Quản trị kinh doanh - Chapter 3: The legal aspects of purchasing

1Chapter 3:The Legal Aspects of PurchasingPurchasing and Supply Chain Management, Copyright 2013. W. C. Benton Jr., All rights reservedPurchasing managerThe purchasing manager is an agent for the firm.The agency concept:An agency relationship requires at least three parties:the principalthe agentthe one with which the agent conducts business on behalf of the principal2Authority of the Purchasing ManagerThe three types of purchasing authority:1. Express authority 2. Implied authority 3. Emergency authority 3By the principalOccurs automatically when appointedStated in company bylawsBy lawOccurs at the time the principal expressively grants authority Protecting the principal’s rights when a consultation with the principal is impossible at the timeLegal Requirements of a Purchase ContractAccording to laws, a legal transaction requires all four components:The parties must be capable. The subject of the matter must be legal and valid.There must be mutual consideration .The parties must reach an agreement by offer and acceptance.4Components of an OfferThree components:Intent to make an offer.Communication of the offer intent.Identification of the specific subject matter.5The Four Outcomes to an OfferThe offer may lapse.Time Limits of an Offer:Specified E.g., immediate acceptanceUnspecifiedReasonable period according to lawThe offer may be rejected.Either verbal or writtenIf the offer is amended, it becomes a counter-offer6The Four Outcomes to an Offer (cont.)The offer may be revoked.According to the law, an offer can be revoked anytime before it is accepted. However, this should be avoided if possible.The offer may be accepted.A contract is made7Terms of ContractsQuantityAn offer must express a fixed quantity of a sale. A contract that does not specifically express quantity is unenforceable. The unit of measure of quantity is unique to the industry.E.g., Concrete is quoted in cubic yards.Quality8Terms of Contracts (cont.)Price and Credit TermsPrice is the third major term. Must be included in an enforceable contractPrice is determined when the offer is accepted.Price escalation clausesNegotiate the credit terms with the supplier.9Terms of Contracts (cont.)Delivery TermsFormalize the responsibilities of the buying and selling firm for delivery of the goods.E.g., Free on board (FOB)LeasingBecoming more attractiveTax and equity effects10EthicsDefined as the standards of right conductThe law can only codify and enforce the most egregious violations.E.g., fraud and exploitationThus, Ethics play a large role regarding fairness in negotiations.Purchasing agents are governed by: Company’s ethical policiesUniform ommercial CodeSecurities and Exchange CommissionMany state and local laws11Women and Minority ComplianceA restriction put on government contractors to promote the government’s policies.To be eligible to participate in some federal programs, a company must be certified as at least one of the following:Woman-owned business Minority-owned business 12Questions?13