Contract Management Body of

Knowledge

Contract Management Body of

KnowledgePre-Award Competencies

Section 1.1 Laws and RegulationsPart 1 of 2

Pre-Award CompetenciesSection 1.1 Laws and Regulations

Part 1 of 2

Laws and Regulations

• Contracts are legally binding

• Provisions are enforceable by law

• Sources

• Uniform Commercial Code

• Federal Acquisition Regulation

• International Contracting law

• Case Law

Commercial Contracting

• States are primary source of law for commercial transactions

• Statutory and common law

• Private law may establish additional terms and conditions

• Statute may require a specific form (written) or procedure for execution

Where We Are Going ...

• Law of Agency

• The Uniform Commercial Code

• Warranties

• Repudiation

• Sarbanes-Oxley Act

The Law of Agency

• Provides an individual with the power to act for another

• Explicit (written) appointment

• Implied agency through acts.

Types of Agents

• Agent - acts on behalf of another for their benefit

• Principle - one who appoints agent

• Universal agent - broad authority to act

• General agent - more limited/defined powers

• Special agent - powers are narrowly defined and may NOT enter into contracts on behalf of principal

Authority of Agents

• Actual - intentionally conferred upon agent by principal to affect legal relations with third party

• Express - plainly granted with respect to specific actions

• Implied - not expressed but is customary in the industry.

• Apparent - The appearance of being an agent without the actual authority.

Liability for Agent

• Corporations are liable for the acts or promises of an employee if it appears to a third party that the employee has been granted authority to bind the corporation.

The Uniform Commercial Code

• UCC provides framework of law for commercial transactions

• Intent is to provide consistency of law across jurisdictional boundaries

• Each state must adopt UCC separately

• Created by:

• National Conference of Commissioners on Uniform State Laws

• American Law Institute

The UCC

• Enacted in 49 states

• Louisiana has enacted much of UCC but some portions conflict with state’s Napoleonic Code

• Some states have modified specific articles or sections

• When applying UCC the specifics for each state need to be considered

The UCC

• Consists of nine articles - each with one or more parts

• Primary source of agreement and guidance in commercial contracting

• Continuously revised

• Only applies to sale of Goods

• Does not apply to services contracts

The UCC ArticlesThe UCC ArticlesArticle 1 General Provisions

Article 2 Sales

Article 2A Leases

Article 3Negotiable Instrument

Article 4Bank Deposits

Article 4AFunds Transfers

Article 5 Letters of Credit

Article 6 Bulk Transfer/Sales

Article 7 Documents of Title

Article 8Investment Securities

Article 9Secured Transactions

Philosophy Behind the UCC

• Fills in the gaps where the contract may be silent

• Merchants are professionals and should be held to higher standards

• Contracts impose obligation of “good faith”

• What is a reasonable time is defined by the nature, purpose and circumstances

UCC Article 2 - Sales

• Sole source of law governing sales of goods

• Supplemented by state law only to the extent a subject is not addressed by UCC

• Addresses:

• Contract formation

• Performance/non-performance

• Cure rights

• Warranties

UCC Article 2 - Sales

• Contracts for sale of goods > $5,000 must be in writing

• To be enforceable it must:

• Provide evidence a contract for the sale of goods existed

• Signed by party to be charged

• Specify a quantity

UCC Article 2 - Sales

• Does not require:

• Time and place of payment

• Delivery location

• Warranty

• No need to use special forms

UCC Article 2 - Sales

• Contracts not in writing can be validated by “partial performance” (acceptance and payment)

• Signed offers are irrevocable for a reasonable period not to exceed 3 months or as stated in the offer

• Acceptance of an offer may be made by any reasonable method including shipment/promise to ship (performance)

UCC Article 2 - Sales

• Last piece of paper rules ....

• Terms and conditions printed on order forms (by offeror) may be countered by terms and conditions on order acknowledgement

• Such terms are a “counter proposal”

• Counter terms may be accepted if:

• Offer does not expressly reject alternate terms

• Acceptance is conditional on the additional terms

• Objection is made so as to reject additional terms.

UCC Article 2 - Sales

• “Course of Performance” includes acts by either party that are not objected to

• “Course of Dealing” a basis of conduct predicated on past transactions that establish precedent

• “Usage of Trade” are practices or methods regularly observed (customary) and justify an expectation that they will apply to the transaction

UCC Article 2 - Sales

• Modifications need not include consideration but must satisfy the “Statute of Frauds”

• Modifications must be in writing

• Must meet the test of good faith

• Modifications not meeting the above can be considered a waiver.

UCC Article 2 - Sales

• Seller must make best efforts to forward the product to the buyer until payment is received

• Tender

• Buyer obligated to pay when product received and inspected

• Goods must conform in all respects to the terms of the contract

• Buyer may reject non-conforming goods and not be bound to subsequent performance

UCC Article 2 - Sales

• Implied Warranties

• Merchantability - reasonably fit for general purpose for which they are sold

• Fitness for a particular purpose- item is fit for the specific purpose for which it is sold

• Warranties may be disclaimed but disclaimer must specifically state

• No warranty of implied merchantability

• “As-is”

Repudiation• Refusal (especially by public official) of a

contract or debt

• One party may wait reasonable time for performance and then seek remedy for breach

• Can do so while it continues to wait for performance in the case of anticipatory repudiation

• Repudiation may be retracted until next performance is due unless

• Aggrieved party has cancelled or materially altered its position

• Announced it considers the repudiation final

• Parties may require adequate assurances of the other parties performance and may suspend their performance pending such assurance.

Son, I Say Son ...That constitutes

Anticipatory Repudiation

Sarbane-Oxley Act

• Public Law 107-204 July, 2002

• Requires changes to corporate accounting so as to control how value is created/recognized

• Large impact on CM since contracts are principle revenue generating device

• Impacts most seen in commercial (predominantly B to B enterprises) since contracts with Federal Government required more stringent accounting