Sales and Purchase Contracts

• Sales and Purchase Contracts
• • Contract Types
  • • Sales Contracts
    • Purchase Contracts
    • Similarities and Differences between Sales and Purchase Contracts
  • Contract Pricing Basis
  • • Product Pricing
    • Analyte Pricing
  • Contract Terms
  • Contract Products
  • Contract Quotas
  • Despatch Orders
  • Linked Contracts
  • Person in Charge (PIC) and Trader

Material contracts cover those contracts that involve selling, purchasing, exchanging or processing of materials.

Contract Types

MineMarket includes both sales and purchase contracts. Together these are sometimes referred to as 'material contracts'. Material contracts cover those contracts that involve selling, purchasing, exchanging or processing of materials.

Sales Contracts

A sales contract is a legally binding document between a buyer and a seller that outlines the agreed terms for the sale of material. Use a sales contract in MineMarket when an internal company sells material to an external organisation or to another internal company or district.

The sales contract is for one or more contract products and each contract product may be delivered in quotas. Despatch orders can be created for a contract product or a quota of a contract product. Pricing, invoicing requirements, taxes, payment terms, analyte settlement rules, contract charges and service charges are configured in a set of contract terms, which may be at the contract, contract product or quota level.

A simple sales contract, also called a 'sales order form', is a condensed version of the MineMarket sales contract functionality. You can use it to view and create the basic details of sales contracts.

Any sales contract can be viewed via the simple editor of the Sales Order Form. Any sales contract created or viewed via the simple editor can also be opened in the detailed view of the Sales Contract screen.

Purchase Contracts

A purchase contract is a legally binding document between a buyer and a seller that outlines the agreed terms for the purchase of material. Use a purchase contract in MineMarket when an internal company buys material from an external organisation or from another internal company or district.

The purchase contract is for one or more contract products and each contract product may be delivered in quotas. Despatch orders can be created for a contract product or a quota of a contract product. Pricing, invoicing requirements, taxes, payment terms, analyte settlement rules, contract charges and service charges are configured in a set of contract terms, which may be at the contract, contract product or quota level.

Similarities and Differences between Sales and Purchase Contracts

Essentially, sales contracts and purchase contracts are identical, except that the buyers and sellers are reversed.

There is also a difference in despatching. On a sales contract, the material is generally tracked from loading the ship to unloading at the destination port. On a purchase contract, the material can be tracked from the incoming port.

A purchase contract can be invoiced just like a sales contract. Usually, an invoice generated for a sales contract is issued to the customer. An invoice generated for a purchase contract is not issued to the customer, but used to extract the financial details for the company's ERP system for internal financial tracking.

If internal districts are buying from each other, the company may wish to track the financial ins-and-outs of each district. An invoice generated for a purchase contract with an external organisation may be raised purely to retain the financial information so that it can be used in budget planning. An example of this is a steel producer buying coking coal, using sales contracts to sell the steel, but setting up purchase contracts to keep track of how much coking coal they have purchased. The invoice from the coking coal seller could be used to determine their expected payment.

To set up a sales contract or a purchase contract, the products or brands that are to be sold need to be specified, along with the amount of tonnage that is contractually agreed, and the currency in which it will be sold. The quotation pricing (QP) then needs to be specified for each product or brand, using either product pricing or analyte pricing. A fixed price can be entered, or a price series specified along with the method used to determine the price, for example, highest, lowest or average for the defined period. If there are multiple quotation pricings for an item, the weighting of each pricing needs to be specified. The quotation period in which the quotation pricing is valid needs to be entered. The number of decimal places for both the prices and tonnages are specified, as it is very important for unit testing. This should be specified in the actual contract with the customer, and if not, the customer needs to be asked.

When configuring contracts, dock the navigation pane to maximise the screen display. See Customise the Navigation Pane.

Contract Pricing Basis

Sales and purchase contracts can be grouped further into contracts based on a different Contract Pricing Basis. See Contract Pricing.

Product Pricing

Product pricing is one of the two ways to price a contract product in MineMarket. Product pricing is used when the entire product is sold and there are qualities on the entire product that determine the pricing (for example, coal, where there may be price adjustments based on the quality).

Analyte Pricing

Analyte pricing is one of the two ways to price a contract product in MineMarket. Analyte pricing is used for materials like base metal concentrates and semi-refined metals and iron ore, when the material is priced based on the elements in it. The quantities of specific analytes in the product determine the pricing.

Contract Terms

Contract terms define the pricing many other details required to generate an invoice for despatch orders. See Sales and Purchase Contract Terms.

Contract Products

A sales or purchase contract must be associated with at least one product or brand. The required quantity of the contract is specified per contract product. Each contract product can be subdivided into quotas; for example, if a certain amount of material should be delivered each month.

See Contract Products.

Contract Quotas

Quotas are an optional sub-division of the contract. See Quotas.

Despatch Orders

Despatch orders are the link between the contract and the despatch (by vessel, train, truck, barge or lot). See Despatch Orders.

Linked Contracts

Linked contracts, also called 'transfer' or 'inter-company' contracts, are used to relate both ends of a contractual agreement, such that the fulfilment of a despatch order in a source contract (the contract dealing with the actual delivery of material) makes the linked contract (the contract used to contain the pricing for raising invoices) contractually fulfilled. See Linked Contracts. An alternative to linked contracts are Despatch Order Data Links.

Person in Charge (PIC) and Trader

In MineMarket, the person in charge is the person responsible for the execution of a sales or purchase contract. The PIC's MineMarket user name can be selected on the top-level node of sales and purchase contracts and on despatch orders. The PIC can be used as search criteria and saved in search profiles in the Contract Explorer, Despatch Order Explorer,Invoice Explorer and Trade Explorer. The PIC can also be used as search criteria when searching for despatch orders to include in invoices.

When despatch orders are created, the PIC selected for the sales or purchase contract is copied to the Person In Charge field on the despatch order. The PIC can be updated for a despatch order. When a DO is duplicated or split, the PIC selected on the original DO is copied to the newly created DOs. If the PIC is updated for the sales and purchase contract, the change is not synchronised to any existing DOs.

In MineMarket, the trader is the person responsible for the negotiation and administration of a sales or purchase contract. The trader's MineMarket user name can be selected on the top-level node of sales and purchase contracts. The trader can be used as search criteria and saved in search profiles in the Contract Explorer and Invoice Explorer.

Users can only be selected as a person in charge or trader if:

• Their user account has been defined in the Security node of the Supply Chain panel of the Solution Explorer and is not deactivated. See Maintain Users.
• The user is in a user group with domain access to the Company Category (in the Organisations panel of the Solution Explorer) that contains the internal company listed as the seller on sales contracts or the buyer on purchase contracts. See Users and Security.