For the past 18 months your company has been using Nippi Transport Ltd (NTL) to
ID: 432998 • Letter: F
Question
For the past 18 months your company has been using Nippi Transport Ltd (NTL) to make very urgent deliveries of important business documents to existing clients and potential new clients. The documents include, tenders for new work (a failure to deliver on time will result in exclusion from the tendering process), design drawings and highly confidential contractual documents. There is no contractual agreement in place, everything is verbal. NTL charge $1.50 per mile for delivery, plus a flat rate of $50 per delivery, plus VAT. The service from NTL has been excellent. Their Managing Director has now asked you, as Head of Procurement to sign his contract. He explains that he is requesting this ‘to get his own house in order.’ You have read the contract and three clauses cause you a difficulty and, accordingly, you now intend to negotiate the detail with NTL. The relevant clauses read:
Clause 8 Limit of liability. Our liability shall be limited to the cost of delivery and we shall bear no responsibility for direct or indirect losses incurred by the customer as a result of our failure to meet our obligations.
Clause 11 Price. We reserve the right, at any time, to increase our prices without prior notification to the customer.
Clause 14 Sub-contracting. We reserve the right to sub-contract any or all of the courier services without seeking customer’s approval.
1. Assuming you have a desire to negotiate in a positive manner, how would you initially respond to the NTL Managing Director?
2. Draft a response to Clauses 8, 11 and 14 based on your ideal wording for the clauses.
3. If the NTL Managing Director told you that he is not prepared to negotiate and you ‘must take it or leave it,’ how would you respond?
4. What would be your BATNA?
Can you please answer QUESTION #2 specifically?
Explanation / Answer
Answer: 2
The response from head of procurement for the three given clauses is as below
Clause 8 Limit of liability:- NTL is responsible for delivering their services as per the agreed contract terms and conditions. The liability for NTL is as per the agreed contract. NTL’s liability shall not be limited to the cost of delivery only, but NTL shall bear responsibility for direct or indirect losses incurred by the customer as a result of their failure to meet their obligations and this liability will be assessed and decided based on a reasonable review process between the NTL and organization.
Clause 11 Price:- NTL to provide their services at the agreed contracted prices. However, NTL may initiate a request for prices increase. The price review request will be negotiated between both the parties i.e. NTL and our organization team. NTL do not have the right to increase their prices, at any time, without prior notification, joint approval and signed off from our organization.
Clause 14 Sub-contracting:- NTL to provide their services as per the agreed sub-contracting organizations. However, NTL may initiate a request for changes in sub-contractors. The sub-contracting request will be reviewed between both the parties i.e. NTL and our organization team. NTL do not have the right to sub-contract any or all of the courier services without prior notification, joint approval and signed off from our organization.