The 4 absolute basics to a contract deal (the 4Ps)

What are the absolute basics towards a steady foundation for a written deal?

Imagine that you have been working on a deal for weeks and during a meeting with the supplier (or customer) you reach a breakthrough agreement. Both parties are quite excited and shake hands. Is this enough?

Certain cultures consider this to be enough.

Irrespective of the integrity (character) of both parties though, it is always best to write things down as a Letter of Intent (LOI) or a Memorandum of Understanding (MOU) or Agreement (MOA).

But what do you actually need to take down as a minimum to make this deal valid, workable and to later avoid disputes.

Read on if you want to find out the 4 elements that are widely acknowledged as the absolute basics to a deal.


The 3 Ps

A deal is considered to be valid if it refers to three basic elements commonly known as the 3Ps. These are:

  1. Parties
  2. Price
  3. Product

It is quite obvious that if we do not have the parties that are covered, the price agreed (and what is included and excluded in the rates) and the product (an exact description of what the product/service is and any agreed variations) then, really, there is no deal. As without these elements there is inadequate clarity to any deal.

3Ps augmented – (the IRON TRIANGLE contribution)

I don’t believe that the above are enough though in the current environment as I have elaborated here based the concept of the Iron Triangle.

This concept reflects the importance of the balance between i) the Scope-Product, ii) the Price and iii) the Performance-Quality-KPI expectations when agreeing a deal.

What the Iron Triangle concept contends is that if these three elements are not in balance the deal is in high risk of failing.

As you can see, the Iron Triangle concept adds to the 3P concept one more element. The element of Performance-Quality-KPI as an absolute basic to any deal.

SUMMARY – the new model = The 4 Ps

So, in summary, combining the two models, the absolute basics to any deal are as follows:

1. Take down the deal in a written agreement (LOI, MOU,MOA etc)

2. Include the below in the written agreement:

  1. Parties
  2. Price
  3. Product
  4. Performance (Quality – KPIs)

What are the elements you use as the absolute basics in a written deal?


Image courtesy of anchor1203 /]

This post was first published on the CILT Australia blog page


About Geovrakas
George Vrakas (MBA, CCMP, CMILT) is highly reputed in the field of services procurement and logistics and has presented on topics such as, Globalisation, Services Procurement, Leadership, Continuous Improvement and Personal Productivity at various venues and Universities in Melbourne. He has also been the host at industry events and published articles on Procurement and Contract Management at various online publications. George was a Board member of the Chartered Institute of Logistics & Transport Australia (CILT Australia) from 2011 until 2016 and also a member of the International Association for Contract & Commercial Management (IACCM). George holds an MBA from Victoria University specializing in International Supply Chain Management and Applied Economics, he is also a certified Commercial Contract Management Practitioner (CCMP), a Green Belt Lean Six Sigma expert and holds a Lloyd's Maritime Academy certificate in KPIs for Ports and Terminals. He also holds certification on variety of topics primarily relating to Contract Management, Negotiations, International Regulations, Problem Solving and Change Management.

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