I once mentioned, in the introduction to supplier lifecycle, that contracts are often included in the supplier selection process in strategic sourcing. But here I’d like to focus on it exclusively because of its importance. Not being an expert in the law, I won’t discuss specific contract contents and precautions much.
Contracts are important because they symbolize the formal establishment of a relationship between two parties, of which the term of validity represents the degree of the relationship. “Contract” can be extensively defined as “being harmonious but not necessarily the same”, a way that brings together people holding different ideas. Therefore, signing a contract is the best way for both parties to avoid possible disputes in cooperation. Seldom do people sign a contract in borrowing money; instead they draft an IOU, which may vary widely in format and content. Likely, small transactions between companies don’t strictly call for a regular contract to ensure the implementation of business: usually an order will do. Following is a relationship line that describes the relationship degree between the supplier and the purchaser stipulated by a contract:
可见没有合同的基础，双方都只是操作层面的沟通，甚至很可能面都没见过，谈相互信任只能说是一厢情愿或者就如同网恋，你都不知道对方是男还是女，最典型的就像早期的网购，你根本就不晓得对方的货会是什么样子 – 看照片很美。从一次性合同到固定合同，是一种信任关系的体现，正是因为信任，所以才要坦诚相待，正所谓先小人，后君子，说的就是这个道理。但是实际操作当中，一说到合同，大家总是有一种不祥的预感，仿佛对方要给自己下一个圈套一样，因而搁置一边，反复咬文嚼字，斟酌再三，迟迟不肯签给对方。超越合同关系的就是信任，并不是说单单有信任就可以了，反而往往是先有合同作为基础，随着双方合作的深入，发现有些新事态并不在当初的合同内容里，才需要靠双方的信任共同去解决。夫妻双方经过热恋进入婚姻阶段，拿了结婚证，并不是说从此双方就绝对受法律保护了，免不了仍然会为鸡毛蒜皮，油盐酱醋茶争吵，这些就需要靠双方的理解，支持，信任去达到“百年好合”的境界。
The shift from call-off contracts to fixed contracts shows trends toward mutual trust. We have confidence in people before we treat each other with sincerity, which corresponds with a saying of “be dubious first, and then trusting.”
People often feel reluctant and hesitating in signing contracts for fear that they might be trapped by the other party. As a result, they would like to do anything, say, put the contract aside or be extremely cautious about the wording, but return a prompt reply.
Trust is much bigger than words; it is something consolidated by contracting relationship and surpassing. As the contracting parties go further in cooperation, new unanticipated circumstances may occur, troubles calling for mutual trust to be solved. A newly married couple getting their marriage certificate doesn’t have their affection ensured by the law. Instead, they will possibly fight over daily trifles. In this consideration, they should understand, support and trust each other to ease the tension, so as to live a life-long harmony.
Meanwhile contracting relationship can also be enhanced through improving mutual trust, the fulfilment of which goes step by step as the business proceeds. Perhaps it is only in project purchasing that business won’t begin until a full set of contracts are signed. People take great risks doing one-shot deal. In the past when people were simple and honest, most of them got married once, divorce and remarriage being contrary to the common sense and despised by the tradition. So in times like that, getting married was a highly risky matter. “Follow the man you marry, be he a fowl or a cur, “because chances are small that you make changes.
在固定合同的情形下，更多是因为业务的增加和发展所带来的复杂性变大，风险变高而在原有基础合同之上增加不同的合同，所以说合同只是工具，随业务的发展势态和需要随机而用。比如说初期只有采购合同，慢慢的发现质量需要质保，需要规范双方的验收标准，投诉的处理规则等等，于是就需要补充单独的质量协议；或者早期没有向供应商采购模具，后面开始向供应商采购模具，而且之前的模具涉及到报废年限，需要重新开模，重新报价，以及如何去分摊模具费用，这个时候就需要考虑模具的合同；之前产品单一，没有人提及品牌的授权，后面量大了，风险也大了，开始有人关注了，就会涉及到品牌授权合同。第二种需要增加合同的情形常常是因为公司政策的变换，而公司政策的变换的原因又常常是因为领导层变了，有不同的领导思路，以前的一些合同“不合时宜”需要重新修订或补充 – 这当然是指处于优势地位的一方。
In the case of fixed contracts, new contracts are added to the original one due to the rising complexity and risks resulted from increased businesses. So contracts are a tool that can be used incrementally according to the needs and development of businesses.
For example, an additional separate quality agreement is needed when such issues as quality warranty, acceptance inspection standards and complaint-handling rules should be regulated; contracts concerning molds are added when a purchaser plans to start a new business—mold buying—with its supplier, to stipulate the price, the sharing and amortization of mold costs,etc.;brand authorization contracts are referred to when single product variety expands to complex series which brings problems of brand authorization and larger risks.
Secondly, additional contracts are also needed when corporate policies change, which often takes place due to reshuffle of the leadership. New powerful leaders, with different leading strategy, may make adjustments or complements for existing but outdated or inappropriate contract items.
Assume the official documents which requiring company stamp of suppliers are contracts, the common contracts as the condition or link for supplier selection in the early purchasing stage include:
Supplier self-assessment questionnaire is an important part in Supplier Selection Process to enable capable and interested suppliers present their strength and weakness to purchasing organization using same process and template.
The supplier manual is like the employee handbook, which is usually signed when the two parties have settled business relationship and are about to receive the first order from the purchaser. The employee handbook must be something that will be studied the first week we go to work. Sophisticated human resources experts will let everyone write down their name after the employee reads through the employee manual.
As explainary guidance to Supplier Manual, to enable supplier understand and follow customer specific requirement and expectation over the Quality Assurance Process throughout from Specification Agreement, Product and Process Approval, Engineering Change, Warranty and Complaints Management Process etc., by binding them legally through signing off the agreement.
The supplier profile serves as a company identity file recorded at the purchaser side. It is listed in contract partially because the validity of the written commitment can be ensured and information verification, delivery, approval and archiving can be regulated this way.
5.无有毒有害物质申明Non-hazardous Substances Declaration (模板请在网站内搜索) (For templates, please search in the website.)
围绕REACH, RoHS, 冲突物质的符合性证书和（或）声明是为了确保供应商持续符合日益增长的各国针对“有毒有害物质”的限制所制定的各类法律法规，从而保护采购方免于因为违反这些指令而招致严重的处罚。它也属于承诺性声明的一种，作为规范的企业管理来讲，企业在签署之前一定会事先调查整个供应链上的风险。
The objective of Certificate of Conformity (CoC) and/or Declaration Letter over REACH, RoHS, Conflict Minerals (SEC), etc. is to ensure suppliers are continuously complying with the increasing statutory requirement and regulations of Hazardous Substances (HS) from worldwide, and as a result to protect purchasing organization away from any severe penalties due to HS subjects. It is also a sort of commitment statement. A company with standard business management usually will investigate the risks in the whole supply chain before signing the agreement for customers.
6.品牌授权 Brand Authorization （模板请在网站内搜索）(For templates, please search in the website.)
As basic business rule, the objective of Brand Authorization is to ensure suppliers and their sub-suppliers are authorized legally to use purchasing organizations or upstream customers’ trademarks and correctly use them under supervision.
The supply agreement is an extension of partnership on the basis of fixed contracts. While most supply agreements are not proposed until the business has extended to some degree, some are signed in the early stage of building relationship mainly because of project critical or key technologies. Supply Agreement is general contract to interpret and facilitate the transaction, including purchasing object, order framework, forecast, production, delivery, stock, payment, quality dispute, compensation, etc.
其目的是有助于合同双方在日常沟通中达成共识。当然作为总的框架合同，供应合同也可用于被增补一些更具体的合同和协议，比如报价条款协议，前置期协议，计划协议或者又称准时交货协议，安全库存协议或者又称供方库存协议，返点协议等等。Its objective is to help the both sides of contractor reach an common sense in daily communication. As a general contract, Supply Agreement can be amended by associated specific contracts like quotation term agreement, lead time agreement, schedule agreement or JIT agreement, safety stock agreement or VMI agreement, Rebate Agreement, on so on.
8.保密协议 NDA （Non-Disclosure Agreement）
Non-Disclosure Agreements should also be signed before the establishment of business relationship, which is the underlying contract for quotation to protect the information from being leaked. Non-Disclosure Agreement (NDA) sets forth the terms and conditions under which Proprietary Information may be used, duplicated and disclosed in conjunction with the request for a quotation, sample, advertising, exhibition, in-house production, outsourcing, storage, or even EOL clean up.
9.知识产权协议 IP Agreement
“知识产权”指所有智慧及工业相关权利，包括专利，版权，已注册或未注册商标，已注册或未注册设计，贸易机密，科学发现，发明，机密工艺，文艺作品，商业方法，程序等等。“Intellectual Property“ means all intellectual and industrial property rights including patent, copyright, registered and unregistered trademarks, registered and unregistered designs, trade secrets, discoveries, inventions, secret processes, works, business methods, procedures, etc.
IP agreements and Non-Disclosure Agreement are usually listed as one contract, known as the “confidentiality agreement on intellectual property rights”. But in practice, IP is not so often referred to while confidentiality for basic information is required, so they two are again separated apart. If the purchaser has special requirements of, say, product design, patent and so on, it should sign an IP agreement with the supplier in the early stage of supplier selection to reduce business risks.
这些协议主要在供应商选择阶段使用，除此之外还有其他一些衍生的协议贯穿整个按供应商的生命周期，衍生的协议主要是因为业务的复杂性，比方集团公司希望集中采购，那出于整合和统一业务的需要可能会有总供应协议（Master Supply Agreement）。这些协议按供应商的生命周期来排的话笔者的理解是这样的：
These agreements are mainly used in the supplier selection stage. Besides, there are some derivative agreements that serve throughout the whole supplier life cycle. These derivative agreements are called for due to the business complexity. For example, if a group corporation intends centralized purchasing, the master supply agreement may be needed to integrate and unify businesses. Here is my understanding of these agreements sequenced in the supplier life cycle:
The starting point of the ribbon represents the link where a related agreement gets started. Some ribbons cover more than one life stages, or even the whole life cycle; it may be because some relevant process haven’t been well established by the purchaser when these agreements are to be formed.
After the process is well-established by the purchaser, however, it is still necessary that the purchaser complement these contracts and agreements with the supplier with whom it has already built business relationship on the basis of future cooperation. It also accounts for the reason why purchasing and supplier management are dynamic rather than immutable.
But in the supplier exit stage, no more efforts will be taken to reach agreements due to resource limitation and reducing business relationship. Instead, the purchaser will try to find out how to end this relationship properly.
With so many contracts, it is required that duties and permission be clearly defined. In supplier management, the supplier actually has to deal with various functional departments of the purchaser. Lack of clear duty definition, problems may arise such as communication confusion, resources wastes, misunderstanding by suppliers and delay in contract signing. According to my own experience, regulations can be undertaken in the following aspects:
Those who initiate relevant contracts, usually a specific responsible position or person.
- Distributor 分发人
Those who send contracts to the supplier, not necessarily the same one as initiator for a contract may be packed with other information to supplier, making it a complete order.
- Driver/Owner 驱动者
Those who trace the contract sent to the supplier, explaining the specific content and requirements, and coordinating negotiations and concessions between the internal and the external parties in order for the fulfilment of the contract.
- Monitor/Overviewer 监控者
Those who possess and maintain the status of the whole contract, to ensure the validity, distribution and progress of all contracting information.
- Archiver 存档负责人
Those who are responsible for file archiving after the signing of the contract, storing signed documents and reminding relevant personnel before the expiration of the contract.
- Procedure and Template Owner 程序和模板拥有者
Those who are responsible for the compilation of relevant processes and templates. Different contracts differ in management process. Usually the driver is also the owner of the process and the specific contract template is designed by it with the joint efforts of some legal personnel and other participants. In this way, people will feel easy and flexible to make minor amendment in contents and templates in specific negotiations rather than report all the details to their boss.
Contracts cannot be abused. As a symbol for and an evidence of a relationship, it is not necessary to bear contracts in mind or codify it as a guide for all behaviors, which may otherwise lead to misunderstanding and tension between the two parties. Those who merely count on the marriage certificate or the labor contract to judge others and for help must be immature youths or inexperienced human resources stuff.
Great Acknowledge Given to Ms. Claire Wang from Guangdong University of Foreign Studies for Translation.