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Terms and Conditions - The Devil Lies in the Details
Tuesday, August 11, 2015

If you conduct business based upon RFPs, purchase orders or other forms typically accompanied by boilerplate "Terms and Conditions," then you may be subjecting yourself to a number of contractual provisions that are heavily weighted in favor of the other party. Express warranties, choice of law, exclusive venue selection, and one-sided fee shifting provisions are the types of unwelcomed terms that often get stealthily swept into transactions through the fine print. The Uniform Commercial Code, which governs all sales of goods over $500, expressly recognizes the accompanying "Terms and Conditions" as part of the "offer"  to purchase. If your company ships goods in response, that offer is deemed "accepted" and those Terms and Conditions become part of a binding contract. 

But the Code also gives you the ability to protect yourself and a means to ensure that, at the very least, the terms of any contract created in this fashion will not include one-sided or commercially unreasonable terms. The key involves responding to the offer with your own set of standard Terms and Conditions (as part of a sales acknowledgment or an invoice to be paid prior to shipment) which, depending on the terms, will be treated as either a conditional acceptance based upon "commercially reasonable" terms, or as  a counter-offer based solely upon your terms. 

Of course, you must choose your "Terms and Conditions" carefully. Avoid including a provision that makes any purchase order "subject to management's review and approval." By definition, an "offer" puts the power of acceptance--and thus the formation of a valid contract--in the hands of the other party. When you retain the ultimate right to approve, the other party cannot be deemed to have the power to accept. In that case, your transmittal may not be deemed an offer, and you may be unwittingly preventing the formation of a contract on your terms. 

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