SUPPLY CHAIN MANAGEMENT BA 244

Reminders

• Next Article: Group 4

• Nivea Talk: Wednesday, 8 Feb

• PPP Talk: Wednesday, 15 Feb

•  LinkedIn Group: Presentation Grades for Mattel and Article 2

Article 3 • The impact of supply chain management practices on competitive advantage and organizational performance • Overarching Study • Empirical? • Primary and Secondary Data? • Where to focus in Supply Chain Management Integration

CONTRACTS IN SUPPLY CHAIN MANAGEMENT

Contracts • One of the key operational processes by which relationships are shaped and controlled

• ‘Legal’ perspective and ‘Managerial’ perspective (Contract Management)

Why do managers need at least a working knowledge of commercial law?

• Organization’s response to the law is not optional or left to managerial discretion; compliance is required

• Requirements are constantly changing e.g. court decisions, new legislation

• We use the law in enforcing contracts

•  ‘ignorance of the law is no excuse’

•  If you know how complex the law is, you are more likely to seek legal advice

Elements of a Legally Binding Agreement

1.  Agreement (Offer and Acceptance)

2.  Consideration

3.  Intention to Create Legal Relations

4.  Contractual Capacity

5.  Correct Form

Agreement • Offer

• Definite promise to be legally bound on specific terms • Offer to Sell • Offer to Buy

• Acceptance • Must be done clearly, unconditionally, and freely • Unconditional assent (‘yes’) to ALL the terms of an offer

Agreement

• Display of goods in an online catalogue?

• Request for Quotation (RFQ)?

Consideration • ‘An act…of one party… as the price of the promise made to him by the other party’

• A contract must be an exchange

• e.g. barter of goods; payment

Intention to Create Legal Relations • Each party acknowledges that if a dispute arises, the matter can be taken to a court of law to decide the matter

• In commercial contexts, there is a strong presumption that parties intend agreements to be legally binding

Contractual Capacity • Each party must be legally able to enter into a contract

• Above 18 years of age, of sound mind

• If on behalf of a business, should have legal authority or formally delegated powers e.g. owner, partner, director

Contractual Capacity

• Procurement Manager?

• Sales Manager?

Correct Form • For specialty contracts e.g. deed for land and lease; share transfers, and bills of exchange (like cheques) must be in writing

• In general, oral agreements are binding as long as the other elements are present

Invalid Contracts 1. Misrepresentation

• False statement by one of the parties which was intended to induce the other party to make the contract

• False Advertisement?

• Contract is Voidable or can be cancelled

• Damages may be payable if fraudulent or negligent vs. innocent mistake

Invalid Contracts 2. Mistake

• Parties end up bound by contract to which they did not intend to commit themselves

• e.g. contract in good faith for the sale of goods which – unknown to them – have been destroyed or do not exist

• Contract is Void

Invalid Contracts 3. Duress or Undue Influence

•  If pressure is placed on one party to agree to a contract

• Contract is Voidable

Invalid Contracts • Hard Bargaining?

Invalid Contracts 4. Legality

• Courts will not uphold a contract if its purpose is contrary to statute or common law

• Contract is Void

Invalid Contracts • Contract to commit a robbery?

Invalid Contracts • Contract with a headhunter to only seek male applicants for Head of Security

• Anti-Discrimination Law (in some countries)

Invalid Contracts • Alliance between PLDT and Globe to buy SMC’s telco unit on May 30, 2016 for ~PHP 70B

• Philippine Competition Act, R.A. 10667

International Law

• Bill of Lading covers: • The quantity of the goods received • The condition of the goods when received • Marks which clearly identify the goods

International Law • February 2000 • CNCCC Dalian Company contracted with Malaysian Airlines to transport 80 barrels of chemicals from Beijing to Kuala Lumpur

• CNCCC declared the shipment as the nontoxic solid, but in fact it was a corrosive liquid, which destroyed the cargo plane

International Law • CNCCC ordered to pay USD 65M by

the Beijing High Court

• Carrier was not required to check whether the cargo corresponded with the descriptions given in the air waybill, nor was it responsible for verifying the cargo, packaging or documents presented by the shipper; Responsibility lay with the shipper

International Law

• Incoterms • Do not cover ownership or the transfer of title of goods • Affects costs and responsibilities involved in shipping, insurance, and tariffs

International Law • International Chamber of Commerce (ICC)

• Under a number of international conventions, awards made in one country are generally legally enforceable in other countries

• Neutrality of the forum in terms of: location of proceedings, language used, procedures or law applied

International Law •  February 3, 2017

• CA orders Piatco to pay PH government PHP 300M for arbitration costs

• Piatco and German partner Fraport AG filed a case against the PH government in the ICC (SG) after the latter rescinded its contract with both parties in 2002

•  ICC then ruled in favor of the Philippine government in 2010

ETHICS IN SUPPLY CHAIN MANAGEMENT Does Legal always mean Ethical?

Procurement Staff are more exposed to temptation than most professionals

•  They potentially control large sums of organizational funds •  They are faced by many opportunities to commit financial fraud or to misuse

systems or information for personal gain

•  Their decisions typically benefit some suppliers over others – creating an incentive for suppliers to try to influence those decisions. It can be difficult to determine wholly objective criteria for deciding between rival suppliers, allowing bias or unfairness to enter the process

Ethics • Often reflect the assumption and beliefs of the families, cultures, and

educational environment

• Shaped more deliberately by public and professional bodies, in the form of agreed principles and guidelines which are designed to protect society’s best interests

• Set of moral principles or values about what constitutes ‘right’ and ‘wrong’ behavior

IPO for Bear Bile Company • A storm of criticism in China over share listing plans by a company that sells tonics made with bear bile (��) is highlighting the increasingly affluent country's changing attitudes toward the environment and wildlife. Reports Friday said dozens of well-known entertainers, writers, and other celebrities signed a petition to the China Securities Regulatory Commission urging it to withhold approval for the initial public offering by Guizhentang, a Chinese medicines maker. The company is awaiting approval for a share listing in Shenzhen. Hundreds of thousands of comments on “Weibo," the Chinese version of Twitter, blasted the company for extracting bile from bears.

IPO for Bear Bile Company

IPO for Bear Bile Company • Would you use this product? Why or why not? • Why is profiting from bear bile different from pork, beef, or chicken?

• What does the criticism by the Chinese celebrities and public say about the potentially changing attitudes towards what is expected of business?

• Whale Shark Watching in Oslob? • Cockfighting?

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