Commercial Contracting (L4M3)


Module Purpose
On completion of this module, learners will be able to describe the key elements and legal aspects of formal commercial contracts, and analyse and interpret the fundamentals of specifications and key performance indicators that are included in contractual arrangements made with suppliers.

Module aim(s)
In any organisation, a significant element of the procurement and supply function is based around the contracting process. If they are to be successful, contracts must be clearly defined, be cognisant of legal requirements and contain key clauses and terms. This module is designed for those working in the procurement and supply field, or those who have responsibility for the development of legally binding contracts with suppliers.

Next steps
Joining a CIPS qualification programme means you will join the largest Institute in the world for those working in procurement and supply. You can join as a member online today. Once you've become a CIPS member you can book your examinations online.

    Learning outcomes

    1.0  Understand the legal issues that relate to the formation of contracts

    1.1  Analyse the documentation that can comprise a commercial agreement for the supply of goods or services

    • Invitation to tender or request for quotation
    • Specification
    • Key performance indicators (KPIs)
    • Contractual terms
    • Pricing and other schedules (such as for health and safety records, details of suppliers staff, use of sub-contractors, non-disclosure/confidentiality agreements)

    1.2  Analyse the legal issues that relate to the creation of commercial agreements with customers or suppliers

    • Invitations to treat or invitations to negotiate
    • Rules relating to offer and acceptance, consideration, intention to create legal relations and capacity tocontract
    • The battle of the forms and precedence of contract terms
    • Risks presented by contracting on suppliers terms or through oral contracts
    • The Vienna Convention on the International Sales of Goods
    • Misrepresentations made pre-contract award

    1.3  Compare types of contractual agreements made between customers and suppliers

    • One off purchases
    • Framework arrangements and agreements
    • The use of mini-competitions
    • Call offs
    • Services contracts
    • Contracts for the hire and leasing of assets

    2.0  Understand the fundamentals of specifications and key performance indicators that are included in contractual arrangements made with suppliers

    2.1  Analyse the content of specifications for procurements

    • Drafting specifications and developing marketdialogue with suppliers
    • The use of standards in specifications
    • Typical sections of a specification
    • Standardisation of requirements versus increasing the range of products
    • Including social and environmental criteria inspecifications
    • The role of Information Assurance in developingspecifications

    2.2  Appraise examples of key performance indicators (KPIs) in contractual agreements

    • Defining contractual performance measures or key performance indicators (KPI)
    • The use of service level agreements
    • Typical KPI measures to assess quality performance, timeliness, cost management, resources and delivery

    3.0  Understand the key clauses that are included informal contracts

    3.1  Analyse contractual terms for contracts that arecreated with external organisations

    • The use of express terms
    • The use of standard terms of business by bothpurchasers and suppliers
    • The use of model form contracts such as NEC, FIDIC,IMechIEE

    3.2  Recognise examples of contractual terms typically incorporated into contracts that are created with external organisations

    • Key terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees andliquidated damages
    • Terms that apply to labour standards and ethical sourcing
    3.3  Recognise types of pricing arrangements incommercial agreements
    • The use of pricing schedules
    • The use of fixed pricing arrangements
    • Cost plus and cost reimbursable pricing arrangements
    • The use of indexation and price adjustment formulae
    • The use of incentivised contracts
    • Payment terms

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