Getting your contracts of supply right is a fundamental element of a trading relationship, but all too often terms are taken for granted, misunderstood or even ignored. The mind-set has to be; what are the consequences and potential costs of not having the right contracts in place with the supplier?
Here are 10 Quick Tips On Understanding Standard Terms for both supplier and buyers to help get your approach back on track:
- A contract is only created when both a buyer and a seller intend to make a contract and both parties are capable of doing so.
- I’d always advise a supplier to ensure their standard terms are brought to the attention of buyers at the earliest opportunity. Furthermore, do not rely on unusual terms buried in your terms and conditions. In my experience this saves time further down the line.
- ‘Privity of Contract’ – It is important to remember only the parties to the contract may enforce the terms of the agreement.
- Ask as much as possible about the product or service you are being sold.
- Always ensure your agreement includes any terms that are important to you. For example, if prompt delivery is important draw your supplier’s attention to it in the contract and ask for written confirmation. It always pays to help them to help you.
- ‘Battle of the Forms’ – “we thank you for your purchase order…and accept under our standard terms and conditions, and will make delivery to you….” sound familiar? Be vigilant in ensuring that your terms are not subsequently ‘trumped’ by your suppliers competing terms. Take reasonable steps in ensuring they are brought to the attention of the person with whom you’re dealing with.
- A supplier should be careful to ensure that any proposals put forward are phrased so as not to constitute an offer, otherwise a buyers acceptance could form a contract before the vendors’ standard terms have been incorporated.
- If your standard terms and conditions are on the back of any contractual document, you should always make reference to them on the face of the document.
- Keep written evidence of what has been agreed.
- Always use plain English!
A few words on express and implied terms
Express terms are terms that have been specifically mentioned and agreed by all parties at the time the contract is made. They can either by oral or in writing.
However, sometimes a term that has not been stated by either party but nevertheless forms a provision of the contract. Usually because the contract would not make commercial sense without them. These are known as implied terms.