Navigating the legal complexities of procurement can be a minefield, but it's crucial for ensuring compliance, minimizing vendor risks, and securing favorable terms. A well-prepared legal checklist can streamline the procurement process and keep your legal team happy. Here's a comprehensive guide to the key legal considerations for procurement professionals.
1. Contract Review and Approval
Key Points:
- Ensure all contracts are thoroughly reviewed by the legal team before signing.
- Verify that all contractual terms are clear, unambiguous, and enforceable.
- Check for any clauses that might pose risks, such as automatic renewals or termination penalties.
Action Steps:
- Develop a standard contract review process.
- Use a checklist to ensure all critical elements are covered. A custom playbook with standard and fall back provisions is a huge help for procurement teams
- Keep a record of contract versions and approvals.
2. Compliance with Laws and Regulations
Key Points:
- Ensure compliance with relevant local, national, and international laws.
- Stay updated with changes in regulations that might impact procurement activities.
- Include compliance clauses in contracts to ensure suppliers adhere to applicable laws.
Action Steps:
- Maintain a database of relevant laws and regulations.
- Conduct regular training sessions for the procurement team members.
- Perform periodic compliance audits.
3. Intellectual Property (IP) Protection
Key Points:
- Verify ownership and usage rights of any intellectual property involved.
- Ensure contracts include clauses that protect your company's IP.
- Address any IP-related issues, such as licensing or infringement, clearly in the contract.
Action Steps:
- Work with your legal team to draft robust IP protection clauses, specially for IT services and Independent contractor agreements where you need to own the code.
- Monitor compliance with IP clauses throughout the contract duration.
4. Liability and Indemnification
Key Points:
- Clearly define the liability and indemnification responsibilities of each party.
- Ensure that the contract includes provisions for indemnifying your company against potential risks and damages.
- Limit your company's liability exposure where possible.
Action Steps:
- Collaborate with legal to draft clear and favorable liability and indemnification clauses. Wherever sharing PII with vendor, ensure to have carveouts for confidentiality breach, indemnification, wilful misconduct and negligence. Discuss with business and legal on the direct damages liability cap before agreeing to anything.
- Review and negotiate these clauses with suppliers to ensure mutual agreement.
- Regularly review and update these clauses in contract templates to reflect any changes in the business or regulatory environment.
5. Dispute Resolution
Key Points:
- Include clear dispute resolution mechanisms in the contract.
- Specify the preferred methods of dispute resolution, such as mediation or arbitration.
- Define the jurisdiction and governing law for resolving disputes.
Action Steps:
- Discuss preferred dispute resolution methods with your legal team.
- Ensure that these mechanisms are clearly outlined in the contract.
- Include timelines and procedures for initiating and resolving disputes.
6. Termination Clauses
Key Points:
- Clearly outline the conditions under which the contract can be terminated.
- Include provisions for terminating the contract for cause or convenience.
- Specify the notice period and any penalties associated with termination.
Action Steps:
- Push the vendors to agree to termination for convenience, it helps to spend time on negotiating this term more favorable, specially for IT contracts
- Ensure that these clauses are fair and mutually agreeable.
- Regularly review and update termination clauses to reflect any changes in business needs or regulations.