For example, one client had a supplier that failed to deliver on time under the contract. The client renegotiated the contract and agreed to pay the supplier incentives associated with on-time performance because receipt of the product was critical to the client's own launch strategy for its whole business line. Why go down this route?
executive memo Contract Management First Call All the Lawyers s the fallout from the financial crisis spreads, many the supplier could tap into to buy raw A companies are realizing that they’re ill-prepared for potential disruptions in their supply chains. In fact, a recent survey by UPS and the Economist Intelligence Unit found that materials to produce the goods that the clients needed. “As the supplier needed to purchase the supplies necessary to just 16 percent of senior executives believe their companies pay perform under the contract, it would sufficient attention to risk mitigation in their supply chains. submit the invoices to the escrow agent, Erika Schenk spends much of her time helping companies avoid the client would get notice of that and a these disruptions. Schenk, a contract law attorney at international copy of the invoice, and the client had law firm Bryan Cave, works with clients to avoid the “contract to approve the payment in order for it meltdowns” that can occur when a to go through,” Schenk explains. buying organization or a supplier Other examples of precautions that is unable to meet its obligations can be built into contracts: Include a security interest in goods under a contract. being sold to a customer, so if the customer doesn’t pay, you can For supply chain executives reclaim the goods. Segregate goods and indicate on them that dealing with suppliers that are they belong to you, so if a supplier goes under and a creditor not in compliance, the first comes to seize assets, they’ll know those assets don’t belong to question that must be posed is, the supplier and are not subject to seizure. Do we want to continue with this Or, run publicly available lien searches on a supplier to see relationship? You must decide if how many and what kind of liens are against their company – this is a strategic supplier, one lots of liens could mean the supplier’s got a lot of debt. That that is critical to meeting business gives you a better understanding of what their risk exposure is goals. If so, can you bring the and whether you want to do business with that company. It also supplier to the table to salvage can help you see wh
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