Contracts and Agreements

#risk_management #supply_chain

(OBJ 5.3)

Types of Contracts and Agreements

Basic Contract
- Foundation stone of most business relationships
- Versatile tool that formally establishes a relationship between two parties
- Defines roles, responsibilities, and consequences for non-compliance
- Specifies terms like payment structure, delivery timelines, and product specifications
- Ventures require additional layers of agreement.
Service Level Agreement (SLA)
- Defines the standard of service a client can expect from a provider
- Includes performance benchmarks and penalties for deviations
- Example:
  - Might state the server downtime won't exceed 2 hours per month, and any deviation from that would result in penalties paid to you by that service provider for breaking their SLA.
Memorandum of Agreement (MOA) and Memorandum of Understanding (MOU)
- MOA
  - Formal, outlines specific responsibilities and roles of the involved parties
- MOU
  - Less binding, expresses mutual intent without detailed specifics
  - Might be used to express an intent to explore a future partnership, and lay out the broad strokes without diving into the exact details.
Master Service Agreement (MSA)
- Blanket agreement that covers general terms of engagement across multiple transactions
- Used for recurring client relationships, supplemented by Statements of Work
  - Instead of drafting up a new contract for every project, the parties might use an MSA to define the overarching terms, and then supplement it with individual work orders or a Statement of Work.
Statement of Work (SOW)
- Sometimes called a Scope of Work
- Specifies project details, deliverables, timelines, and milestones involved
- Provides in-depth project-related information to complete a given project or deliver a certain service
Non-Disclosure Agreement (NDA)
- Commitment to privacy that ensures confidentiality of sensitive information shared during negotiations
- Commitment to privacy, protecting proprietary data
Business Partnership Agreement (BPA) or Joint Venture Agreement (JV)
- Goes beyond basic contracts when two entities collaborate
- Outlines partnership nature, profit-sharing, decision-making, and exit strategies
- Defines ownership of intellectual property and revenue distribution