Managing Contractual Risk (L5M3)


Module purpose
On completion of this module, learners will be able to evaluate the legal and process issues relating to the formation of contracts and the legal implications of contractual non-conformance.They will also assess the impacts of breach of contract and examine coping remedies and provisions that are available under such circumstances.

Module aim(s)
As organisations outsource more and more activity it is vital that they ensure that theassociated contracts deliver expected services and/or products. Hence, a fundamental area that those who are tasked with managing the procurement and supply function are faced withis the identification, monitoring and management of contractual risk. This module is designed to enable learners to examine the nature of contract risk and the associated legal implications that relate to contract formation and non-conformance. They wil also consider the impact of breach of contract and coping strategies to address such breaches.

Next steps
Joining a CIPS qualification programme means you will join the largest Institute in the world for those working in procurement and supply. You can join as a member online today. Once you've become a CIPS member you can book your examinations online.

    Learning outcomes

    1.0  Understand the legal and process issues relating to the formation of contracts 

    1.1  Identify the issues relating to the formation of contracts and the associated risks 

    • Offers
    • Counter offers
    • Acceptance
    • Precedence of documents
    • Contract change
    • Contract variations

    1.2  Analyse the implications of the various elements of contractual documentation and process on overall risk 

    • Indemnities and liabilities
    • Insurances
    • Guarantees
    • Liquidated damages
    • Payment
    • Delivery and completion

    2.0  Understand the impacts of breach of contract and coping strategies and provisions that are available 

    2.1  Analyse the different levels of breach of contract and their impact 

    • Minor breach
    • Major breach
    • Fundamental breach
    • Anticipatory breach

    2.2  Compare and contrast the tools and techniques available to resolve a breach of contract

    • Negotiation
    • Mediation
    • Conciliation and expert determination
    • Adjudication
    • Arbitration
    • Litigation and legal implications
    • Formal vs. informal action

    2.3  Explain different organisational responses to a breach of contract

    • Subcontracting
    • Penalty clauses
    • Reputational damage
    • Claims management process

    3.0  Understand the legal implications of contractual non- conformance in procurement and supply

    3.1  Contrast remedies that apply to the non-performance of contracts in procurement and supply

    • Contractual provisions on performance
    • Clauses for default
    • Penalties, liquidated damages and unliquidated damages
    • Assessment of consequential loss
    • Service credits
    • Serving notices

    3.2  Analyse the legal consequences of terminating a relationship in procurement and supply

    • Assessment of damages
    • Contractual warranties and conditions
    • Specific performance
    • Termination clauses

    3.3  Compare mechanisms for dispute resolution for resolving conflicts in procurement and supply

    • Mechanisms for dispute resolution such as:
      • negotiation, alternative dispute resolution (ADR), adjudication, arbitration and litigation involving lawyers

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    Choose three ELECTIVE module to make up the final 18 required credits.

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