Training ON

Legal & Contract Management

1 KEI Legal & Contracts Training 2019

 Legal & Contracts Management Team

 C.V.S. Krishna Kumar – Director - Corporate Affairs & Company Secretary

 Inbarajan- DGM-Legal @ Head office, Chennai @ (+91) 99622-10616

 Barath Kumar - Manager - Legal @ Head office, Chennai @ (+91) 98406-00155

 Chaturvedi Bhupendra - Deputy Manager – Legal, @ Delhi @ (+91) 97110-55585

CCM MAIL ID : KEIContractManagement@kone.com

2 KEI Legal & Contracts Training 2019
 Objective

• For better understanding of Legal, Commercial,

and Contractual terms and to facilitate branch
level contract review process.

• To understand the basics issues in contract

review and to suggest practical solutions for the
Customer queries in Contract.

3 KEI Legal & Contracts Training 2019

 TYPES OF KEY CONTRACTS HANDLED IN KONE

• NEB Contract (SITC)

• SEB Contract (AMC)

• Major Projects Contract

• Sub-Contractor Contract (Framework)

4 KEI Legal & Contracts Training 2019

 CONTRACT PATTERNS IN KONE

KONE AS DIRECT CONTRACTOR

KONE signs the Contract with customer directly.

KONE AS SUB CONTRACTOR

Main Contractor appointed by the Customer signs Sub-contract with KONE

KONE AS NOMINATED SUB CONTRACTOR

Customer appoints KONE but through the Main Contractor

5 KEI Legal & Contracts Training 2019

 TYPES OF COMMERCIAL MODELS IN NEB CONTRACTS

1.COMPOSITE WORKS CONTRACT

Supply from KEI Factory and Installation by KEI

2. SPLIT CONTRACT
Supply by KCO /from outside India and Only installation by KEI.

In Split model, the tender purchase, providing offer to customer and

signing of agreement to be done independently by KCO and KEI.

6 KEI Legal & Contracts Training 2019

 KONE Standard Contracts

Any Contract signed on standard formats approved by the company

without any deviation need not be referred to CCM

7 KEI Legal & Contracts Training 2019

 Non- Standard Contracts

For NEB Contracts upto 1 Crore / For SEB (AMC Contracts) upto 5 Lakhs
Need not be referred to CCM Review.
To be reviewed by Branch team itself
CCM Checklist needs to be complied.
For Deviations, approval to be taken as per DOA.

8 KEI Legal & Contracts Training 2019

 Non- Standard Contracts

For NEB Contracts above 1 Crore / For SEB Contracts above 5 Lakhs
Need to be referred for CCM Review to
“KEIContractManagement@kone.com”
Inputs from CCM Team to be incorporated in the Customer template.
If customer disagrees, Deviation approval to be taken as per DOA.

9 KEI Legal & Contracts Training 2019

 Important Clauses of a Contract
i. Indirect & Consequential Loss & Damages
ii. Limitation of Liability
iii. Indemnifications
iv. Statutory Variations
v. Intellectual Property Rights
vi. Liquidated Damages
vii. Pay when Paid
viii. Termination/ Suspension
ix. Force Majeure
x. Delay & Extension of Time

10 KEI Legal & Contracts Training 2019

 Limitation of Liability

• KONE’s maximum aggregate liability

should be limited to its Contract Value.

• If the Contract is silent on this, even then

the risk is alive.

“KONE’s maximum aggregate liability under or in relation with this contract shall
in no event, exceed an amount equal to the contract value.”

11 KEI Legal & Contracts Training 2019

Indirect & Consequential Loss and Damages

• KONE’s liability towards Indirect & Consequential Loss and Damages to be explicitly
excluded in the Contract

• If the Contract is silent on this, even then the risk is alive.

• “In no event shall KONE be liable to the other party for any loss of profit, loss of use,
loss of contracts, loss of business, loss of customers, loss of goodwill, the contractual
liabilities of others or for any indirect or consequential loss or damage, which may be
suffered by the Purchaser or such other third party in connection with this agreement.”

12 KEI Legal & Contracts Training 2019

 Indemnification

• One Party to the Contract undertaking to cover the loss or damage that
might be incurred by the other party to the contract and any liability
resulting from third party claims.

• Where KONE and others have jointly caused the Purchaser to suffer loss or
damage under or in connection with this agreement, KONE’s liability will
be limited to the extent that KONE has caused or contributed to such loss
or damage.

13 KEI Legal & Contracts Training 2019

 Liquidated Damages

• Liquidated Damages is for KONE’s Delay’s

• Can be capped upto 0.5% per weeks’ delay and shall

not exceed 5% of the contract value

• Liquidated Damages payable only for failure to meet

substantial completion dates

14 KEI Legal & Contracts Training 2019

 Statutory Variations

• Statutory variations to be passed on to the Customer

• “Any amendments and variations to the existing taxes, increase in taxes

and new levies will be to the purchaser’s account and purchaser shall pay
the same without any demur or protest”

• Even in Firm price contracts, statutory variations can be included, if delay

is due to the customer.

15 KEI Legal & Contracts Training 2019

 Delay & Extension of Time

KONE may be entitled to an Extension of time

on following circumstances:

• Delay caused by the Customers

• Delay due to Force Majeure Conditions

The cause of delay to be substantiated and Extension of Time to be obtained

without any levy of Liquidated Damages.

16 KEI Legal & Contracts Training 2019

 Force Majeure
• Force Majeure is a “an extraordinary circumstances which is beyond the control of the party
but which has an impact on the execution of contractual work.”

• Force Majeure includes but not limited to acts of God, strikes, lockouts, bandh, fire, accident,
explosion, theft, floods, riots, civil commotion, war, malicious mischief, enemies, terrorism,
Lack of shipping space, embargoes, power shortage, delay in supplies or non- availability of
raw materials, rail/road transporter’s strike, act of third party.

17 KEI Legal & Contracts Training 2019

 Intellectual Property Rights (IPR)

• KONE IPR are not transferred to the

purchaser along with the product at the time
of Handing Over.

• IPR ownership always remains with KONE

and it is only non-exclusive and non-
transferable License to use given to the
Purchaser.

18 KEI Legal & Contracts Training 2019

 Pay when Paid –BACK TO BACK CONTRACT

• KONE does not encourage “Pay When Paid” concept.

• Where the Main Contractor links the payment to

its Sub Contractor KONE only when its payments
are cleared by the Principal Employer.

• KONE’s Sub Contract payment terms should be independent of the Main Contractor
payments from the Principal Employer.

19 KEI Legal & Contracts Training 2019

 Termination/ Suspension

• KONE should always have the right to terminate or suspend the contract in
case of any delay(s) from the side of the Customer.

• In case of customer termination clause: Customer to give KONE 14 days

notice to remedy any default prior to any termination.

20 KEI Legal & Contracts Training 2019

 Rescue Training

• Rescue Training is one major thrust area for focus and continuous monitoring.

• Rescue Training is given to handle an emergency situation till proper trained

technician arrives at site

• Rescue training is properly documented in the KONE standard contract.

• In customer template contracts, ensure rescue training documentation at the

time of handing over of elevator.
21 KEI Legal & Contracts Training 2019
 Handing Over of Elevator/Escalator

• Purchaser or end user shall not use the Lift prior to proper ‘Handing
Over’

• If Purchaser refuses or delays to take ‘Handing Over’, KONE can intimate

for “Deemed Handing Over” for the purpose of commencement of
warranty period.

22 KEI Legal & Contracts Training 2019

 JURISDICTION IN CONTRACTS

As per our standard contracts : Place of Arbitration and Jurisdiction is at Chennai.

Considering the business requirements and process simplification, the following cities are also acceptable as
the Place of Arbitration / Jurisdiction without referring to CCM for approval.

North : New Delhi / Gurgaon / Noida / Chandigarh / Jaipur / Lucknow

East : Kolkata / Bhubaneswar / Ranchi / Guwahati
West : Mumbai / Pune / Nagpur / Ahmedabad
South : Chennai / Coimbatore / Bangalore / Ernakulam / Secunderabad

Additionally, for the Government orders, if the Govt. Authorities resist to change the Place of Arbitration /
Jurisdiction, than the same place as mentioned in the contract can be acceptable with intimation to CCM.

23 KEI Legal & Contracts Training 2019

 NON PERMISSIBLE CONTRACTUAL DEVIATIONS

× Indirect & Consequential Losses to be borne by KONE

× Limitation of Liability in excess of contract value
× Indemnification other than due to negligence of KONE
× Non acceptance of Statutory Variations by customer
× Granting Intellectual Property Rights to customer
× Liquidated Damages on KONE above 5% of Contract Value
× Right to Terminate without payments
× Pay when paid
24 KEI Legal & Contracts Training 2019
 IMPORTANCE OF PROPER DOCUMENTATION

• Collect entire set of contract documents in originals including all Annexures

• Ensure all blanks are filled and signature in all pages and with name & designation in last page

• Obtain covering letter from customer along with cheque payments for third party payments

• Take photocopy of the cheque/DD issued by the customer

• Ensure any change of address/alternate address of the Customer and proper senior level contact details

• Relevant project documents and communications to be filed separately for use in case of any litigation

25 KEI Legal & Contracts Training 2019

 CONTRACTUAL RISK MANAGEMENT

• Read through the contract clauses and understand fully

• Never allow the customer or end user to use the Elevator/Escalator before Handing Over
• Ensure Safety of KONE Materials @ site and Follow KONE Safety Rules @ Work
• Identify an Ensuing problem in work progress and start building correspondences with the customer
• Respond immediately to the customer grievances and escalate
• Any oral instructions/variations from customer, send the minutes of such meetings through mail
• Important client communications to be sent by registered/speed post with acknowledgment due
• Ensure timely collection of BGs from customer

26 KEI Legal & Contracts Training 2019

 SAFETY IS PRIORITY

 Ensure elevator shaft is clean and dry before entering into Pit
 Ensure shaft openings are sealed/barricaded for safety
 Ensure Lift Doors are closed in all floors when not in use
 Display proper sign boards “ Not to use Lifts”/“Under Maintenance” when Lifts are shut down.
 Do not use cell phones for other purposes while at shaft or car top or during Lift works
 Have clear understanding of work plan and adhere to work instructions

27 KEI Legal & Contracts Training 2019

IF YOU HAVE ANY LEGAL & CONTRACTUAL QUERIES
PLEASE FEEL FREE TO ASK YOUR

KONE FRIENDLY LAWYERS

 THANK YOU

29 KEI Legal & Contracts Training 2019