Offer and acceptance

Consideration

Competent parties

legality of purpose

For goods worth more than $500

1. One of parties documents in writing and sends copy to the other party who then has 10 days to object.

2. Goods are made specifically to the org. order and are not saliable to others.

3. Both parties behave as if a contract exists and actually perform their obligations under the oral contract.

4. Party against whom contract is to be enforced admits under oath in a legal preceeding that a contract existed.

1. Reserving a place in line for equipment

2. Basing volume discounts on future business without giving a firm order for the whole quantity.

3. Encouraging a seller to stock items of interest.

4. Providng supplier with evidence to secure bonding.

1. Fixed Price

2. Cost reimbursable

3. Indefinite delivery

4. Letter Contracts

5. Dealers agreement

6. Service agreements

7. Licensing agreements

8. Master purchase agreement

9. Construction contracts

Escalation provides for both upward and downward changes in price as a result of changes in either material or labor. Tied to indices.

Used during economic uncertainty, long term contract, and when market prices are erratic such as metals and copper.

both future costs and amounts of labor or material are uncertain. Fixed price determined and adjusted after experience is gained and costs become known.

Max redtermination provide only for downward adjustement

flexible redterminiation provides for price adjustment up or down.

Incentive to supplier to control costs by establishing targest cost, target profit, ceiling price, and final profit formula. Seller/Buyer split the savings.

Used in contracts high cost and long leadtime projects.

 used when neither work nor results can be specifically defined prior to performance.

Settle on fixed rate, after which assess results and decide whether additional effort required.

Used in research & development work and lab testing.

fixed pricing with an option to obtain reimbursement for extroardinary expenses.

Ex: through mutual agreement delivery date extended and extra costs incurred by supplier are allowed.

provide for payment of allowable, allocable, and reasonable costs incurred in performance of contract to extent that such costs are prescribed or permitted by the contract. 

guarantee supplier a price sufficient to cover allowable costs plus whatever addtnl. amount is negotiated. Beyond that point, supplier will do no addt. work unless buying firm agrees to provide more money.

1. cost without fee

2. cost sharing

3. cost plus incentive fees

4. cost plus award fees

5. cost plus fixed fee

6. cost plus percentage of cost

both buyer and supplier share costs and benefits.

Ex: buying org. has equipment developed for its use that supplier may also place in its line for sale. On  a larger scale oil drilling org. might share with th eland owning country or org. a percentage of the output of a well it has developed.

Purchase requirements that are not yet known. Min quantity is contracted and expected range of quantity/service is expected.

Ex: contract for purchase of fuel for a fleet of vehicles.

Used for purchase of computer and MRO supplies.

Ex: Org. establishes agreement for computers specifying desktop and laptop systems. New employees can order a new system against master agreement. Specs already established in master agreement.