Professional Documents
Culture Documents
by W.C. Benton
Chapter Three
The Legal Aspects of
Purchasing
3-3
Learning Objectives
3-5
The Title and Duties-Purchasing Agent
3-6
The Title-Purchasing Manager
3-7
Legal Status of Purchasing Manager
• From a legal point of view, the following
factors are associated with the appointment:
1. Express authority
2. Implied authority
3. Emergency authority
3-9
Execution Of Contracts
and Purchase Orders
• Purchasing personnel routinely sign purchase orders and
contracts committing the company to the specific terms and
conditions of purchase orders and contracts. The purchasing
official has no personal liability providing that the following
requirements are met:
3-10
Essentials of a Purchase Contract
1. The parties must be capable
3-12
Invitation To Do Business
• In most instances, the purchasing official initiates an
invitation to do business. The purchasing official
issues a request for quotation.
3-13
Counteroffers
• The negotiations process between the buyer and the
seller usually leads to many offers and counteroffers.
3-14
The Time Limits of an Offer
3-15
Firm Offers
• The firm offer question should be raised when
quotations are requested. This approach gives the
supplier equal opportunity to consider the risks
before quoting.
3-16
Option Contracts
• In case the supplier is unwilling to give the buying
firm a firm offer, the purchasing professional should
attempt to offer the seller an option contract.
The seller will make an agreement to allow the
buyer a specific time limit to make the purchase.
Consideration will pass from the offeree to the
offeror in return for a firm commitment.
• This option contract is enforceable because of the
payment of the $ 1,000 consideration.
3-17
Bid Bonds
• A bid bond enlists a third party into the transaction.
3-18
Promissory Estoppels
3-19
Promissory Estoppels (Example)
3-20
Oral Contracts
• Oral contracts occur everyday. Ordering a pizza is an
oral contract. However, oral contracts have no place
in the professional purchasing arena. If a supplier
refuses to perform, there is no recourse for the
buyer.
3-21
TERMS OF A
CONTRACT
3-22
Quantity Quality
3-23
Price and Credit Terms
• The price is determined when the offer is accepted.
In some cases, price escalation clauses are used in a
contract.
3-24
Delivery Terms
• Delivery terms are closely related to price terms.
3-25
Leasing
• Leasing is becoming more attractive for both
consumers and businesses. Consumers are leasing
automobiles in record numbers.
3-28
Electronic Contracts and
Signatures
3-29
Electronic Contracts
• A secure signature should be such that it can be used to
identify the signer. This does not mean that the signature
itself must consist of or include the signer's name.
Identification by reference to other sources of information
would be sufficient.
• Thus, for example, a digital signature may identify the signer
by reference to a certificate issued by a certification
authority.
• A secure signature must be linked to the data message being
signed, in such a manner that if the message is changed the
signature is invalidated. Such a linkage may be regarded as a
crucial requirement for a secure signature, since otherwise
the signature could be simply excised from one data message
and pasted onto another.
3-30
Cryptographic Signatures (PKI)
• Cryptography is the science of securing information.
The technology is based on scrambling information
and then unscrambling it.
3-31
The Federal Electronic Signatures in Global and
National Commerce Act (ESGICA)
3-34
The End,,,