If you work for a company and have any involvement in contracting for goods, you are familiar with the dreaded ‘Battle of the Forms.’ Both your company and the company you are contracting with have their own standard contracts, RFP terms, purchase orders, or conditions of sale. Perhaps the advice you’ve received from your own in-house legal department is to ‘use our standard contract/form.’ The problem is, your customer or supplier is getting the same advice from his or her own corporate attorney. So what are you to do? Can you still do the deal? And which terms and conditions prevail? Here are a few general tips:
- Neither document prevails. So long as the parties each had good sets of terms and conditions on their respective forms and the forms generally comply with Uniform Commercial Code (U.C.C.) requirements of taking exception to the other’s terms, where the forms are in conflict, neither document supersedes the other.
- Professional Tip: Your purchase order forms should include standard language that meets the U.C.C.’s requirement of taking exception to the seller’s terms along the lines of Section 2-207 of the U.C.C. “This purchase order is limited to terms and conditions contained on the face and the reverse. Any additional or different terms proposed by Seller in any quotation, acknowledgement, or other document are hereby deemed to be material alternations and notice of objection to them is hereby given. Any such proposed terms shall be void.” Of course, the Seller’s documents should include the same sort of language which objects to the Buyer’s additional and different terms.
- The U.C.C. will fill in the gaps. In situations where your company issues a purchase order/quotation without negotiating terms other than the most important terms (such as product, price, delivery), and without requiring the other party’s signature, if there was a dispute, the court would look to the U.C.C. (for the sale of goods) to fill in the gaps of the terms that have not been agreed to. For service type contracts, general contract law says that when the forms do not agree, no contract has been formed. Of course, the parties rarely read those forms and proceed with business. The contract is formed when the parties proceed with the work.
- Agreed upon terms prevail. Where the buyer’s and seller’s terms are in agreement, those terms apply.
- Focus on the front of the forms. Frequently, a dispute originates because the parties have not agreed to an essential deal term. For example, how many times have you seen the Seller’s quote with 30 day Net payment terms, but the Buyer’s P.O payment terms are 60 days? Make sure that the face of both the Buyer’s and Seller’s forms are consistent with respect to description of product/ service, delivery terms, price/payment terms, service levels and other key deal points.
If you are involved in corporate purchasing or sales, or have questions about standard form agreements for your business, 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.