Contract Termination / Renewal Decisions Life of a contract - - PowerPoint PPT Presentation

Contract Termination / Renewal Decisions

Contract life

Life of a contract

Contract Signature Start of activities (Delivery of supplies, start

• f services, work execution)

Implementation period Contract Execution period

Final Closure (For supplies or

work)

End of activities

(Acceptance /Payments)

Reporting closure activities

Warranty period (supply) or defect liability period (works)

Time

Contract Risks

• Risk of Misunderstanding
• Risk of Non-Payment
• Risk of Quality
• Risk of Non-performance
• Risk of Delayed delivery
• Risk of Transit Loss
• Risk of Forex (in international contracts)

Achieving Results

Systematically managing contract execution for the purpose of maximizing performance and minimizing risk Ensuring compliance with the terms and conditions, documenting and agreeing on any changes What does Contract Management Imply ?

Contract Review Mechanism

• Milestone to be fixed for successful completion
• Quality standard to be achieved
• Timeline for completion of identified project

activities

• Cost break up, financial progress
• Advance action for various approvals – Designs,

Drawings, Samples, Prototypes, Inspections

• Submission of periodic progress report

Review Techniques

• Project Site inspections
• Techno-Commercial audit
• Periodical meetings
• Review of CPM
• Mid-Term review
• Circulation of minutes & action taken report
• Customers satisfaction / feedback report

Non-Monitoring/Poor Monitoring

Quantitative factors

• Time over runs
• Cost over runs
• Debt restructuring
• Revenue losses

Qualitative factors

• Public inconvenience
• Public goodwill / image
• Project creditability

Precautions

• Mechanism for Documentation
• Accuracy of Documentation
• Timely Stage inspections
• Consultation with Technical experts
• Safe custody of all important documents / files
• Periodic transfer of project team members
• Consultation of legal experts

Contract Termination

Implication – “ End of legal relationship and discontinuance

• f legal obligation under the contract “

Conditions precedent to termination of contract

• Mutual consent
• Material breach of condition under the

contract

• Insolvency
• Change in control

Termination Activities

• Opportunity to cure
• Issue of notice of termination
• Notices as provided for in terms of contract
• Formal closure letter
• Forfeiture of deposits
• Execution of balance contract at risk and cost
• f the defaulting contractor,
• Recoveries or payment of dues

Contract Renewal / Contract Extension

Determinants

• Evaluation of suppliers performance
• Contracted price Vs market price
• Presence of competitors in the market
• Legal Provision in the contract
• Pre-estimated Damages (LD) in the contract
• Reasons for need to extend the contract

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