Linked Contracts

Linked contracts are used when the fulfilment of a despatch order (DO) in one contract makes another contract contractually fulfilled. Linked contracts are also called transfer or inter-company contracts.

In MineMarket, the contract in which the contract link is configured is called the source contract.

Linked Contract Creation

Linked contracts can be created as inter-company contracts or as contract links set up in existing contracts (at the product or quota level).

A linked contract can itself be the source contract of a contract link. That is, you can configure a contract link in a linked contract. For example, Sales Contract A can have a contract link to Purchase Contract B, which can have a contract link to Sales Contract C, on so on. A circular link between contract products is not possible. For example, If Sales Contract A has Product X and Product Y, and Product X is linked to Purchase Contract B, then you can create a link from Purchase Contract B to Product Y, but not to Product X. The Linked Despatch Orders tab of the Despatch Order displays a diagram of links for that despatch order.

Splitting Quantities Across Multiple Contract Links

If a source contract has multiple contract links, the quantity can be split by percentage or by contributors.

Contract Links with Flat Percentages

Flat percentages are used when the contributions are known up-front, or when one contract fulfils 100% of another, or the sum of them fulfils several others.

Example: Sales Contract 1 has links to:

  • Contractual products or a quota in Sales Contract 2, with 80% counting towards Contract 2
  • Contractual products or a quota in Sales Contract 3, with 20% counting towards Contract 3

80% of the total mass delivered in Contract 1 is assumed to be delivered in Contract 2, and 20% of the total mass delivered in Contract 1 is assumed to be delivered in Contract 3.

Contract Links using Contributors

Contributor contract links are used when the contributions are not fixed percentages, but rather, they come though the supply chain using the contributor functionality of MineMarket.

Example: In a delivery to a customer where one district supplies most of the material, that district receives a greater proportion of the revenue. Sales Contract 1 with the customer is linked to Purchase Contract 2 (raised for District 1) and Purchase Contract 3 (raised for District 2).

Any contributor can be selected when linking contracts to determine the percentage to assign, either from the district contributor group or a regular contributor group.

If not all contributors are specified, there will be some unassigned mass when the masses are assigned to the various contributors during invoicing. The system cannot determine where the material comes from, and unless the process flow specifies that unassigned contributors are to be redistributed, the unassigned mass will not be considered financially. For contract links using contributors, this means that if contributor data is missing, linked invoices are not created.

If the contributor details are overridden on the source invoice, the linked invoice is updated when the source invoice is recalculated, or when the values are reset on the linked invoice.

Linked Despatch Order Creation

If the contract link evaluation is Invoicing or Despatch Order Creation, linked DOs are created automatically at that time. If the contract link evaluation is Manual, linked DOs are not created automatically. See Create Linked Despatch Orders Manually.

However, if the contract link evaluation is Despatch Order Creation or Manual, and linked DOs have not yet been created by the time of invoicing, the linked DOs are created when an invoice is calculated.

If a source DO is deleted, any linked DOs are deleted automatically.

Parent and Child Despatch Orders

If the source DO is a parent despatch order (PDO), when linked PDOs are created, the linked child despatch orders (CDOs) are also created. That is, the PDO/CDO relationship in the source and linked contracts is identical. See Parent and Child Despatch Orders.

Manual Linking of Individual Despatch Orders

If a one-off link is required between two DOs, the link can be created from the source DO. This linking does not create contract link configuration in the contract product. The link configuration can be viewed and edited via the Linked Despatch Orders tab of either the source or linked Despatch Order.

The source DO for the manual link:

  • Can be a CDO, but care must be taken to ensure this makes business sense
  • Cannot be a PDO
  • Can be a source DO
  • Can be a linked DO (which creates a chain of linked DOs)
  • Cannot be assigned to a despatch
  • Cannot already be invoiced

The linked DO for the manual link:

  • Can be a PDO or CDO, but care must be taken to ensure this makes business sense
  • Can be a source DO of another link (which creates a chain of linked DOs)
  • Cannot be a linked DO
  • Cannot be assigned to a despatch
  • Cannot already be invoiced

Control Passed

The configuration of delivery terms includes the conditions that must be met on despatches in order for control to pass from the seller to the buyer. See Delivery Terms.

If control has passed for a source DO, control has also passed for any linked DOs that have the same delivery terms.

Depending on linked contract configuration, the delivery terms of linked DOs may be different from the delivery terms of the source DO. For control to pass for the linked DO, the linked DO's delivery term conditions must be met on the despatch associated with the source DO. For example, a source DO has the delivery term FOB (control is passed when loaded), and its linked DO has the delivery term CFR (control is passed on arrival at destination). The source DO is assigned to a shipment. A survey is added to the shipment, and the actual end of loading is entered for the loading route point. Control has now passed for the source DO, but not yet for the linked DO. When the actual time of arrival is entered for the unloading route point, control has passed for the linked DO.

Contract Fulfilment (Assay Exchange)

Assay rules can be configured in a linked contract. However, the assay rules and analyte settlement rules of the linked contract are only used, and an assay exchange is only possible for linked DOs, if Allow Assay Exchange is checked in the contract link configuration.

Otherwise, assay exchanges are performed only for source DOs in the source contract.

Further Contract Link Examples

Example: Company B sells on behalf of Company A.

Sales and marketing for both companies is managed in one implementation of MineMarket:

  • Company B has a sales contract with a customer for 10,000 tonnes of coal at USD 45/t. This is considered to be the source contract in MineMarket.
  • Company B buys coal from Company A at USD 40/t. A purchase and a sales contract are set up in MineMarket to handle the accounting for both companies. The purchase contract is from Company B's perspective. The sales contract is from Company A's perspective. Both of these contracts are linked to the source contract. Both contract links are for 100%.
  • Company A despatches 10,000 tonnes of coal to the customer.
  • Company B receives USD 45/t from the customer, and pays Company A USD 40/t. Company B retains USD 5/t for making the sale to the customer.

Example: Company D sells on behalf of Company A, B and C.

Sales and marketing for all the companies is managed in one implementation of MineMarket:

  • Company D has a sales contract with a customer for 10,000 tonnes of copper concentrate at USD 45/t. This is considered to be the source contract in MineMarket.
  • Company D buys copper concentrate from Companies A, B, and C. A purchase and a sales contract are set up in MineMarket for each of these companies. The pricing depends on the quality of the copper concentrate. All of these contracts are linked to the source contract, using contributors.
    • Company A supplies 3000 t of copper concentrate priced at USD 39/t.
    • Company B supplies 4000 t of copper concentrate priced at USD 38/t.
    • Company C supplies 3000 t of copper concentrate priced at USD 42/t.
  • Company D despatches 10,000 tonnes of copper concentrate to the customer, who pays USD 450,000.
    • Company A receives USD 117,000.
    • Company B receives USD 152,000.
    • Company C receives USD 126,000.
  • Company D retains USD 55,000 for handling the sale and despatch to the customer.