By: Andrew J. Steimle
Are you entering into a contract without even realizing it? If you either buy or sell goods on a purchase order basis (“POs”), the answer is “probably.”
Many companies either buy or sell raw materials, components or finished goods purely on a PO basis. It is just not realistic in today’s world to negotiate and write up a detailed contract every time a company wants to buy or sell some material or good from another company – even when the items purchased are large volume commodity items important to your company. Often times, however, those POs may have small print, several paragraph-long terms and conditions on the back of them, or attached as a separate document. In some cases, the POs contain a statement that all orders are “subject to the Company’s standard terms and conditions which can be found at www.companynamehere.com”, which is a link to that company’s most recent set of terms and conditions. Most often, people ignore those terms and conditions without realizing their significance.
The typical set of terms and conditions address things like shipping (e.g. who pays, how goods are shipped, who has the risk of loss while in transit?), delivery dates (what if a shipment is late?), warranties (and disclaimers of warranties), limitations of liability (what are damages capped at?), intellectual property provisions (who owns what as it relates to any IP related to the product?), and choice of law provisions (where and how are disputes settled?).
The old saying of “It’s all good until it ain’t” is particularly true when it comes to buying and selling goods under POs. Most legitimate companies make a good product and provide good materials, deliver those items in a timely manner, and charge the agreed upon price. As such, most of the time no one really cares what the terms and conditions say because they do not need to. Everyone gets what they bargained for and everyone is happy.
But when a problem arises, the first place to look is at the PO and its corresponding terms and conditions.
In template terms and conditions prepared by Steimle Birschbach, LLC, we take great care to discuss with our clients the impact and meaning of each of those terms and conditions because, depending on the size and scope of the purchase order, it is the only writing (i.e. the contract) that establishes what the parties actually agreed to.
On more than one occasion the terms and conditions we prepared for our clients have effectively saved the day. Unanticipated delays in shipping caused either by a customer’s last-minute changes, or caused by an unexpected shortage of raw materials, or caused by some other uncontrollable event were effectively (and thankfully) addressed in the terms and conditions establishing what happens in these scenarios.
Another example demonstrating the importance of effective terms and conditions involves one of our clients, who was a buyer of certain raw materials. The timely delivery of those materials on a regular and ongoing basis was absolutely essential to our client’s continued operations. In that circumstance, we added a provision where our client was to be served first before all other customers of the supplier. This clause saved our client’s ability to continue to operate its facility by receiving its materials in an uninterrupted flow, at a time when other customers of this particular supplier (and competitors of our client) were not able to get the raw materials they needed to manufacture their competitive products.
While many view terms and conditions as being tedious, boilerplate and generally something they do not wish to get bogged down with, please understand that by ignoring them and proceeding with a transaction, you may be entering into a detailed contract that severely limits your rights, remedies or protections under certain unanticipated circumstances. Spending some time with a business attorney familiar with terms and conditions is well worth the effort. If you are a seller of materials, products or services and sell your items on a PO basis, I suggest hiring a competent attorney to prepare a template set of terms and conditions for use in your company. Once you have the template complete, a periodic review and update of the terms and conditions is likely all you will need to protect you and give you piece of mind.
Straight talk. Solid advice. That’s our way of doing business. Why not give us a try?
–Andrew J. Steimle © 2018
To download this blog post, please click the following link: BLOG – Terms and Conditions
This blog post is provided for informational purposes only and by its very nature is general. This information is not intended as legal advice.