Today, I would like to talk to you about the signing and review of contracts.
In the process of the company's operation, it is necessary to sign many contracts or agreements with upstream and downstream customers, such as: raw material or equipment procurement contracts, product sales contracts, engineering construction outsourcing contracts, consulting service contracts, bank loan contracts, investment promotion agreements, etc., and the review of relevant terms of the contract is a basic skill necessary for financial managers.
The company wants to sign a business contract, and the process that needs to be taken before the contract is signed and sealed is:
First of all, the business department needs to draw up a draft business contract according to the matters communicated by both parties, and the draft contract needs to be reviewed and approved by the person in charge of the business department. The business departments mentioned here include: purchasing department, marketing department, administration department, R&D department, finance department, production department, etc. The content of the contract includes: professional terms, public terms. Among them, the professional terms include: product name, specification and model, quality national standard or industry standard standard, warranty period, various technical indicators, etc. The contents of the public terms include: delivery period, mode of transportation, invoicing, payment of goods, liability for breach of contract, etc.
Secondly, the business department will draw up the electronic version of the draft contract and send it to the financial manager for review. Why does it have to be reviewed by the financial manager? Due to the lack of professional knowledge of the business department on the financial-related terms, and the actual situation of each contract is different, if the invoice, invoice tax rate, payment term, liquidated damages payment and other financial-related terms are wrong, it will cause great annoyance to the smooth performance of the contract. Especially when the company is larger, the departments are larger, the internal management is more complex, and the business process is more complex, the role of finance in contract review is becoming more and more important.
Third, the business department sends the electronic version of the revised business contract reviewed by the financial manager to the legal department for review. Since many SMEs do not have a legal department, the task of contract review can be entrusted to external legal counsel. In the process of signing the contract, the lawyer is the most professional in the description of all the contract terms, the agreement on liability for breach of contract, as well as the later contract breach and litigation-related enforcement. A contract can only be finalized and ready to be signed after it has been reviewed by the person in charge of the business department, the financial manager and the legal department. In practice, many contracts are drawn up by the other party, and the business person in charge or the general manager almost signs it without looking at it, in fact, it is very risky to deal with it at will without review, and even most businesses do not sign contracts at all, and many enterprises have suffered big losses in this regard.
Fourth, the business department has been fully audited to find the effective signatories of both parties to sign and seal, and important contracts need to be photographed or recorded by business personnel on the spot, and the files are ready for reference.
The signing of the contract should follow the principle of "whoever draws up the contract will be in his favor", because not all companies are very perfect in contract review management. If the other party insists on drafting the contract, our company will also go through the contract review process as mentioned above, and try to revise the contract terms to be more beneficial to us and control the performance risk of the contract to the minimum.
List a few key points for contract review:
1. Are the basic terms such as product name, specification, model, unit price, and service fee rate accurately expressed?
Second, the issuance of invoices should be clear. For example, is a special VAT invoice or an ordinary VAT invoice issued? What is the tax rate for invoices? What is the invoicing and delivery time? Who is responsible for the taxes? If the invoice is not issued and delivered to the buyer on time, or the invoice tax rate does not meet the agreement, how can the liability for breach of contract be borne?
3. Liability for breach of contract if the goods or services are not delivered on time at the time of delivery.
4. Are the quality requirements of the goods or services in line with national standards or industry standards? Or is there no standard? Is there a detailed agreement on product concentration, percentage of impurity content, weight, volume, reasonable error, etc.? What are the technical parameters, circuit design methods, acceptance criteria for goods, services and projects of the purchased equipment or instruments?
5. Is the packaging method of the goods, the information printing on the surface of the packaging, the sticking method of the self-adhesive label, the packaging method, whether the packaging carton is three-layer corrugated or five-layer corrugated, and the details of the packaging are accurately expressed?
6. The payment method of the deposit or deposit, whether the payment or service fee is paid in batches or in a lump sum, the time point or time period of payment, whether the bank acceptance bill or commercial acceptance bill is collected, and what is the proportion of the collected bill in the total payment? What is the liability for breach of contract if the other party fails to pay the payment or service fee as agreed? Bearing of additional costs, etc.
7. Definition of the mode of transportation of goods, the bearing of freight costs, and the risk of transportation.
8. The party responsible for breach of contract, the cost of breach of contract, the percentage of liability for breach of contract, the definition of liability for breach of contract, the way to remedy the breach of contract, the cost of remediation, the time limit for remediation, etc. Is the breach of contract through arbitration or court proceedings? What is the agreed place for arbitration or litigation? Here, I would like to ask you a question, if the breach of contract involves a lawsuit, what if the court involved the lawsuit agrees that the company's place of business is located? Or is it better to do business in the other company's place of business?
9. Change of contract terms and signing of contract annexes.
10. The business license, qualification certificate, contact person, and other basic information of both parties to the contract are reported.
Of course, due to different industries, the terms of the signed contracts or agreements are also different, and the focus of contract review is also different. Due to the company's position in the industrial chain, the company's right to speak in the contract is also strong or weak, and many terms are helpless even if they are not good for themselves.
Well, on the issue of contract signing and review, I will talk to you so much today, if you have better suggestions, you may wish to leave a message below so that everyone can learn together.