February 21, 2012
Battle of the Forms
February 21, 2012
Here’s a situation that’s probably familiar: You send out a request for quotation to a number of potential suppliers and receive a number of responses. You select the best supplier for the job, issue an award letter, complete PPAP, issue a purchase order and start sending weekly releases for the parts. Everything seems to have gone off without a hitch. But a few months into the relationship, you and your supplier have a dispute over pricing, and things begin to get ugly very quickly. When you tell your supplier that it can’t just raise its prices above the purchase order prices, your supplier tells you to go read the terms and conditions again. Why would those matter? All of your documents--the RFQ, the award letter, the purchase order and the releases-- all reference your terms and conditions.
So, you’ve covered your bases and made sure the contract terms are all in your favor, right? Not so fast.
Just because you made sure to reference your terms and conditions at every opportunity doesn’t necessarily mean that your terms and conditions govern your contract. Why not? If the supplier ever objected to any of your terms and conditions, referred to its own terms and conditions, in any way altered your terms and conditions or added new terms and conditions, whether formally or informally, then the contract could be governed by the supplier's terms and conditions, a combination of your and the supplier’s terms and conditions, or may even have some terms that are filled in by law. This is sometimes called “the battle of the forms,” and, whether you’re a buyer or a supplier, you always need to be on the lookout for the possibility that your contract might not be governed solely (or at all) by your terms and conditions.
There are ways to protect yourself against this sticky mess, but the circumstances of every contractual relationship are different, so it’s best to get a professional to review and revise (or even draft) your terms and conditions before you send out that RFQ or respond with your quotation.