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Master Agreements with Your Vendors or Suppliers

If your company buys goods from suppliers or vendors with any regularity, you may be familiar with Master Agreements for the sale of goods.  The Master Agreement is the contract between the parties that is negotiated—how many units, what price, and other terms and conditions.  However, you may be less aware of what is known as the ‘Battle of the Forms.’  The ‘Battle of the Forms’ is a situation where both companies have their own standard forms in addition to that Master Agreement—your company has a standard form purchase order, while your supplier has its own standard acknowledgement form, invoice, and so on.  There will be plenty of forms that are in conflict with one another, and the Master Agreement, even where the buyer and the seller have already agreed upon a price and conditions for the sale in the Master Agreement.

A typical situation is where your company, the purchaser, sends your standard Purchase Order to the vendor, the seller, and the vendor sends back an acknowledgement and the invoice.  That acknowledgement form might have terms and conditions on the back of it or referenced on the company’s website.  If you started reading those acknowledgment/ sales/ invoice terms, you might be shocked at what you would find.  For example, you might learn that the acknowledgement form cites a 25% restocking fee for returned goods!  Wait, a minute—the Master Agreement says nothing about a restocking fee—and your contact at the vendor never even mentioned it, or assured you that there was no restocking fee.

The best thing you can do as a purchaser (or seller) to prevent the inadvertent addition of your seller’s (or customer’s) terms, would be to include  language in the Master Agreement that negates any such additional terms appearing on the seller’s (or buyer’s) form, such as “This Master Agreement shall apply to all purchase orders and other documents issued by either party in connection with the purchase and sale of Products (referred to as “releases”).  No inconsistent or additional terms or conditions in any releases shall be applicable to a transaction within the scope of this Master Agreement.”  

An ounce of prevention in purchase and sale agreements is often worth a pound of cure.  If your company needs assistance with developing vendor contracts, or has other contracting questions, attorney Leslie S. Marell can help.

Leslie has more than 25 years of experience as in-house counsel and as a legal adviser working with businesses, business people, and business contracts, in the technology, manufacturing, software, and medical device industries.  She understands the real-world practicalities of what it takes to draft, review, and negotiate corporate contracts, and has presented her dynamic seminars to Fortune 500 companies and small to mid-sized businesses across the country.  Leslie specializes in helping contract analysts, project managers, and department leaders work better with their own internal legal departments and outside counsel.  To learn more about Leslie’s seminars, or get expert advice on contracting matters, contact Leslie at (310) 372-8663, or visit her online.

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