Every contract seems to provide adequate protection when it is negotiated and signed. However, during contract performance, disputes often arise between buying organisations and their suppliers.
The following checklist, from Next Level Purchasing, aims to help you review your contracts before signature so that you avoid some of the most common procurement contract pitfalls.
1. All prices must include a unit of measure.
2. Express the contract pricing as fixed or specify the circumstances and methods for pricing changes.
3. Make sure that the Force Majeure clause does not contain any unreasonable excuses for the supplier’s failure to perform.
4. Ensure that the warranty clause specifies applicable remedies for failure and includes the time frame in which each remedy is required.
5. Be sure that the time that the warranty begins is adequately specified, as there are many options.
6. Ensure that the limit of liability provision applies to your organisation, not just the supplier.
7. Make sure that the confidentiality provision protects your organisation’s intellectual property, not just the supplier’s.
8. Make sure that the indemnity provision protects your organisation, not just the supplier.
9. If the time frame for payment and/or delivery is specified in days, ensure that it is clear when the counting of days begins as there are many options.
10. Make sure that how the word “days” is to be used is adequately defined as there are many options.
11. Make sure that you follow your organisation’s policies for having contracts reviewed by an attorney.
