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Applying Purchase Terms and Conditions

Making your Terms & Conditions Apply: Purchasing

Where your business purchases goods from other businesses, you may be at a legal disadvantage if you buy without imposing on sellers detailed terms of purchase which favour your business. Even where you have developed terms and conditions of purchase which protect your position on paper, they will not assist if, as in the following two scenarios, they do not apply to a particular transaction.

No Terms Agreed: Sometimes the parties neither seek to put forward any terms of sale/purchase nor refer in any documents to such terms. They may instead simply exchange emails or send simple forms to each other (e.g. a quotation, order, order acceptance etc.) none of which include terms of sale/purchase (or any reference to terms) other than basic details of the goods and the price. In such cases, the terms that apply will only be those implied by the law to a sale of goods, and those terms may not sufficiently favour you as the purchaser. Furthermore, the absence of terms expressly agreed in writing can cause uncertainty as to your legal position.

Seller’s Terms Apply: However, rather than leaving a sale transaction to be governed by the terms implied by law, the seller may instead choose to put forward, or refer to, a set of their own sale terms. Such terms may be set out in a stand alone document produced by the seller, or they may form part of, or be attached to, some other document of the seller, e.g. a quotation/estimate, acceptance of order, price list, sales brochure, letter, email or website page. If you do not reject such terms, they are likely to apply as a matter of contract law. Since they will have been written to favour the seller, you may be at a legal disadvantage in certain situations, e.g. where the seller limits or excludes their liability or remedies for their breach of contract, or where the seller provides no or very limited warranties as to quality of the goods.

Make Your Terms Apply Instead: It is much more preferable for you to avoid both of the above situations and instead impose your own written standard terms of purchase on sellers where you are in a strong enough commercial position to insist on doing so. If you submit your own standard terms to a seller, and they have not submitted, and do not submit, any of their own terms to you at any stage, you should be able to claim with some confidence that your terms (and no others) apply provided that you submit them before the seller accepts your order or tenders delivery of the goods. In order to optimise the chances of your terms and conditions of purchase applying to a purchase transaction, you should give them to your supplier in an easily legible and accessible format at the outset of the trading relationship. 

Battle of the Forms: If the seller submits their own terms to you before you submit your terms to them, you then submit your terms, and the seller does not again refer to their own terms before accepting your order or tendering delivery of goods, you should be in a strong position to claim that your terms (and not any of the seller’s terms) apply. 

Where however a seller submits any terms of their own to you at any stage after you have submitted your terms to them, you may still be able apply your own terms to the exclusion of their terms by making clear in writing to them (e.g. email or letter), before they accept your order or tender delivery of goods, that none of their terms are accepted or agreed and that the only terms that will apply are yours. If, before accepting your order or tendering delivery, they do not respond to contradict your email or letter, you should be able to argue that your terms (and only your terms) apply.

It is always advisable for you, as purchaser, to get the last word in this way, before an order is accepted or goods are sent by the seller, in order to try to ensure that you win this “battle of the forms” and succeed in having your terms apply to the exclusion of the seller’s terms. Ultimately, ensuring that you get the last word before the deal is concluded and dogged persistence in insisting on the application of your terms is still probably the most certain way of winning the battle. However, it is often not a straightforward task to establish as a matter of contract law whose terms actually govern a transaction, and it is recommended that, to clarify the position in any given case, you should obtain professional independent legal advice on the question.

It is common to have a reference in your terms and conditions of purchase themselves that your terms will apply to the transaction regardless of what else is said to the contrary in any terms of the seller. However, where both your terms and the seller's terms contain such a clause (they commonly do), the effect may well be for the clauses to cancel one another out. 

It must be acknowledged that many “battles of the forms” are decided on commercial muscle rather than legal guile.

Formally Agreeing on the Terms to Apply: Despite the above, it is preferable, if possible, for you as a purchaser to do more than to simply insist on your terms and assume that your terms prevail. A more constructive and co-operative approach to this aspect of contract management may be to agree clearly with the seller, preferably in an agreement signed by both of you at the commencement of your trading relationship, the terms and conditions that will apply between you and the seller. Those terms might be your standard ones or terms negotiated between you and the seller. Such an agreement with a seller could comprise either a long term supply contract or, where there is no advance commitment to purchase or sell any particular type of goods or minimum or specific quantity of goods, an agreement as to the terms to apply to any such subsequent transactions as may take place between the you and the seller. 

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