Legal and Contractual Preparations in Purchasing - LCAP7065

This report provides a comprehensive analysis of legal and contractual preparations in purchasing, focusing on the essential elements of a contract, including offer, acceptance, consideration, capacity, and the intention to create legal relations. It delves into negotiation and drafting principles, exploring terms, clauses, and the implications of implied and expressed terms. The report also examines the performance and enforcement of purchasing contracts, addressing sustainability and ethical considerations. It discusses legal rights, EU procurement procedures, and practices, as well as remedies and damages for contract breaches, including case studies. The report covers concepts like BATNA in negotiation and the importance of sustainable procurement practices. The report also covers breach of contract, including the conditions resulting in breach and the remedies available for the parties in case of a breach. The report concludes with recommendations and a summary of key findings, providing a valuable resource for students studying strategic procurement and supply chain management.

RUNNING HEAD: Legal and Contractual Preparations in Purchasing
Legal and Contractual Preparations in Purchasing

Legal and Contractual Preparations in Purchasing
Executive Summary
Sale and purchase of agreement are enforceable by laws. This assignment will discuss about
the legal provision relevant to the contract management. This assignment will evaluate the
steps and provision applied in an agreement to make a contract enforceable by law. This
assignment will discuss the facts and decision of two cases naming Amey Birmingham
Highways Ltd (Claimant/ Respondent) And Birmingham City Council (Defendant/ Appellant
and Emirates Trading Agency LLC V/s Prime Mineral Exports Private Limited. This report
will discuss the essential elements of the contract and legal rights and obligation of each party
entering into the contract. This report is a critical evaluation of the damages to the parties,
provision regarding breach of contract and the remedies available for the parties in case of
break of the bond and the negotiation management in the sustainable procurement of the
contracts.
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Contents
Introduction...........................................................................................................................................3
Legal aspects of purchasing...................................................................................................................3
Offer..............................................................................................................................................3
Acceptance....................................................................................................................................4
Lawful consideration.....................................................................................................................4
Purpose to create legal relations....................................................................................................4
Capacity.........................................................................................................................................5
Certainty of contracts.....................................................................................................................5
Negotiation and drafting principles of purchase contract.......................................................................5
Negotiation........................................................................................................................................5
Drafting rules in purchase agreement................................................................................................6
Terms and clauses of purchasing contract.............................................................................................6
Implied and expressed terms of contract............................................................................................6
Implied terms.....................................................................................................................................7
Performing and enforcing purchasing contracts.....................................................................................7
Sustainability and ethical consideration related to purchasing...............................................................8
Sustainable obtaining.........................................................................................................................8
The principles of “green/ethical” purchasing activities......................................................................8
Legal rights of the parties and procurement in purchase agreement......................................................8
EU procurement procedures and practices.........................................................................................9
Remedies and damages for contract breach...........................................................................................9
Equitable remedies..........................................................................................................................10
Case studies.........................................................................................................................................11
Recommendations...............................................................................................................................15
Conclusion...........................................................................................................................................16
References...........................................................................................................................................17
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Introduction
Contract simply means an acceptance of the agreement that is enforceable by law. Agreement
is the mixture of proposal and the approval. An offer is made and accepted by the other
becomes an agreement and this agreement becomes a contract when it is enforced by the law.
Hence an agreement is enforceable by law is a contract whether written or oral including
buying or selling, employment, tenancy and many more promises that is enforceable by the
laws is a contract. Set of promises to do certain things to achieve a fixed target enforced by
the legal conditions is an act of contract (O'brien, 2019).
Legal aspects of purchasing
Purchasing is the main aspect of the purchasing contract. A contract to deliver something in
exchange of some consideration is purchasing agreement. The purchasing manager is entitled
to perform purchasing functions (Erdmenger, 2017). A contract’s essential elements are offer,
acceptance, consideration, willingness to enter into a contract and capacity in the facts of the
contract law to create a contract (Stone & Devenney, 2017).
Offer
The very first step to make a contract is asking the party accept the proposal. In terms of a
contract, an offer is a kind of invitation. Everything including the whole process of contract
revolves around the offer. An offer made to a person to perform something in exchange of
some consideration, taking all legal term in consideration is a valid offer (Smits, 2017).
General Offer
An offer made to the whole public at large level is a general offer. These offers have no
specific parties. Any member found suitable to accept the conditions can accept the offer. For
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example crossword puzzle published in newspaper in exchange of reward is not published for
any specific person or party they are generally acceptable by all and anyone can solve that to
get the reward.
Specific Offer
A specific offer is just opposite of the general offer. This offer is titled to a particular person
or parties and only they are able to accept or reject the offer. They are specially made to
specific party hence they are called specific offer (Bayern, 2016).
Acceptance
Acceptance is the second phase to create a contract. Making an offer is not sufficient but the
acceptance is important to make an offer complete. Without acceptance an offer has no value
to make it valuable it must be accepted by the person to whom it is made. Acceptance must
be expressed with same consent. A mere silence is not an acceptance according to the law to
make a lawful contract (Falk et al., 2015).
Lawful consideration
Consideration is that thing for which an offer is made and accepted. It is something in return
in completion of the action in a contract. A consideration can be in form or reward, money
and many more but is should be lawful. Lawful consideration means the consideration that
are not forbidden by law and permitted by the contractual laws (Fandl, 2016).
Purpose to create legal relations
Both the parties, entering into a contract needs to be clear with their purpose to make the
legal relations. This simply means parties are not allowed to enter into an unlawful
agreement. Without legal intention no agreement can be treated as contract. Intention is must
in order to make a contract (Mik, 2017).
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Capacity
Contract needs two parties but these two parties must be capable to enter into contract. A
person has some essentials conditions to make a contract these contractual capacities are
 A person needs to attend age introduced in the contract act.
 A person needs to be sound mind in nature sound mind person is able to understand
the legal terms and conditions to enter into contract.
 A person stopped by the law to enter in a contract is not capable to accept an offer
(Besley, 2018).
Certainty of contracts
This is an important part of the contract that parties entering into a contract need to ensure
that the contract they are entering are certain and are enforceable by law. This is an initial
duty of the parties to check the contract is lawful and certain.
Negotiation and drafting principles of purchase contract
Negotiation is a mid-way to solve a conflict arises between the two parties on allocation of
scarce resources. This is a process of solving the potential dispute by mutual consent in form
of decision where both parties are free to put their views and have complete power to accept
or deny the solution (Koval, 2018). Negotiation in contract needs extra efforts and
understanding of the sales and purchase rules and regulations. Negotiations in contract
include a wide range of tangible and intangible desires (Crump, 2015).
 BATNA (Best Alternative To a Negotiated Agreement)
In situation of disputes arose among negotiating between the seller and the buyer an
experienced buyer always keeps a backup plan in form of the BATNA to make the
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negotiation complete. BATNA includes different steps like reservation pricing, bargaining
zone and aspiration stage (Marsden & Siedel, 2017).
 Booking (reservation) price is the lowermost line of agreeing on the terms and
conditions and to enter into an agreement. A party never reveals their reservation
price to each other until they enter into negotiation (Geiger, 2017).
 Bargaining zone is the narrow possibilities to negotiate between the buyer’s booking
price and seller’s booking price; this is the area where agreement is highly possible.
Drafting rules in purchase agreement
An agreement is a legal document hence requires skills and effective ability to draft an
agreement. Standers form of drafting a contract is adhesion contract drafted between two
parties and one party has little liability to negotiate. The overall goal of drafting a contract is
to ensure the understanding of the terms and conditions to each party (Velasco, 2018).
Terms and clauses of purchasing contract
Every contract have key terms and they also falls in some clauses. These terms and
conditions are essential to maintain in the agreement and the contract to purchase and supply.
The terms in the contract can be expressed or implied (Broekhuis & Scholten, 2018).
Implied and expressed terms of contract
Contractual agreement include terms in form of warranties, condition and innominate term
 Warranties are the promises or guarantees that a party do to other in exchange of the
consideration or any act in exchange. Breaching of a warranty can cause right to sue
to the injured party but not repudiation (Sammut-Bonicci & Channon, 2015).
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 A condition refers to the situations that are important for the contract and are essential
in nature. They are expressed by the parties openly though it will not cause any doubt
to the parties.
 Innominate terms are identified as warranties and also as the conditions, including the
term that a contract can only be repudiated in the condition of a contract breach if it is
acceptable for both sides (Ziyaeva, 2015).
Implied terms
Expressions of the conditions is sometimes not expressed or written in the contract but
contracting parties assume them to be familiar with the terms in their minds. Some implied
terms are those that are applied by the laws and statues irrespective to the wishes of the
parties (Abada, 2019).
For example; Consumer Rights Act 2015, Consumer Contracts Regulations 2013
Performing and enforcing purchasing contracts
Contract is a legal term hence entering parties in the contract has legal obligations and rights
against each other as well, legal duties for each other. If any party plunges to complete its
duties then first party have right to enforce the contract and can sue the second party for
breach of the contract. Breach of contract is a condition where a party unable to perform an
assigned task or responsibility (Knapp, 2019).
A party if fails to perform an absolute duty can be discharged by the performance or
assignment by
 Mutual agreement or consent
 Operation of the law
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Sustainability and ethical consideration related to purchasing
Sustainable obtaining
It is the Process of meeting the business needs including an environment-friendly, responsible
and ethical manner. Companies entering into the sales and purchase agreement trues to make
long term relations dedicated to sustainable procurement (Walker, 2016). An integral part of
sustainable procurement is sustainable supply chain including the welfare of the contractual
parties as well the society. Sustainable procurement, involves the using of the products that
are made from recycled content and are environment friendly (Kumar, 2017).
The principles of “green/ethical” purchasing activities
This is a new concept taking high place in the contracts that any party entering in the contract
has to ensure to use the resources in sustain manner though they will remain in world for long
time (Blome, 2017). The life cycle impact of “green” purchasing on supply chain is that it
focuses the right quantity if the resources in right order at right place so this can meet the
corporate outcomes and will not cause any harm to the environment and the resources
availability.
Legal rights of the parties and procurement in purchase agreement
Contract obligations are duties assigned to the parties who are entering into a contract for the
sale or purchase of goods and services. In the obligations parties are legally responsible to
perform the contract (Hughes, 2015). If any party fails to perform the obligations of the
contracts then this is assumed as the breach of the contract. Obligations can be defined as the
duty to pay for the services, deliver the goods in exchange of the money and to deliver the
quality goods to the buyer (Thai, 2017).
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EU procurement procedures and practices
Procurement is simple but revolutionary process to negotiate in a contract helps to improve
the buyer’s position. The milestone of procurement process is preserving the competition
between the parties in every aspect of a negotiation. Legally sound procurement protocol
helps to construct legal relations; it needs to reveal useful information to the parties to
remove doubts from the contract (Pirvu, 2016).
Remedies and damages for contract breach
When a party of the contract fails to fulfil the actions or deny performing the assigned
obligations is liable to break the contract or conducting breach of the contract. A breach occur
when performance is not complete, performance is wrong and against the conditions of the
contract (Eisenberg, 2015).
 Monetary damages- A contract breaching party is responsible to pay the monetary
damages to the Non-breaching party weather breach is minor or not.
 Compensatory damages- Is awarded money to an injured party for the loss of the
giveaway. Sometimes it can give full benefits of the bargain to the non-breaching
party.
 Liquidated damages- These are the pre-decided damage and lawful certain implication
in case of breach of the contract. This damage provides certainty to the contracts and
removes hazards of the lawsuits and procedure (Hoeppner, 2017).
Equitable remedies
Equitable remedies are applied when a break of contract cannot be adequately rewarded by a
legal cure. These remedies are useful to prevent unjust development in the contract. Equitable
remedies are given in two conditions; court either can specify the performance standards for
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the breaching party or can order to rewrite the agreement to express the real intention of the
parties (Smith, 2016).
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Case studies
AMEY BIRMINGHAM HIGHWAYS LTD (Claimant/ Respondent)
- And –
BIRMINGHAM CITY COUNCIL (Defendant/ Appellant)
Facts
An appeal applied by Birmingham City Council against a decision about correct
interpretation of a PFI contract. Key issues in the appeal are: 1st was PFI service provider
require to update the inventory details on database (2) can four completion certificate set
aside for Manifest error.
On 6 May 2010 the parties entered into the project agreement and on 7 June 2010 ABHL
started to perform their service according the contract. The core period of the services was
intended for five years.
All was going on in good manner for the starting three years and six months the certifier
independently issued the milestone certificates issued certificate number was 1, 2, 3, 4 and 5.
There were no complaints regarding these certificates.
In February 2014 Mr Clive Betts, Contract and Performance manager of the BCC’s observed
unrepaired parts poop of the road and footpaths. It was sure that ABHL was deliberatively
leaving the faults and defects in selected area.
The argument was continued on the matter that whether ABHL was in good faith with the
contract and as according to the clause no. 70 of their contract BCC referred their dispute to
the mutually appointed arbitrator Mr Andrew Goddard QC.
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The three issues referred to the arbitrator were:
Detail discussion on the scope of ABHL’s duty relevant the core investment works, whether
ABHL were liable to update the PNM (Project Network Model) and whether milestone
certificates as per number six to nine could be set aside
The arbitrator on the basis of the widespread evidence arranged an oral hearing on 23 June
2015. The judgement was passed on 9 July 2015.
In opinion all facts were found in favour of BCC and following statements were given
(i) That ABHL’s duties to complete the Basic Security Works and attain the measures of
Presentation levels 1 cover to the Project Network as a complete and are not restricted to the
RSLs as recorded in the Project Network Model enclosed in DRD0626.
(ii) That ABHL must update the Project Network Model and need to maintain inventory of
project model to reflect the accurate size of the Project Network and the Project Road.
(iii) All relevant Documentations related to the End for Milestones numbering 6 to 9 all-
encompassing is set aside, but they can be alternatively used, applied and revised.
Aggrieved by the adjudicator’s decision ABHL referred the dispute to the TCC pursuant to
clause 70.3.1.5 of the contract, the justice received written evidence, he denied to hear any
oral evidence. The issues before both the magistrate and the arbitrator primarily concerned
the correct construction of the contract. Now BCC were wounded by the judge’s judgment.
Accordingly they pleased to the Court of Appeal.
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Decision
The contract in front of the court is a PFI contract planned to track for 25 years. It may
therefore be classified as an interactive contract. The best suitable example, given by the
court was Professor Hugh Collins’ paper “Is a relational contract a legal concept?” in
Contracts in Commercial Law.
Judge made comment any relational contract of this oddity is likely to be of immense extent,
covering many infelicities and twists. Two parties are assumed to behave in reasonable
approach and according to the conducts of the contract; they both should not behave in
latching to fulfil their personal satisfaction that cause damage to the interest of the other party
(Degeling and others, Thomson Reuters 2016).
For the reasons set out rejection of ABHL’s ingenious new interpretation of the contract. For
the reasons set out in Part 7 milestone certificates 6, 7, 8 and 9 was set aside.
The court made statements to the same effect as the announcements made by the arbitrator.
Judge requesting the counsel to agree on the precise wording.
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Emirates Trading Agency LLC
V/s
Prime Mineral Exports Private Limited
Facts
A contract was signed on 20 October 2007 between Prime Mineral Exports Private Limited
and Emirates Trading Agency LLC, according this PMEL approved to buying Iron Ore from
the ETA.
11th section of the agreement was for the dispute resolution and arbitration
This was about that if party falls in any breach of the contract or any disputes they will
resolve it by friendly discussion. If they fail to make the solution with-in four weeks them the
injured party have rights to appeal the settlement section and can state the matter to the
settlement.
On 1st December 2009 PMPEL assisted a notice of expiry with the claim of the sum of the
US$472,800 in liquidated damages against ETA. After holding various discussions and
meetings to solve the claim of the PMPEL but failed. PMPEL referred their case in the
arbitration under ICC rules according to the contract conditions. ETA trailed a claim in the
Commercial Court looking for a command that the arbitral court of law was in fault to fail to
hear the fact of the jurisdiction and to decide the relevancy of the claim raised by the PMPEL.
PMEPL raised argument on the situation practice trusted upon by ETA was an unenforceable
responsibility in any incident but if it was enforceable it was compiled with by the parties to
make the authorities to ensure rule.
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The demand here was: in a clash on resolution clause no. 70 that an obligation is enough to
require the contractual parties to resolve the arising disputes by mutual discussion in part of
the good faith and in the decided limited time period is it enforceable to put the disputes
referring to the arbitration.
Judgement
The Judge acknowledged that as a problem of building afore both party can raise a right to
settlement “friendly discussions” were essential. But, he did not admit ETA’s suggestion that
“for a continuous period of 4 (four) weeks” expected that open deliberations need to be
discussed continuously for a period of the decided four weeks.
The Judge held that it could at the time he reached his decision judge distinguished that from
the ancient time commercial bodies are expecting the court to impose duties that have been
entered into easily, and the reason behind such expectations was to neglect the costly and
lengthy adjudication actions, it was in the communal concern to impose such promises.
Therefore, The Judge consequently dismissed ETA’s claim under section 67 of the
Arbitration Act 1996 and he alleged that as putting the disputes into the arbitration was
enforceable and the intermediaries had dominion to resolve the argument with in the
consideration of good faith of the parties.
Recommendations
Managing the contract and agreement is the process requiring the legal and managing skill to
draft an agreement disclosing the essential facts about the contract (Ageron et al., 2012). A
selling and purchasing contract includes vendors, partners and the customer disclosing the
terms of making the contract. The business of the selling and purchasing is very dynamic and
including legal factors to ensure the security from the damages and the fraud. Negotiation is
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the key factor for the buyer and the phase to increase the mutual understanding of the contract
(Cordell, 2018). Drafting an agreement is depending on purchase needs, writing the facts and
figures in detail, keeping the terms simple and understanding, finding the right person to
make offer and finding the potential ability of the targeted person (Glumac et al., 2015).
Managers in the company can use their skills and ability to manage the risk and opportunities
to identify the contractual management with the parties. Drafting the contract needs legal
investigation to the business background and this is the time to put efforts in identification of
the actual and potential impact of prevailing obligations. Finalization of the agreement needs
to include pre-closing meeting and preparation to survey the effects of legal terms in the
contract (Prado & Martinelli, 2018). Terms relating to the rights and duties of the parties
needs to be note down clearly and making the both parties agree to fulfil the duties properly
and behave in good faith to make the contract survive for a long time.
Conclusion
It is concluded in this report that offer made by a party require proper arrangement of the
legal aspect relevant to make an agreement. An agreement needs to be enforceable by the law
if not then that is not a contract. Two cases naming Amey Birmingham Highways Ltd
(Claimant/ Respondent) And Birmingham City Council (Defendant/ Appellant and Emirates
Trading Agency LLC V/s Prime Mineral Exports Private Limited conclude about the
relational contracts are very significant in buying and selling of the goods and the arbitration
is the mean to solve the dispute but parties dealing in good faith can set exclusion remedies to
solve the disputes in friendly manner . a contract is a long term relation and it need the faith
of the parties to complete the target in order to attain the sustainable development. Hence
legal impacts are very important in the contract no contract is valid until it fulfils the legal
aspect of the contract law.
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