Contract Assignment Information

1. Use Trane Supply Chain Contract from course website

2. Read the contract and then read the exercise questions below.

3. Turn in answers to questions written in a Word doc.

Hypothetical situation:The #1 Salesperson at your Company has been awarded a huge contract to supply Trane 5 million widgets per year for 5 years to be used by Trane as components for their HVAC systems. The price Trane has agreed to pay your Company for each Widget is $5 per Widget. Your company's cost for materials and sub-contractor labor to produce each Widget is $3 per Widget.

Your Salesperson's counterpart at Trane tells him that Trane's "standard" form of supply agreement is what they would prefer to use for this transaction.

Your Salesperson forwards the email to you and asks you to review the "fine print" and start the process so your management can sign the Agreement and lock-in this great deal.

-Review the Agreement Form and answer the following questions:

1. Is the price that Trane will be paying for the Widgets sufficiently clear? See Section 2.3.What happens if in Year 2 of your Agreement, your competitor offers Trane a better deal?

2. Although Trane has agreed to a 5 year term in Section 1.3 of the Agreement, is Trane obligated to buy 5 million Widgets per year for 5 years? See Sections 2.4 and 2.5. How might these provisions effect your Company's negotiation of supply and sub-contractor agreements that it is required to enter into to produce the Widgets for Trane? If Trane terminates the Agreement, will Trane be obligated to meet its obligations under the Agreement for the entire 5-year term?

3. Is your Company's warranty obligations to Trane described in the Agreement? What kind of liabilities might your Company be responsible for if you deliver non-conforming Widgets to Trane? Are the liabilities limited to your expected profit? See Sections 2.7 and 2.12.

4. Are the specifications or quality standards clear in the Agreement? See Section 2.25. Based on the Agreement, can your Salesperson accurately predict that your Company will make a $2 per Widget profit?

What changes to Section 2.25 would make your Company's obligation to Trane clearer from a quality requirement standpoint?

5. If your Company's warehouse burns down and you are not able to meet your delivery obligation to Trane, does the Agreement provide for an extension of time? What if your material supplier fails to deliver the materials to you on-time? See Sections 2.11 and 2.21.

6. What are the delivery terms of the Agreement? See Section 2.17. Does the UCC apply to this Agreement? What if the UCC and Section 2.17 are inconsistent?

7. What provisions in the Agreement are intended to address the FCPA or Sarbanes-Oxley?

8. Does the Agreement permit your Company to stop supplying Widgets to Trane if they fail to pay on a timely basis? If not, does the UCC apply?

9. As described in the introductory paragraph, your Company subcontracts with another company to provide labor to produce the Widgets.Does the Agreement permit this arrangement? See Section 2.9.

10. Do you think this Agreement reflects the understanding that your Salesperson has regarding this deal?

Attachment:- TRANESUPPLYAGREEMENT.rar