Contract management

What are the necessary terms for collection?

overdue interest, no set off right against claim, payment term

What are the necessary term for recovering payment on behalf?


What are necessary term for revenue management

charge to shipper for non-delivery cargo, restraint of trade

What are the necessary term for limitation of liabilities

termination clause for loss making project


What is the function of confidential clause?

business protection

Shall we accept non STC contract?

No at all unless you are going to buy extra insurance

What are the payment procedure to support contract management?

No payment without contract

What is the function of contract?

  • deadline payment
  • business planning
  • investment approval
  • support legal case like debt collection

How to handle non-STC?

Extra approve, insurance charge back insurance

What are contract risk for logistics companies?

  • Uncontrollable risk
  • Consequence risk
  • Imbalance of information

What are contract terms to Avoid Contractual liability

exemption of liabilities and limitation of liabilities

procure service as agent

arrange insurance as agent

store the goods as agent when the customer do not take delivery

What are contract term to exempt liability

  • exempt liability that is unable to avoid
  • exempt indirect consequential loss

What are the contract term for limitation of liabilities?

Limitation of liability -- not exceeding

loss or damage (HKD200 per shipping unit or HKD10 per kilogram)

other claim (HKD200 per shipping unit or HKD10 per kilogram)

failure to delivery or delivery in  reasonable time

logistics/warehousing (max. 1 year management fee)

Inventory loss (0.05% to 2%) of annual total value of goods stored

What are the contract terms to indemnify by customers ?

Indemnification by customers

all penalty, claim, damages, costs and expenses arising from

handling dangerous goods

claim against Director, Servant or Employee

general average claim and acting in accordance with customer


to store goods at the sole risk of customer not taking delivery

What are common risk term in logistics contracts?

unable to avoid/force majeure

consequent loss

willful conduct by employee

willful conduct by agent

negligent conduct by employee

negligent by agent

Inventory loss

liquidated damage


What are the methods to manage risk under contract?


maximum liability


take up by subcontractor


indemnified by customer

What should be covered by contract backing under warehouse contract?

  • Min price, Max price, transactional pricing, Share of saving cost, Performance related bonus
  • Square meter
  • currency
  • insurance
  • reinstatement
  • income entitlement
  • reimbursement
  • relocation
  • re-organizaion
  • redundancy
  • termination against compensation-- imperfect match
  • withholding tax
  • notice
  • Flexibility
  • Max. liability
  • Credit term granted
  • starting
  • Ending
  • termination
  • buy back
  • funded change
  • consequence loss
  • penalty
  • compensation
  • exclusion
  • license
  • change in price
  • service performance
  • compensation amount, invoice value or manufacturing value
  • claim procedure and deadline

What are the basic elements for contract management?

  • Restraint of trade, employee and vendor
  • Pass on the risks to vendor
  • Avoid consequence loss
  • Confidential of information, customer, employee, vendor
  • Commodity risk bore by customers
  • Quotation in non RMB should be effective within very short period of time and controlled
  • Contract staff for seasonal product

What items should be covered when apply contract back technique?

  • starting
  • Ending
  • termination notice
  • buy back
  • funded change
  • consequence loss
  • penalty
  • compensation
  • exclusion
  • license
  • change in price
  • service performance including delay penalty

Consolidation can save costs. What are consolidation types?

  • Volume discount
  • Equilibrium
  • Co-loading
  • Business Partnership
  • Acquisition

What are cost saving opportunity for small freight forwarders?

  • Volume discount
  • Equilibrium
  • Co-loading
  • Business Partnership
  • Acquisition

What are contract terms to be negotiated or added in Oil supplies contract?

  1. Payment term to be changed from 15 days to 60 days upon receiving monthly statement (it seems the company do not have much pressure on cashflow as the overdue interest is only 0.5% per month). Acknowledgment of receipt by assigned inspector or receiver should be attached to monthly statement.
  2. Credit limit is too low. It should be more than 2 month consumption. Reminder about over credit limit should be sent to assigned person upon the time when the credit limit is exceeded.
  3. negotiate lower prices/volume discount by asking prices of alternative product/brand, alternative package/unit of measurement, prices and payment terms offered by competitors for the same oil offered by new oil supplier,  committed volume per year , committed volume per order, comparing the price and payment terms offered by existing oil suppliers and new oil supplier for the existing oil currently purchased,
  4. If there is an adjustment (down) on the oil prices, the oil supplies company should adjust the price offered by the same day
  5. Adjustment (up) on the prices offered should be limited to certain % of the change in buying costs. The adjustment on price should be sent by fax attention to the assigned person
  6. agreed reference for change in buying cost
  7. The time of delivery should be within eight hours of order. The oil supplies receives order and delivery oil 24 hours per day
  8. No minimum order and no additional surcharge applies to Point  6 above
  9. The delivery address should be exact location or exact vessel.
  10. The oil supplies company should be responsible for quantity and quality of the oil supplies company. All returned oil due to wrong quantity and quality is at the expense of oil supplies company. The oil supplies company should arrange another delivery with 4 hours even if there is any dispute
  11. If there is out of stock of oil, the buyer should be put into priority usage list.