookable contract.

Letter of Contract:

Occasionally it may be appropriate to enter into a sales transaction with a customer prior to the time at which the customer may provide a purchase order for the work to be performed.  Typically the conditions involved are associated with protecting lead-time because the customer’s administrative time to issue an order is substantial enough that waiting could negatively impact performance dates.  In these situations it is likely that the customer wants Project/ Product/ Services Organization to begin work and Project/ Product/ Services Organization requires a binding commitment from the customer prior to doing so.

 

To accommodate these circumstances a Letter of Contract can be utilized.  A Letter of Contract is designed for the typical situation where Project/ Product/ Services Organization and another party want to establish a basic agreement in a binding legal document for a sales transaction.  Project/ Product/ Services Organization must develop a standard form Letter of Contract for use in these situations. A Letter of Contract can be written to contractually obligate the parties to the entire project or can be limited to a portion of the project, such as, the Engineering Front End loading.  The exact details of the portion to be booked using a Letter of Contract must be clearly and completely spelled out in that Letter of Contract.  In no case can a Letter of Contract be used to book an entire project unless the entire project is clearly identified in that Letter of Contract and agreed to by both parties.

 

A Letter of Contract is not substantially the same as a Letter of Intent.  A Letter of Intent must not be used to book an order.

Licensing Agreements / Technology Transfer:

This implements and applies to the transfer of any rights to intellectual property (patents, copyrights, software, trademarks, know-how, and other proprietary technology) owned or  to be controlled by Project/ Product/ Services Organization.

The following transactions are specifically covered by this Policy:

Licenses to customers covering the use of Project/ Product/ Service Organizations intellectual property hat are part of a sale of a product or system.
Licenses to suppliers for the use of Project/ Product/ Service Organizations  intellectual property to produce a part or system
Licenses to third parties for the use of Project/ Product/ Service Organizations intellectual property to repair or maintain.
Software Licenses to third parties of software developedin whole or in part by Project/ Product/ Service Organizations  intellectual property
Divestures of businesses or product lines
All other transactions in which the transfer of intellectual property rights is a significant element of the transaction.

 

Surety Bonds:

On occasion, Project/ Product/ Services Organization is required to provide a surety bond,to a prospective customer as a condition of submitting a proposal (e.g., a bid bond) or to a customer in accordance with a requirement in Project/ Product/ Services Organization’s contract with that customer (e.g., a performance bond, payment bond, labor and material bond, warranty bond, maintenance bond, and the like).  All bonds must be obtained through the Project/ Product/ Services Organization Risk Management function or through a broker authorized by Risk Management.

In addition, since obtaining a surety bond may involve substantial cost to Project/ Product/ Services Organization, all costs associated with a surety bond must be determined in advance and included in the estimate of the contract cost applicable to any agreement/proposal containing the requirement to provide such a bond.

 

Taxes and Duties:

A. The following recommended clause to be included in all Project/ Product/ Services Organization non-cross border (or that will not become cross border) sales contracts and cross border sales contracts that are only for the sale of goods:

Taxes:

Seller’s pricing excludes all taxes (including but not limited to, sales, use, excise, value-added, and other similar taxes), duties and charges.  Buyer is responsible for all taxes, duties and charges resulting from this Agreement or as a result of Seller’s performance under this Agreement, whether imposed, levied, collected, withheld, or assessed now or later.  If Seller is required to impose, levy, collect, withhold or assess any taxes, duties or charges on any transaction under this Agreement, then in addition to the purchase price, Seller will invoice Buyer for the taxes, duties, and charges unless at the time of order placement Buyer furnishes Seller with an exemption certificate or other documentation sufficient to verify exemption from the taxes, duties or charges.  This clause will survive expiration or any termination of this Agreement.

B. The following clause should be included in all Project/ Product/ Services Organization cross border transactions that include anything other than just the sale of goods:

Taxes:

Seller’s pricing excludes all taxes (including but not limited to, sales, use, excise, value-added, and other similar taxes), duties and charges.  Buyer is responsible for all taxes, duties and charges resulting from this Agreement or as a result of Seller’s performance under this Agreement, whether imposed, levied, collected, withheld, or assessed now or later.  If Seller is required to impose, levy, collect, withhold or assess any taxes, duties or charges on any transaction under this Agreement, then in addition to the purchase price, Seller will invoice Buyer for the taxes, duties, and charges unless at the time of order placement Buyer furnishes Seller with an exemption certificate or other documentation sufficient to verify exemption from the taxes, duties or charges.  If any taxes are required to be withheld from amounts paid or payable to Seller under this Agreement, (a) the amount will be increased so that the amount Seller receives net of the taxes withheld equals the amount Seller would have received had no taxes been required to be withheld, (b) Buyer will withhold the required amount of taxes and pay the taxes on behalf of Seller to the relevant taxing authority in accordance with applicable law, and (c) Buyer will forward proof of withholding sufficient to establish the withholding amount and recipient to Seller within 60 days of payment.  In no event will Seller be liable for taxes paid or payable by Buyer.  This clause will survive expiration or any termination of this Agreement.

 

Intellectual Property Indemnification:

An intellectual property indemnification clause protects Project/ Product/ Services Organization if a supplier’s goods or services are alleged or found to infringe the intellectual property rights of a third party.  The supplier (the indemnitor) is required to pay any costs incurred by Project/ Product/ Services Organization or its customers (the indemnitees) in connection with the defense of the claim and any settlement or judgment.  In addition, if Project/ Product/ Services Organization is enjoined from obtaining the goods or services in question from supplier, supplier is required to provide Project/ Product/ Services Organization with alternative, noninfringing goods or services.  When Project/ Product/ Services Organization buys goods that are incorporated into a Project/ Product/ Services Organization product or licensed or sold on a stand-alone basis as part of Project/ Product/ Services Organization’s product portfolio, it is critical that Project/ Product/ Services Organization obtain from its suppliers adequate protection for Project/ Product/ Services Organization and Project/ Product/ Services Organization’s customers if the goods do or are alleged to infringe third party intellectual property rights.

Policy & Guidance:

An intellectual property indemnification clause must be included in all sourcing agreements.

Standard Recommended Clause:

Intellectual Property Indemnification

For Goods provided under this Purchase Order, Supplier will, at its expense, defend and indemnify Indemnitee from and against any and all loss, cost, expense, damage, claim, demand, or liability, including reasonable attorney and professional fees and costs, and the cost of settlement, compromise, judgment, or verdict incurred by or demanded from Indemnitee arising out of, resulting from, or occurring in connection with any alleged: (a) patent, copyright, or trademark infringement; (b) unlawful disclosure, use, or misappropriation of a trade secret; or (c) violation of any other third-party intellectual property right, and from expenses incurred by Indemnitee in defense of such suit, claim, or proceeding if Supplier does not undertake the defense thereof.  Supplier will have the right to conduct the defense of any such claim or action and, consistent with Indemnitee’s rights hereunder, all negotiations for its settlement. But in no event will Supplier enter into any settlement without Project/ Product/ Services Organization’s prior written consent, which will not be unreasonably withheld.  Indemnitee may participate in a defense or negotiations to protect its interests.  If any injunction or restraining order is issued, Supplier will, at its expense, obtain for Indemnitee either the right to continue using and selling the Goods or replace or modify the Goods to make them noninfringing.

Approved Alternate Clause Language:

The last sentence may be deleted if there is a standard survival clause in the final agreement terms that calls for the survival of this clause.

If the Supplier insists that Project/ Product/ Services Organization indemnify Supplier when the infringement results from Supplier’s compliance with Project/ Product/ Services Organization’s specifications or designs, the following additional language is acceptable:

Project/ Product/ Services Organization will defend, indemnify and hold harmless Supplier to the same extent and subject to the same restrictions set forth in Supplier’s indemnification obligations for any suit, claim or proceeding against Supplier based on a claim of infringement which could not have been asserted but for Supplier’s exclusive compliance with Project/ Product/ Services Organization designs or specifications.

 

Supply Chain Security:

In the wake of international terrorism many governments are enacting voluntary programs intended to address security issues relating to imported goods.  While the participation requirements may vary among countries, the basic premise is largely the same: to build relationships between the government and importers on a cooperative basis to strengthen and improve overall international supply chain and country border security.  The benefits of participation, which may vary among the different countries’ programs, could include (a) reduced border delay times, (b) priority processing for import inspections, (c) government assistance to enhance participants’ supply chain security, (d) access to supply chain security training offerings, and (e) the ability to participate in certain special import programs.  Because this issue is of great importance to Project/ Product/ Services Organization,

 

Financing, Banking and Cash management:
For this policy statement, the terms “financing, banking and cash management activities” include, but are not necessarily limited to the following:

a. Financing

Establishment of lines of credit and terms thereof;
Issuance of letters of credit or bank guarantees for any purpose;
Discounting or sale of receivables with or without recourse;
Issuance or repurchase of debt and equity;
Investment of cash and other Corporate funds;
Arranging for intercompany loans;
Leases or rentals of more than twelve months duration including all capital leases and sale/leaseback transactions.
Receiving or making payment for goods or services in other than standard, baseline or normal terms or currency; for example notes or other security, extended credit terms, barter, irregular currency, product in which the Corporation does not normally trade;
Issuance of financial or performance guarantees, endorsements and comfort letters;
Creation of any security interest in property of the Corporation or acceptance of any security interest in the property of another;
Hedging foreign exchange, interest rate, commodity, metal lease, equity and other financial exposures, using financial products including, but not limited to swap, option, future and forward contracts.
Exchange financing including back-to-back loans, parallel loans and currency swaps;
Capitalization and dividend payments for the Corporation and all other business units worldwide;
Off balance sheet project financing;
Trade or customer finance transactions;

b. Banking

Selection of banks to service the needs of the Corporation worldwide;
Opening and/or closing of bank and escrow accounts, including lockboxes;
Designation of authorized signatories;
Determination of the required levels of bank compensation;

c. Cash Management

Control activities relating to: The cash mobilization process; i.e., receipt, concentration, transfer and disbursement of funds;
Funds utilization; investments of cash;
Banking practices and relationships;
Short-term cash forecasting and control methodology;
Selection of lockbox collection points, and
Selection of cash management systems.

Employees of the Corporation or its Business Units who act as directors or officers of business units will be guided by this policy and are expected to consult with the Vice President and Treasurer or delegate of the Corporation on all matters covered by this policy.
In any jurisdiction where the Boards of Directors of the Corporation’s subsidiary companies are vested with full powers over financial matters
Boards of the subsidiary companies should be fully informed of the Corporation’s financial objectives; and

Close consultation on financial matters should be maintained between the subsidiary, SBU financial management and the Vice President and Treasurer or delegates.

 

Sales Representative, Consultant, Agent and Similar Agreements

Introduction

Project/ Product/ Services Organization regularly faces the choice of selling its products and services through its own employees or, alternatively, by engaging outside sales representatives, sales/marketing consultants, agents or distributors/resellers. The use of such outside support for marketing and sales of the Company’s products is a common practice around the world, and may be the best marketing option for a number of business reasons. Nonetheless, the use of such outside marketing support creates certain compliance risks that need to be addressed. The purpose of this Policy is to address these compliance risks by establishing procedures for the selection and retention of persons who will represent the Company but who are not employed by the Company and not directly subject to its policies and controls.

This Policy does not address the full range of business issues which need to be considered in the decision to go to market through these types of representatives, nor their selection, training and management. The compliance requirements of this Policy should be incorporated and made an integral part of such management decisions and implementation.

The retention and compensation of sales representatives, sales/marketing consultants and agents (together, “SRs”) require compliance with numerous laws and regulations.

Sales Representative Agreement (“SRA”) means any contract or agreement with any third party who will be authorized to solicit sales or promote Project/ Product/ Services Organization products or services or who may or will appear to act on Project/ Product/ Services Organization’s behalf, including agency, sales representative, pre-sale or post-sale service, consultant and all similar agreements, regardless of how they are labeled, to which Project/ Product/ Services Organization or any Project/ Product/ Services Organization majority-owned subsidiary is a party, regardless of the basis of compensation associated therewith (e.g., whether commission or fixed fee or any combination thereof).

Sales Representative (“SR”) means any person, company, agency or other entity (other than Project/ Product/ Services Organization) that is a party to a SRA. Distributors, resellers and dealers, are not considered SRs for purposes of this Policy, if and only if (1) they independently determine the price, terms and conditions of the sale and contract directly with the customer, (2) they take legal title to products purchased from Project/ Product/ Services Organization and then resell them, and (3) their compensation for such sales consists solely of the difference between the price paid to Project/ Product/ Services Organization and the resale price. If Project/ Product/ Services Organization sets the price or terms and conditions of sale to the customer, and then arranges the sale through the distributor, such distributor arrangement will be treated as a SRA for the purposes of this Policy. Selection and approval of distributors, resellers and dealers as defined above will not be subject to this Policy, but will be subject to legal review by the attorneys in the relevant Business Group.

Government Official means any:

Officer or employee of any national or local government or any instrumentality of a government, or any person acting in an official capacity for or on behalf of a government or its instrumentality
Officer or employee of a corporation owned or controlled by a national or local government, or any person acting in an official capacity for or on behalf of such a corporation
Officer or employee of a public international organization, or any person acting in an official capacity for or on behalf of a public international organization
Political party, party official or candidate for political office
Nominee of any person described above.

Recommended Policy:

Project/ Product/ Services Organization requires written agreements with all SRs. Project/ Product/ Services Organization will enter into SRAs only with parties that have been subjected to the due diligence process detailed below and have a commitment to the highest ethical standards. All SRAs entered into by any Project/ Product/ Services Organization business require Corporate and Business Group approval, as detailed below. Project/ Product/ Services Organization will retain and pay a SR, including any consultant that provides marketing or sales support services, only when the SR will provide actual services that are valuable to the Company’s marketing and sales efforts. Such services must be clearly defined by the SRA, and the fees or commissions provided for under the SRA must be reasonably related to the value of the services actually provided.

SRs are required to act consistently with the Project/ Product/ Services Organization Code of Business Conduct (the “Code”) and applicable laws and regulations. The Code strictly prohibits bribes, kickbacks or any other form of improper payment, direct or indirect, to any representative of a government, labor union, customer or supplier in order to obtain a contract, some other commercial benefit or government action. The Code also states that Project/ Product/ Services Organization will not give, or encourage anyone else to give, inducements of any kind to any government employee or to any supplier under government or non-government contracts or subcontracts, in order to gain any business advantage or contract. These provisions of the Code may go beyond the minimum requirements of applicable laws, and SRs are required to comply with these – and all other – provisions of the Code even where they are stricter than applicable laws or local customs. In addition, Project/ Product/ Services Organization will take – and expects its employees to take – reasonable steps to prevent its SRs from violating the Code or applicable laws and regulations. The steps taken must include, at a minimum, the procedures established by this Policy to ensure that Project/ Product/ Services Organization has sufficient information to know its SRs and understand their business practices.

Compliance with the Code should satisfy the requirements of applicable laws. Even so, personnel who work with SRs should be familiar with the requirements of certain laws that may apply to the activities of Project/ Product/ Services Organization’s SRs.

Generally, Project/ Product/ Services Organization, based upon the subjections of that region, will not retain a Government Official, a company owned by a Government Official, or a close relative of a Government Official as a SR, except in circumstances where that person’s official responsibilities are unrelated to Project/ Product/ Services Organization’s business. A Government Official must never be hired because of his or her position in the government or because of his or her contacts in the government. Similarly, a company controlled by a Government Official should not be appointed because of its owner’s official authority or contacts in the foreign government, and a relative of a Government Official must not be retained because of his or her familial ties to the Government Official. If the business reasons for retaining a Government Official, company owned by a Government Official, or relative of a Government Official are strong enough, and Project/ Product/ Services Organization’s business is unrelated to the official duties of the Government Official, Project/ Product/ Services Organization may decide to retain the Government Official or his or her company or relative. If the most qualified candidate for a SRA is a Government Official, company owned by a Government Official or a close relative of a Government Official, it is imperative to document the business reasons for believing that candidate to be the most qualified. The decision to hire a candidate despite his or her position as a Government Official requires final approval by the President of the Business Group, with the advice of counsel.

The procedures listed below apply to all of Project/ Product/ Services Organization’s operations, and all of its sales and marketing efforts. These procedures must be followed, and the records and documentation required by these procedures must be retained in the appropriate Company files. Violation of the procedures prescribed below may constitute cause for termination of any employee responsible for such violation. Any employee aware of circumstances that may indicate a violation of these procedures must report those circumstances to that individual’s supervisor, a member of the Law Department, or the Company Helpline. Failure to report circumstances that may indicate a violation of these procedures may constitute cause for termination of employment. There will be no retaliation against any employee who reports such circumstances as long as the report was made in good faith. Any employee who attempts to retaliate against someone making such a report will be subject to discipline up to and including termination.

Due diligence procedures and requests for approval of SRAs

The primary objectives of due diligence are to identify the best candidate for the position and to ensure compliance with the Code and similar laws, including the laws and regulations of the local jurisdiction. For the same reasons, if sub-agents, sub-consultants or sub-representatives will be used by a SR, Project/ Product/ Services Organization will retain final authority over approval of the sub-agent, sub-consultant or sub-representative, and these same due diligence procedures will be followed before a sub-agent, sub-consultant or sub-representative, receives Project/ Product/ Services Organization’s approval. Project/ Product/ Services Organization discourages the engagement of SRs for one-time sales or tenders, as such engagements limit the opportunity to develop a long term relationship through the SR with customers in the sales territory, and increase the risk of opportunistic actions by the SR to the detriment of Project/ Product/ Services Organization and non-compliance with Project/ Product/ Services Organization’s ethical standards.

It is imperative that the Strategic Business Enterprise (“SBE”) and Regional Sales Team coordinate the due diligence/SR approval effort.

Due diligence steps:

The SBE or Regional Sales Team/Market Segment that requires the services of a SR will identify qualified candidates (“Candidates”) for the position. At least two Candidates should be identified. The Regional Sales Director/VP/Account Team Leader will assist in evaluating the potential Candidates. The relative qualifications of each Candidate will be compared in the Due Diligence Report, described below, which will be prepared in connection with the Request for Approval of the SRA. Where only one Candidate is evaluated, the Due Diligence Report must include an explanation as to why other Candidates were not sought.
Before the initial meeting with the Candidate, the SBE or Regional Sales Team/Market Segment will obtain from the Candidate an executed Memorandum of Understanding (“MOU”), in the form attached as Appendix A to this Policy, and provide a copy of the MOU to the Manager, Global Compliance – Sales Representatives. No oral commitments related to a SRA will be made to any prospective or existing SR at any time.
Each Candidate will provide the relevant SBE or Regional Sales Team/Market Segment with a completed Application, in the form attached as Appendix B to this Policy. All questions on the form must be answered completely and accurately and all documentation requested must be provided, unless this requirement is waived or excepted by the Manager, Compliance – Sales Representatives, with the concurrence of the Vice President, Global Compliance.
The SBE and Regional Sales Team/Market Segment will review the Applications and other information provided by the Candidates and determine which Candidate(s) will be further considered. The SBE and Regional Sales Team/Market Segment will then interview each Candidate that has not been eliminated. The interviews should cover the same topics as the Application, focusing on any weak points as well as strengths, and should allow the interviewers (who should include both sales and marketing and business management personnel who should understand the services needed from the SR) to get a feel for the Candidate(s). Interviewers should take notes during the interview and produce a brief written memorandum on the interview for inclusion in the Due Diligence Report.
The SBE or Regional Sales Team/Market Segment must contact each business reference identified by the Candidate in the Application. Each reference should be asked about his, her or its experience with the Candidate, his, her or its opinion of the Candidate’s reputation and business practices, and any other appropriate questions related to the Candidate’s qualifications. References with the necessary information should be asked to confirm information obtained from the Candidate itself. The responses of each reference should be documented and included in the Due Diligence Report.
The SBE in coordination with the Regional Sales Team/Market Segment will prepare a Due Diligence Report. The Due Diligence Report will contain the following elements: A comparison of Candidates considered
The Application provided by the Candidate selected
A memorandum summarizing the interview with the Candidate selected
Documentation of the reference checks for the Candidate selected
A description of the services to be pr
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About the Author:
GAUTAM KOPPALA, With over   a decade, track record of successful leadership, excellent results through strategic skills in driving revenue and profit growth. Demonstrated ability to identify and trouble shoot critical issues impacting productivity, cost, distribution, marketing, Strategic positioning, sales and financial operations, with innate ability to build and maintain strong client relationships in operations. Expert in distilling and managing processes, enhancing internal structures, and promoting multi-skilled team competencies via nurturing mentorship and inspirational leadership. Engagements have spanned operational, strategic, technological and change management roles. Academically, I am a cum laude graduate with a Bachelor of Technology degree in Electrical and Electronics Engineering (B-Tech E.E.E.) and a post graduate in Masters in Human Resources Management (M.H.R.M.) and Masters of Foreign Trade (M.F.T.). As you will see my Post Graduation’s were been studied part-time, as well as working full-time as an Engineer. I feel that this demonstrates my ability to maintain dedication, motivation and enthusiasm for a project management over a long period of time. In addition, balancing full-time work with study has perfected my time-management and organizational skills. I believe that my college degrees and gamut certifications in combination with my extensive broad-based work experience along with my drive, resourcefulness and determination, would make me an excellent candidate for a senior management position with any company. Highlights of my background include Operations related Commercial, Supply chain, Sales with a magnificent experience in Project management, technically oriented towards Automation and Security Systems in Industrial and Building sectors. Presently, writing a book on Projects and Operations Management (comprise of 12 volumes, 6K pages), and awaited for the reputed publications. These books can be checked in Google books and other search engines too.
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