Introduction
An agreement between two or more companies doing business together is called a business contract. Companies entering into an agreement must present their clear obligations, prohibitions and permissions.
The contract also involves penalties to the party that can end up failing to complete its part of the deal. The contract must be able to protect the parties’ interests by making sure that the contract is completed within the specified time (White, 2010).
Terms of contract
Duties
Parties to the contract have duties that they must perform. They can be the obligations that each party must fulfill and also what parties are not allowed to do. For example, in a manufacturing company, the producer may sign a contract with the distributor to distribute the products for a price. Then the distributor may be restricted from getting another person to help him perform the duties since it might solicit the business (Plimpton, 2007).
Rights
This part of the contract gives the rights that each party is entitled to. For example, if the parties disagree with each other about the quality of the products, they should have stipulated rights of whether to get an arbitrator or whether the parties should sue each other. The parties may also disagree on the compensation rate. Therefore, a contract must state the right of the parties.
Dates
The contract must have the dates of stating and the dates of completion of the task. It also includes the dates when the payments should be made.
Payments
The contract must specify the terms in which the payments will be made. For example, parties can agree that full payments will be made upon completion of the work.
The agreement can also state that the payments will be made upon completion of every phase in case the work is done in phases. The payment terms also include the penalty charge on the performing party for not completing the work on time. The interest charged for late payments is also included in the term.
Payments can be based on the quality of the services that is provided by the company. Quality can be measured with regard to customer’s satisfaction.
This can also help the service providing company to increase the competitive advantage above its competitors. The companies entering into an agreement can agree on the metrics that will be used to measure the quality of the services provided. Efficiency and effectiveness of the services provided can also be a scale to measure the quality (Plimpton, 2007).
Confidentiality
Confidential details about the contracts should not be shared with any third party who is not involved with the contract. For example, a manufacturing company hiring a distributor may need to share some crucial information about the company with the distributor. Similarly, a distributor needs to share some information with the company.
The term of the contract must indicate that there should be no disclosing of confidential information about each other. The disclosure of crucial information may, however, be required by the law. In case this happens, the disclosing party must inform the other party about the disclosure (White, 2010).
Silwan Foods International signed a contract with the AGS Logistics LLC
AGS Logistics LLC is one of international companies that is based in the United Arab Emirates and provides logistics services to other companies. The firm provides logistics solutions to the companies based inside and outside the UAE. The company operates the best warehousing and transportation facilities in GCC countries.
The company has established good relationship with its customers and suppliers thereby winning the competitive advantage over competitors. The company also enters into contracts with its customers and the terms of the contracts are observed well in that they perform the duties within the stipulated time in satisfaction of customers (Plimpton, 2007).
Silwan Foods International is the leading company in supplying milk powder, dried nuts and fruits, cocoa, gear and other food product. The company is dedicated in its services to satisfy customers. The company has standards and quality services to their customers, therefore, maintaining the first position in the market. The company merges with other companies who believe on the customer’s satisfaction. The company also uses the logistics providers to transport their products to customers.
An agreement for logistics services
The logistics contract was signed on April 25, 2005. The agreement was between the Silwan Foods International and AGS Logistics LLC.
The terms of contract
Silwan Foods International requires logistics services to transport its goods to its customers. The company needs the AGS Logistics LLC Company to provide the services. Therefore, the company enters into an agreement to be involved in this transaction. Silwan Foods International believes that its needs can only be satisfied through an agreement, which is also a contract.
The duties
The logistics services provided by the AGS Logistics LLC to Silwan Foods International must be of high quality and provided professionally. Companies will conduct the transaction guided by the industry’s standards. The services include movement of milk powder from producers to the warehouse then the firm will transport the milk to customers according to the orders given to Silwan Corporation.
The performance of the AGS Logistics LLC will be measured according to the following metrics. The target for the AGS Logistics LLC to deliver the goods in time according to Silwan Foods is 98% and the damages target at 0.5%.
If the AGS Logistics LLC performs the services in the expected manner, then Silwan Foods International would be able to save 11% on costs. “If by any chance the AGS Logistics LLC fails to perform as the two parties have agreed for two months consecutively Silwan Foods International will have the right to terminate the contract after giving a notice of thirty days” (Plimpton, 2007, p. 25).
The meetings
Silwan Foods International and AGS Logistics LLC schedule their meetings to be one in a year to discuss the progress of their agreement. These meetings will also be based on discussion of future plans of the two companies regarding their operations. Both companies agree on the dates, time and venue of their meetings.
The AGS Logistics LLC will be the single contractor and will not at any chance act as an agent. The company will be independent in the performance of the services. In the contract, the companies agreed that the logistics services will be provided by the employees of AGS Logistics LLC and no one of them will be regarded as an employee of the Silwan Foods Limited.
The company will be responsible for the employees that will be involved in providing the services under this agreement. AGS Logistics LLC will also be bound to observe rules and regulation regarding logistics services provided to Silwan Foods International. The AGS Logistics LLC employees have no right to the benefits that the Silwan employees have the rights to. Similarly, Silwan Foods International will not have the authority over the employees of the logistics company (Donald, 2009).
Payments
Silwan Foods International will have an obligation to pay all the payment within one month after completion of the services. The company agrees that the AGS Logistics LLC will subcontract some of the services to other subcontractors and the payments will be in-line with those of the subcontractors.
The companies agreed that the rates of the rates would be subject to change due to uneven variations imposed by subcontractors. The number of changes that Subcontractors would be required to make are only once within a period of six months and incase variations are to be made, a one month notice should be provided to the other parties.
The changes will be done in writing and there will be representatives from each company in this agreement. Both companies have the right to negotiate the payment charges on the logistics and other services that may arise before the end of the contract (Plimpton, 2007).
Silwan Foods International and the AGS Logistics LLC agree that the Silwan Foods Company will be bearing the burden of paying all the charges accrued in the stated in the agreement.
The invoices will be paid directly to the AGS Logistics LLC within 20 days of the date on the invoice. After Silwan Foods International has met all the obligations concerning the payments, AGS Logistics LLC will declare it harmless against any claims by other companies requiring its services or by customers for underpayment of non-payment (Donald, 2009).
Indemnification
After completion of the logistics services by the AGS Logistics LLC, it will hold harmless Silwan Foods International against fines, damage, loss and claims for injuries. It will also declare it harmless against the claims that may be laid against it by another company or customer regarding its services. This is except in the circumstance that the damages or the losses are caused due to the negligence of an employee of the Silwan Foods International (White, 2010).
Insurance
It is required that AGS Logistics LLC will maintain the required insurance cover such as insurance against the death, property damages or injuries caused to different parties involved in the contract.
According to Gido and Clements, “in case there is any other extra insurance cover required by law under the agreement, the company will be obliged to uphold the responsibility of paying the cost and expense with the insurer” ( 2006, p. 45). The company will have to give the Silwan Foods International a copy of the insurance policy and the certificates of the insurance cover.
Term and termination
The conditions of the agreement start from the date that the agreement was signed between the two companies. The agreement will take a period of three years if the two companies do not a reason to terminate it. During those 3 years, there will be a meeting every first day of May to negotiate the charges.
AGS Logistics LLC will give a report on any increase in charges in 45 days before they meet to negotiate. The increase in warehouse charges will also be presented in writing to the Silwan Food International 15 days before the date of negotiation and at least 5 days before the transportation date. All notices required by this agreement will be made in writing. Any other parties under this agreement can file a request to terminate the agreement.
This may be due to default materials. If one of the parties writes a notice containing the details of the default and the other party ignores the complaint or fails to rectify the default within 20 days, the company can terminate the agreement and seek other reliable companies (Plimpton, 2007).
The termination of the agreement can also happen if one party fails to vacate the appointment of the other party within the agreed time in the contract. After the termination of the contract, the AGS Logistics LLC will return all the copies of documents, data, records which belong to the Silwan Foods International.
Silwan Foods International will have an obligation to return the document to the AGS Logistics LLC upon the termination of the contract. The notices which will be made with regard to this agreement will be delivered directly to the company not longer than one day. The addresses of each company are given in the details sheet presented with the contract document (Gido & Clements, 2006).
Rights of the Parties to Other Services
AGS Logistics LLC and Silwan Foods International agreed that either of them can give can provide services to other companies which they have signed a contract with, without any restrictions. The Silwan Foods International is also free to make transactions with other companies of making other agreements with other contractors as long as it is meeting the obligations of the AGS Logistics LLC.
Uncontrollable forces
If by any chance, the parties in the contract are unable to meet the obligations due to uncontrollable forces like floods, droughts, terrorism, riot, storm, fire and other supernatural powers, the party will be excused. This is with the exemption from the Silwan Foods International’s obligation to make the payments. The company will be required to make the payments immediately after the floods of the forces are over (Gido & Clements, 2006).
Confidential information
According to Gido and Clements, “each company in the agreement has the obligation to protect the other party’s information” (2006, p. 35). One party can gain access to the other party’s information without the consent of the other party. The company is, therefore, obliged to use the information only in the performance of the duties in the agreement but not for other purpose whatsoever. They are bound to disclose the information only to their employees who needs in the process of providing the services.
However, the parties are free to disclose the confidential information if and only if the information is needed by law. If under any circumstances, the information is being needed by law, the disclosing party has to inform the other party through writing and ask for assistance in the disclosure of the information. If the disclosing party informs the other party before it discloses the information, this will not be regarded as a bleach of contract since both the parties will be aware of the disclosure (Gido & Clements, 2006).
Intellectual property
The AGS Logistics LLC will not by any chance have the ownership of the Silwan Foods International. The properties include the software, documents, technology or any other properties. The same applies to the Silwan Foods International, except for the goods transported in the company which will be bought by the company (Gido & Clements, 2006).
Invalidity of the terms and conditions
“If by any circumstances the some of the stipulations and conditions of these terms or termed as invalid by law or by a court of order, then the terms will be removed from the list under the agreement signed by the parties” (Donald, 2009, p. 56). The remaining conditions will continue to be effective up to the end of the contract.
Arbitration
The AGS Logistics LLC and Silwan Foods International will ensure that there is mutual agreement that they have understood the conditions in the contract. Therefore, the differences that may arise from both parties concerning the rights and obligations will be presented to an arbitrator as required by the UAE law and the dispute will be settled by the arbitrator.
The arbitrator suggested by the parties will have to be familiar with the law concerning the logistics services. The arbitrator will help to interpret the terms and conditions of the agreement and help the companies to solve the disputes that it might be having.
He will not be allowed to expand or change the rights of the parties. The decision made by the arbitrator will be final and the party which will be prevailing will have the responsibility to make the attorney general’s fee (Donald, 2009).
Any party will have the right to move to court seeking enforcement. The parties will not be prevented by anything from moving to court to seek the enforcement. In case one of the parties bleaches the agreement section of disclosure of confidential information, the party which the information will be disclosed will have the right to move to court for compensation. The monetary compensation will not be enough and the court will have the final decision (Gido & Clements, 2006).
The witnesses
The agreement will be signed by the head of corporate affairs of both companies and the attorney will be the witness of the agreement. Each company will have the copies of the documents regarding the contract.
Legal requirements on the environment
The UAE government requires every company to conduct its services effectively while conserving the environment. Both the AGS Logistics LLC and Silwan Foods International will have to include a section of the environmental conservation ion their agreement.
Therefore, the packaging of the Silwan Foods International milk powder which is the one transported by the AGS Logistics LLC, will be done in recyclable papers to avoid pollution. Lorries which will be transporting the products from Silwan will also have to use fuels which will not emit gases in the air (Gido & Clements, 2006).
Responsibilities of the consultant in the contract management
The consultants should have the knowledge and skills of leadership in that they can control the performance of the contract for the satisfaction of the involved parties. The consultant and the supervisors are responsible for the implementation of the set rules and regulations for the agreement.
He is also responsible for the interpretation of the agreement to the involved parties so as to avoid conflicts between them. The consultants are responsible for the advice that is needed in case one of the parties bleaches the contract. They have the role to ensure that the parties are meeting their obligations (Donald, 2009).
References
Donald, K. (2009). Case studies in contract and procurement management. Kuala Lumpur: E-Leader.
Gido, J. & Clements, J. (2006). Successful project management. Florence, KY: Thompson South-Western.
Plimpton, L. (2007). Business contracts: Turn any business contract to your advantage: Entrepreneur Legal Guides. Irvine: Entrepreneur Press.
White, E. (2010). Colorado business contracts: A drafting guide for lawyers and business owners. Colorado: Bradford Publishing Company.