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Purchasing Contract Law

Purchasing Contract Law Training
Purchasing Contract Law Training

I was in the Bay Area the other day doing a purchasing contract law seminar, and was talking to one person during the break who was a senior procurement manager in a pharmaceutical company.

He was frustrated with their contract review process. It’s a story I’ve heard a lot of times actually.

It goes something like this: Purchasing sends contracts that suppliers mark up over to the under-staffed and overwhelmed legal department, where they gather dust for a seemingly endless period, until they finally come back to purchasing, and sometimes not before many back and forths with the legal department on various changes.

Throughout this process, purchasing is frustrated that legal takes their sweet time with contract review, meanwhile (big surprise here) the legal dept is frustrated that purchasing keeps throwing a seemingly endless stream of heavily marked up contracts over the fence.

His story was all too familiar. I wish I could wave a wand and make it go away.

I remember experiencing this myself many years ago as well, when I first started purchasing. By the way, the training program that they had ready for me was quite literally called “sink or swim” (i.e. there was no training, and they had a name for that). No kidding.

Anyways, I felt just like the pharmaceutical purchasing professional above: frustrated.

My way of dealing with it was to study contract law (UCC, Common Law, CISG) to the point that I was completely independent.

Long story short, it worked. As a result, my cycle time for contract negotiations ended up being 80% less than that of all of my peers.

As I thought about it more, it hit me that the legal department was a CRUTCH that people were using.

Worse than that, I also realized that suppliers knew this, and so they red-lined contracts knowing that the purchasing professional would just throw it over the fence to someone else to deal with – after price was already agreed to… so what does the supplier have to lose?

Hint: as much as I did on my last diet (which I’m technically still on)… NOTHING!

There’s so much more that purchasing professionals need to do differently with respect to how they manage and write contracts, but I truly believe that nothing beats taking time to establish a solid knowledge of contract law.

If your experience is like mine, once you get good at it, you wonder how you ever managed your career without it.

A friend of mine told me that once he got an SUV, he hated the trunk of his sedan (too small). Getting good at contract law is kind of the same thing; you will hate the feeling of helplessness that you had before and you’ll never want to go back.

The other nice thing is, there are a lot of benefits to your personal life. You should see the contracts I have landscapers sign before they come wielding dangerous tools on my property!

In that same contract law seminar that I was teaching, I had a case study at the end. It’s a real contract… and it’s bad, really bad.

Guess what, a highly paid purchasing professional in a Fortune 50 company signed it (I knew the guy, he was a senior direct materials commodity manager), and it was so bad that it resulted in a lawsuit, and not the kind where his company was getting money. I white-out his name to protect the guilty when I teach that course.Trust me, you don’t want to be that guy (unless you like updating your resume).

The nice thing is, this is not a curse, like being 5’2” and wanting to be a professional basketball player. Every purchasing professional can learn just enough contract law to be dangerously good.

The best challenges in your career, as in life, are the ones that are surmountable. Just don’t talk to me about applying this logic to my diet!