Seven Contracts

1. NCNDA
2. Preliminary Soft Offer
3. ICPO
4. Allocation & Soft Offer
5. FCO
6. Draft contract
7. Final contract

Since there is a sequence to these 7 contracts, some brokers might think it’s a procedure

These are not the steps to the seller’s procedure,

It is a list for brokers to use to explain how we process the order and contract it

It is a summary of the documents that the buyer must sign in order to get product from my supplier

They are a large company and have been around a long time

They have made changes over the years in their procedures and we have to follow them

This list is not their procedures

It’s our list

Brokers want to avoid circumvention and so we develop a list  

Buyers develop a checklist too and they use it when they scrutinize sellers and brokers and that helps them work effectively and efficiently

Everyone wants to get the job done, correctly and swiftly and that’s why we develop a list

The contracts listed have two purposes

For a broker, the first concern is commission

Buyers like to circumvent brokers and sellers often invite them to do so

My supplier doesn’t do that

When buyers go around me, my supplier tells me about it

My supplier has ten mandates

I deal with one of them and there are at least ten seller’s brokers, like me

I have at least ten buyer’s brokers, regularly looking for buyers and each broker has at least 10 prospective buyers

When you multiply it out, 10 x 10 x 10 x 10 = 10,000 buyers being interviewed by brokers for a possible sale

My supplier doesn’t want 10,000 prospective buyers calling his office, every day
He only has 100 people in his office
Those in the office don’t want to carry on the task of negotiating prices with buyers
They prepare the final contracts and don’t want to be involved in the lower level contract stages, because most go nowhere
Small sellers are more likely to invite buyers to come to them, directly
They know it’s circumvention, but they don’t care about playing fair
Circumvention ruins relationships
As a broker, I won’t tolerate it and you shouldn’t tolerate it, either
We should do our job in the most professional manner and we should get paid, if we succeed
A reasonable seller will agree and a large seller will insist upon it
Only if we are paid, will we repeat the process of finding buyers, negotiating price and writing contracts
There should be no contact, between buyer and seller
Contract are passed from broker to broker to the seller’s mandates
This list protects the broker’s commission, while doing all the legwork for the seller
Brokers who carry out the signing of these documents have value with sellers 
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Here is a list of those seven contracts which lead to sales to buyers

After we agree on price, buyer signs seven contracts
1. NCNDA

• All brokers sign, first
• Then we ask buyer to sign in front of a witness, like a public notary, so that the buyer doesn’t later tell us that he didn’t sign our NCNDA

2. Preliminary Soft Offer

• Buyer signs ………. from me
• No notary is needed, but a seal is nice

3. ICPO

• Buyer provides signed IRREVOCABLE CORPORATE PURCHASE ORDER and bank information

4. Allocation & Soft Offer

• Seller provides allocation and soft offer and buyer signs and returns

5. FCO

• Seller provides a Full Corporate Offer and buyer signs and returns it to his broker and then to the seller

6. Draft contract

• Prepared by seller and sent to buyer, who signs and returns with corrections

7. Final contract

• Prepared by seller, following the recommended modifications amended by buyer
• Buyer receives, signs and returns
• Buyer is then invited to visit the refinery, meet the important people and returns home with confidence that his order will be shipped