I hope that you’ve enjoyed the article, Contract Templates: False Sense Of Security?
The issue of enforceability of procurement contracts is tricky. There are various things that can make a procurement contract unexpectedly unenforceable. Therefore, knowing exactly how to write a contract is critical.
One “war story” that I love to share is from my days back in the airline industry. This was in the days when airlines were financially healthy and had significant leverage over their suppliers. Now, I imagine some airlines have suppliers who will refuse their business unless it’s done on a C.O.D. basis.
Anyway, for this large service procurement contract, my VP of Procurement demanded that one of the terms be a $15,000 per unit per day liquidated damages clause. This was unheard of!
Competing suppliers’ jaws collectively dropped when they saw that clause in our RFP. And once we got to the negotiating stage, the suppliers fought it vehemently. Ultimately, the successful bidder did agree to it!
But I wonder…if the liquidated damages ever had to be collected and the supplier refused to pay, would the courts find the clause enforceable? Or would they deem it unconscionable?
I am thankful that I never had to find out!
Recommended Reading
- Contract Termination Letter
- Eliminating the Pain Out of Contract Management
- Is Contract Management a Critical Process?
- Executing a Global Sourcing Strategy
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