McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 15 Legal and Ethics

Legal Authority of the Buyer Actual authority Express authority includes the acts that the agent is expressly and directly authorized to perform Implied authority is all other authority that is necessary, usual, and proper to carry through to completion the express authority conferred Third party role: It is the duty of the third party to ascertain the scope of an agent’s authority Apparent Authority Apparent authority is that which the buyer appears to have The appearance of authority is created when the words or actions of the principal (employer) lead a reasonable person to believe that authority has been granted

The Supply Officer May Be Personally Liable Under Certain Conditions When making a false statement concerning authority with intent to deceive or when the misrepresentation has the natural and probable consequence of misleading When agents perform a damaging act without authority Even though believing they have such authority When performing an act which is itself illegal Even on authority from the employer When willfully performing an act which results in damage to anyone When performing 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 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 1. Competent parties - either principals or qualified agents 2. Legal subject matter or purpose 3. An offer and an acceptance 4. Consideration (bargained-for exchange)

Three Options for PO Terms and Conditions Boilerplate or a framework agreement Includes the complete terms and conditions that apply 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 Normally there must be some written notation if the price of the order for the sale of goods is $5,000 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 1. Reject the whole shipment 2. Accept the whole shipment 3. 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 Implied warranty of merchantability Implied warranty of fitness for a particular purpose Warranty of title

Types of Services Contracting Methods Service level agreements (SLA) Milestone deliverables Time and materials (T&M) Volume of service (VoS) Cost and cost plus

E-Commerce and the Law Uniform Electronic Transactions Act (UETA) Validates the use of electronic records and electronic signatures United Nations Commission on International Trade Law (UNCITRAL) The Electronic Commerce Enhancement Act Electronic Signatures in Global and National Commerce Act

Commercial Arbitration Is your clause in proper form under the appropriate arbitration laws? Does your clause fully express the will of the parties or is it ambiguous? Does your clause ensure the appointment of impartial arbitrators? Does your clause provide for a method of naming arbitrators? By reference to the rules of an association or otherwise Safeguarding against deadlocks or defaults in the proceedings