Current Event Assignments 2

MGT533Chapter15.pptx

Home >English homework help >Current Event Assignments 2

Chapter 15

Legal and Ethics

©2020 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.

Key Questions Addressed in Chapter 15

How can we assure that the legal record reflects the commercial agreement?

How can we confirm the legal record?

How can we assure that supply personnel deal ethically and in conformance with regulatory requirements and organizational values?

Law of Agency

Gives legal status to supply personnel

Gives the authority as an agent of the organization to attend to the business of supply in accordance with the instructions given by his or her employer

Typically instructions are a job description

Rationale for title: The title “Purchasing Agent” – although not commonly used any more

Legal Authority of the Buyer as an Agent of the Employer

Actual authority

Express authority: the acts the agent is expressly and directly authorized to perform; job description

Implied authority: all other authority that is necessary, usual, and proper to carry through to completion the express authority

Third party role: the duty of the third party to ascertain the scope of an agent’s authority; ;important to document and clarify level of authority

Apparent Authority

created when the words or actions of the principal (employer) lead a reasonable person to believe that authority has been granted

the authority a buyer appears to have

Maverick Buying and the Law of Agency

Employees who are not legal agents have no actual authority

Maverick buying refers to these employees acting as if they had authority (ordering from suppliers)

An employer confers apparent authority when such goods are received and the company pays the supplier

Personal Liability of the Buyer

Makes a false statement concerning authority with intent to deceive or when the misrepresentation has the natural and probable consequence of misleading

Performs a damaging act without authority

Even though believing they have such authority

Performs an act which is itself illegal

Even on authority from the employer

Willfully performs an act which results in damage to anyone

Performs a damaging acts outside the scope of authority

Even though the act is performed with the intention of rendering the employer a valuable service

Uniform Laws

A uniform body of law governing the sale of goods within a country and between countries minimizes the risks associated with the acquisition process and facilitates fair and efficient trade

USA: Uniform Commercial Code (UCC) with adaptations at the State level

Canada: The provincial Sale of Goods Acts

International: UN Convention on Contracts for the International Sale of Goods (CISG)

Purpose of Uniform Laws

Provide a set of rules for making and interpreting contracts

Clarify rights, obligations and remedies of parties to the contract

Provide a more efficient and economical way to buy and sell raw materials, commodities, and manufactured goods

Provide buyers and sellers a framework within which to mold their contracts to their specifications

Reduce uncertainty and doubt about which rules apply

Reduce disputes

A Valid Contract is Based on Four Factors

Competent parties - either principals or qualified agents

Legal subject matter or purpose

An offer and an acceptance

Consideration (bargained-for exchange)

Three Options for PO Terms and Conditions (Ts and Cs)

Boilerplate or a framework agreement

Includes complete terms and conditions applied to any transaction

Specific Ts and Cs

Includes detailed terms and conditions applying to that specific order

Basic Items

Includes only the basic items necessary for a valid offer and depend on the provisions of the UCC for proper legal coverage

The supply manager should rely on the company’s legal counsel to determine the policy to be followed

Purchases Made Orally: Statute of Frauds

Normally there must be some written notation if the price of the order for the sale of goods is $500 or more

If the seller supplies a memorandum which is not in accordance with the buyer’s understanding of the oral order, he or she must give a notice of objection to the supplier within 10 days of receipt of the memorandum to preserve his or her legal rights

The Buyer Has Three Options When Delivery Fails to Conform to the Contract

Reject the whole shipment

Accept the whole shipment

Accept part of the shipment and reject the balance

The goods may be late, may be delivered in the wrong quantity, or may fail to meet specifications

Four Types of Warranties

Express warranty

affirmation of facts, promises, description, sample, or model pertaining to goods that are subject of negotiation

Implied warranty of merchantability or usage of trade

the goods fit the ordinary purpose for which goods of that description are used in the trade

Implied warranty of fitness for a particular purpose

the seller, at the time of contracting, has reason to know any particular purpose for which the goods are required

Warranty of title and against infringement

no liens or patent or copyright infringement

Common Law and the Purchase of Services

The UCC does not address contracts for services

Common law governs the purchase of services

contracts solely for services

contracts wherein services and goods are bundled and the service portion equals more than 50 percent of the value of the contract

Common law develops over time as courts make decisions on a case-by-case basis, developing what is known as “case law”

Common Law System

Flexibility

Changing conditions make decisions inapplicable except as analogy

Courts turn to other English-speaking (common law) judicial experiences

Stability

General acceptance of certain authoritative materials

When courts fail to address changing conditions, statutes are enacted that supersede common law

In statutory interpretation, courts have recourse to the doctrines of common law

Implications for Supply Managers

Common law

provides general guidelines for contracting for services

does not stipulate performance obligations

no set of rules to govern performance

Services contract

must ensure each and every performance requirement and expectation is clearly defined

start with performance-based specification or statement of work (SOW) with clear performance obligations

Types of Services Contracting Methods

Service level agreements (SLA)

Milestone deliverables

Time and materials (T&M)

Volume of service (VoS)

Cost and cost plus

Typical Provisions in Service Contracts

Request for renegotiation

Dispute resolution

Termination for cause

Termination for convenience

Clauses related to on-premise service delivery

Clauses related to professional services

Key personnel

Warranty

Independent contractor

Work product

Indemnification

Nondisclosure

Subcontractor

E-Commerce and the Law

United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on Electronic Signatures (MLES)

Uniform Electronic Transactions Act (UETA)

Validates the use of electronic records and electronic signatures

Electronic Signatures in Global and National Commerce Act

Intellectual Property (IP)

IP: inventions, literary and artistic works; designs; and symbols, names and images used in commerce

Protected in law through

Patents

Industrial designs

Trademarks

Product Liability

Refers to liability of any or all parties along the manufacturing supply chain for damage caused by that product

Includes

the manufacturer of component parts

an assembling manufacturer

the wholesaler

the retail store owner

Liability suits filed over inherent defects in products that harmed consumers

Growing Importance of Product Safety and Liability

Government regulations/oversight increase and judicial interpretations of laws favor plaintiffs

Lawsuits, large settlements, greater public awareness

Regulations/oversight are reduced or eliminated leading to lax control within/among supply chains

Product recalls

Global supply chain growth; difficulties managing safety/ quality across borders and legal/regulatory systems

Increase in the risk of harm to consumers

Strict Liability

The defendant is liable when it is shown that the product was defective

No amount of care on the part of the manufacturer exonerates it from its legal liability if it is demonstrated that the product was defective

Three Types of Product Defects

Design defects

a product may perform its function but is inherently dangerous due to a design flaw

Manufacturing defects

occur during construction or production

Defects in marketing

improper instructions and failures to warn consumers of latent dangers in the product

Alternative Dispute Resolution

Any means of settling disputes outside of the courtroom, including

Arbitration

Mediation

Internal escalation

Provide an opportunity to reach negotiated settlements and maintain working professional relationships

Commercial Arbitration

Is your clause in proper form under appropriate arbitration laws?

Does your clause express the will of the parties or is it ambiguous?

Does your clause ensure impartial arbitrators?

Does your clause provide method of naming arbitrators?

Refer to rules of an association

Safeguard against deadlocks or defaults

Mediation

A less formal alternative to litigation than arbitration

Mediators are individuals trained in negotiations

Bring together opposing parties to attempt resolution

Each party can accept or reject the proposal

Used for a wide range of case types

Internal Escalation

First resolution attempt: purchaser and sales rep

Second attempt: their supervisors

Continues up the chain of command

Final round: top executives of both organizations

If they fail to agree, pursue other forms of dispute resolution

Sustainability

Sustainability includes respect for the natural environment and the ethical treatment of people.

Firms must comply with its legal obligations and meet the values and standards of its key stakeholders (e.g., employees, shareholders, nongovernmental organizations (NGOs), and customers.)

The concept of the triple bottom line (TBL) balances financial, environmental and social performance of the organization

The 3Ps of profit, plant, and people.

The supply function has a central role in organizational sustainability performance

Four approaches to managing supplier sustainability practices: corporate codes of conduct, industry standards, supplier audits, and third-party certifications.