I hope that you’ve enjoyed the article, “Contract Templates: False Sense Of Security?”

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The issue of enforceability of procurement contracts is tricky. There are various things that can make a procurement contract unexpectedly unenforceable. Therefore, knowing exactly how to write a contract is critical.

One “war story” that I love to share is from my days back in the airline industry. This was in the days when airlines were financially healthy and had significant leverage over their suppliers. Now, I imagine some airlines have suppliers who will refuse their business unless its done on a C.O.D. basis.

Anyway, for this large service procurement contract, my VP of Procurement demanded that one of the terms be a $15,000 per unit per day liquidated damages clause. This was unheard of!

Competing suppliers’ jaws collectively dropped when they saw that clause in our RFP. And once we got to the negotiating stage, the suppliers fought it vehemently. Ultimately, the successful bidder did agree to it!

But I wonder…if the liquidated damages ever had to be collected and the supplier refused to pay, would the courts find the clause enforceable? Or would they deem it unconscionable?

I am thankful that I never had to find out!

Got a war story too? Click the comments link below and share it!

Respectfully,
Charles Dominick, C.P.M., SPSM
President
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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