Re: Vetting of Purchase – Sale Contract
As we understand, Square Pharmaceuticals Limited contemplates to set-up a Cephalosporine production plant, and in pursuant, has approached Z Products S.A to provide machinaries, equipments relating to the plant and further installations and commissioning of the same. Z Products S.A agreed and sent the draft Purchase-Sale Contract to be executed by and between both the parties. We have perused the draft Agreement and our opinion is as follows:
|SL No.||Paragraph No.||Observations|
|1||Nomenclature||It is advised to replace the term “PURCHASE-SALE CONTRACT’ with ‘DEED OF AGREEMENT.|
|2||Clause I,First paragraph||All the sub-clauses should be numbered.
There is a stipulation that in case of discrepancy between the Annex and the Contract, the provisions of the recent document shall prevail. Annexures are the integral part of the contract. Thus there in is no chance of any discrepancy between the two. Therefore, the lines relating to the said preference should be deleted.
It is further advised to incorporate the following paragraph (numbering in order):
“The seller further agreed to carry out certain civil works or civil construction (as stipulated in Annexure ___) on and to the site in order to prepare them so that the installation, commissioning and Acceptance of the System/plant can take place in accordance with the specification and design under Validation Master Plan (VMP)”.
|3||Clause IScope of seller’s service||Annexure 1 is not provided to us for perusal. However, it appears that the Annexure 1 is labelled as an Offer instead of Scope of the Work. Please look into the matter.
Square is thereby advised to check the scope of the seller’s services before execution of the present Agreement. Please note that, the seller should be responsible for all the civil constructions, installation, commissioning and Acceptance of the plant.
|4.||Clause ICompletion Date||The entire clause should be re-arranged as follows:
“The seller shall be responsible to complete setting up the Cephalosporine production plant along with all the civil construction, installation, commissioning under this Agreement, within 18 (eighteen) months from the commencing date of the present Agreement as stipulated herein subject to opening the L/Cs within 15th July, 2003 by the buyer for import of the related materials”.
It is further advised to Square to get the work schedule from the Z S.A. and attached the same as Annexure (numbering in order).
|5.||Clause IPrice||It appears that the contract price includes the telephone bills. Being an overseas institution, the seller may need to do too many overseas phone calls which will be highly expensive. However, it is upon Square to decide.|
|6.||Clause IBuyers right||The cost implication to inspect the site by the buyer is not understandable. It is buyer’s own project.|
|7.||Clause ILAD||It is advised to add the phrase “ mentioned hereinabove” next to the term “ stipulated time” in the third line.|
|8||Clause IShipping dates||The expected shipping dates should be stipulated in a different attached Annexure.(numbering in order)It is further advised to delete the entire paragraph starts with the phrase “in the event of Force Majeure” due to repetition of the same in paragraph XI|
|9||Clause IIServices and Labour||It is stipulated that the 18 equal payments to be paid by the buyer by bank transfer. Please note that, Bangladesh Bank’s approval is required for every outward remittance.|
|10||Clause IV||The clause should be re-arranged as follows:
“The seller shall be responsible to pack the materials/merchandise in such a way so as to prevent damage during the entire voyage from the factory to the site. Packages shall be marked according to the rules under the L/C”
|11||Clause VI||The entire clause may be re-arranged as follows:“The seller warrants and represent that:
a) The seller has the requisite corporate authority to enter into this Agreement and consummate the transactions contemplated by this Agreement.
b) The seller gives warranty for a period of 1(one) year from the date of final acceptance (Annexure_____) that the merchandise delivered to the buyer as well as the proper functioning of the plant and the civil works and commissioning carried out by the seller.
c) The seller undertakes that during the warranty period of 1(one) year it shall be responsible to make good, by rework, rectification, repair or replacement or where applicable by the supplying of replacement parts, any defects in civil works/construction, the products or the plant at their own cost. Such repair or replacement shall be carried out by the seller or their nominated local agent within 15(fifteen) days from the receipt of the notice either oral or written from the buyer. In the event such works to be carried out by a local agent, the competence of such local agent shall be verified by the buyer before appointing them.
d) The warranty for 1(one) year does not cover damages, defects or plant malfunctioning if :
i.) The buyer materially changes the nature of the merchandise supplied by the seller; and
ii.) The buyer moves the machines/equipments from the place where they have been originally installed
e) The seller further warrants that the civil works and the installation and commissioning of the plant shall be done and completed in a workmanlike manner by employing specialized, competent and skilled personnel and all the machineries, materials and equipments shall be fit for the purpose”.
|12||Clause VIIA. Obligation of the Seller||All the sub-clauses should be numbered.
The first paragraph should be re-arranged as follows:
“Upon shipment of the merchandise, the seller shall intimate the buyer the expected date of arrival of the vessel”.
|13||Clause VIIB. The buyer’s obligations:||In the second line of the first paragraph it is stipulated that the buyer is under an obligation for all civil works. Such stipulation may cause complication in future, in that, the seller is also responsible for civil construction/work. It is thereby advised to delete the phrase “in particular all civil work” from the second line. Further it is also advised to insert the Annexure number in third line.Further as per the terms of the second paragraph, Square shall be responsible for indemnity in the event of any damage or personal injury to the third party. Please look in to the matter.|
|14||Clause VIII||The term “client” in the first line is advised to be replaced with “ the buyer”.Throughout the entire agreement the term “client” should be replaced with “the buyer”.|
|15||Clause IX||The entire clause should be re-arranged as follows:
1. “The seller shall give written notice to the buyer when it is ready for the Acceptance Tests to be carried out specifying the date and time. The Acceptance Tests shall be carried out by personnel of the seller in the presence of the representatives of the buyer.
2. If the Acceptance Tests show the Civil Construction/works, installation and commissioning are in accordance with the design and specification of the Validation Master Plan (VMP),the buyer and seller jointly issue a Certificate of Inspection. The final reception Certificate (Annexure _____) shall be issued by both the parties upon full satisfaction of the proper running of the plant for commercial use”.
|16||Clause XI (4)||Since both parties are under equal obligation to fulfil respective duties/obligations, the force majeur clause should be equally applicable. Therefore, it is advised to replace the term “Z projects S.A.” with “either party”|
|17||Clause XIV||The effective date of is subject to opening L/Cs within 15th July 2003, means neither party has any obligation under the Agreement before 15th July, 2003. In the circumstances, any obligation under the present Agreement due before 15th July, 2003 may not be challenged. Please look into the matter.|
|18||Clause XV||The place of Arbitration under the Agreement is London. It is upon Square to decide whether to accept it or suggest for Singapore.|
|19||Clause XVI||The termination clause is found blank. The following paragraphs are advised to be incorporated:
1. “Without prejudice to the generality of the foregoing, either party shall be entitled to terminate this Agreement by ______ days notice in writing to the other if:
a) The other party commits any breach of any of the provision of the Agreement and, in the case of breach capable of remedy, fails to remedy the same within 14(fourteen) days after receipt of the written notice giving full particulars of the breach and requiring it to be remedied
b) The other party makes any voluntary arrangement with its creditors or becomes subject to winding up order
c) The other party goes into liquidation unless it did so for the purposes of amalgamation or reconstruction and the amalgamated or reconstructed company has assumed the obligations of that other party.
2. Following termination of this contract for the reasons aforesaid, the buyer shall pay to the seller:
a) A fair proportion of the fee payable for the Works done (if not covered by instalment payment under this Contract)
b) The reasonably and properly incurred costs (which is supported by proper documents) resulting from the termination”.
|20||New Clauses||1. As we understand, no mobilisation advance has been made by Square to Z SA. It is advised to incorporate the following paragraph (numbering in order) in the Agreement:“Upon completion of all Works under this agreement and issuance of the Reception Certificate, the seller shall be paid the balance(if any) of the contract price. If any claims of the buyer shall remain after final payment under this contract which are not satisfied by the Performance Bond or otherwise, the buyer shall retain the amount withheld”.2. Non-partnership:
None of the provisions of this Agreement shall be deemed to constitute a partnership or joint venture amongst the parties hereto
3. Successors Bound:
This Agreement shall be binding upon the successor-in-interest, legal representatives, administrators and assigns of the parties hereto.
Square is advised to re-number all the Annexures chronologically in the line of the present Agreement. Further, the name “Z Projects SA” should be replaced with “the seller” throughout the entire Agreement to keep consistency and avoid confusion.
Subject to the above observations and some typographical errors the other terms were found in order.
For: “The Lawyers & Jurists”
M.L.Hotel Tower Ltd,208,Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.