Join Date: Aug 2012
My law firm has the opportunity to review a good number of sales terms and conditions for manufacturers and that work has made it clear to me that there may be some opportunities to shift risk and otherwise lower exposure by tightening up sales terms and conditions ("T&C's"), which do not often get the attention or consideration they warrant. There are several issues my law firm sees on a regular basis as areas for improvement:
• Many T&C's do not disclaim indirect, consequential or special damages (such as to lost profits, down time, personal injury or property damage), leaving the door open for much more significant exposure.
• It is important to keep in mind that the warranty provided by a supplier is not simply limited to any written warranty provided, but will include certain warranties implied by the law unless properly disclaimed. Unknowingly, you can be assuming a warranty obligation that is dramatically broader than what you may have put in black and white.
• Even in those cases where implied warranties are disclaimed, unless the express warranty is properly crafted, vague or imprecise language can lead to warranty obligation that is much broader than intended.
• Unless the T&C limits the remedy to repair, replacement or return of the purchase price, the scope of recovery can become rather broad, and could include the costs of repairing products of which it is component, the cost of procuring substitute goods and similar obligations.
• Specifying the nature of the obligations of each party with respect to the development of specifications, tooling and the design of the product is critical to ensure that the supplier is only financially responsible for those facets of the project over which it had some control.
• If a vendor did not have any role in design of a product, it is important that it be indemnified with respect to design defects or intellectual property infringement associated with that design.
• Getting out in front of issues with financially distressed customers is absolutely critical in this climate. All too often, T&C's fail to provide some basic tools with which a supplier can deal with a non-paying customer, such as the assessment of late fees (to ensure that customers do not start to use the supplier as a bank) and the ability to recover all costs of collection (including attorneys' fees).
We certainly see additional deficiencies with T&C's on a case-by-case basis, but the above items tend to be the most recurrent themes and those that are most likely to translate in real dollars and cents. Our firm has included a special program under ARPM's Legal Assistance Program to review and revise T&C's for a fixed fee. It is also possible to apply our three free hours of consultation member benefit against any such review. Please feel free to contact me via telephone or email if you have any questions or need any assistance in upgrading or developing T&C's.
Ice Miller, LLP