We include in our Bid package our terms and conditions of purchase and we state that any terms and conditions contained in the supplier’s proposal will not apply. In those cases where the supplier includes its terms of sale, whose Ts and Cs have superiority?
- This is a classic example of the “Battle of the Forms”. If you have included a set of terms and conditions of purchase in your RFP and the supplier responds with their terms and conditions of sale, neither document would supersede the other. The outcome would be as follows: In those areas where your terms are in agreement with the seller’s, those terms would apply. However, most terms will be in conflict with one another, in which case, neither clause would apply. In the event of a dispute regarding a clause with which there has been no agreement, the courts would look to the Uniform Commercial Code (if the contract involved the sale of goods) or General Contract Law (for service and other contracts) for resolution.
What language should be on our form that takes exception to the terms in the seller’s (or other company’s) forms?
- This is an example of important “knock out” language which mirrors the battle of the forms section in Uniform Commercial Code:
- Buyer proposed language:
This purchase order is limited to the terms and conditions contained on the face and the reverse. Any additional or different terms proposed by Seller in any quotation, acknowledgment or other document are hereby deemed to be material alterations and notice of objection to them is hereby given. Any such proposed terms shall be void.
- Seller proposed language:
This Quotation is limited to the terms and conditions contained on the face and the reverse. Any additional or different terms proposed by Buyer in any request for proposal, purchase order, or other document are hereby deemed to be material alterations and notice of objection to them is hereby given. Any such proposed terms shall be void.
- Buyer proposed language:
We have a Master Agreement with a supplier. After we issue our P.O. release, our supplier provides its acknowledgment form (with its terms). Are the seller’s terms binding and do they supersede the negotiated terms of the Master Agreement?
- While terms on the back of the supplier’s form will not supersede a provision of the Master Agreement, they might ADD TO the Master Agreement. For instance, assume that your Master Agreement did not address the right to cancel an order. If your supplier’s acknowledgment form has a clause that assesses a 25% restocking fee if you cancel, that term might be considered part of the overall agreement between the companies.
The way to avoid this from occurring is to include language in your Master Agreement similar to the following:
- This Master Agreement shall apply to all proposals, 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 term or condition in any release shall be applicable to a transaction within the scope of this Master Agreement.
NOTE TO SELLERS: The above clause also protects the seller from additional terms contained in a buyer’s P.O. or other document.