2 Types of Contracts

Hi! I'm Jeff and this is my first time to contribute to the blog so please bear with me as I formally introduce myself.

I am currently employed in a QSR company handling non-food items particularly the categories of IT equipment, Kitchen equipment, Tools and Utensils and several others. I have just entered this industry so I consider myself a noob in the field as this will be evident in most of my posts. I hope that with my contributions, many other noobs will benefit and that other professionals might also share some insights to my posts.

Now back to the topic.

When I first got the job, the word contract was overly used and it was obvious that the word was used differently in different situations. Thus, let me outline the 2 types for better understanding.

1) Price contract - this means that you have agreed with your supplier a fixed price for a given period. For example: Item x will cost $3 from May to June of 2007. The logic for this kind of contract is for the procurement officer to handle a large number of items, standardize costs and protection against price fluctuations. However, this protection can also benefit your supplier depending on your arrangement with them.

2) Legal written contract - this refers to the conventional image of a contract which contains stipulations for the agreement. This is usually used for big projects or service agreements. Typically, this should contain the following (excluding legal requirements).
a) Declaration of Need by the client
b) Declaration of Offer by the vendor
c) Contract Price
d) Contract/Service Coverage (technical, temporal, spatial and conditional) - I will cover these in a later post
e) SLA - Service level agreement
f) Contingency agreement
f) Penalty Agreement

I will discuss contract monitoring for these two types of contracts in another later post.

That's all for now!

Jeff