Standard Terms for Sale of Goods : Practical incorporation steps for a supplier

12/02/2010

Companies often overlook the importance of their standard terms of sale ("Terms") and assume that the Terms are accepted by their customers. Whilst Terms are commonplace, large retailers today often have their own standard terms of purchase. Consequently, without proper procedures in place, a supplier may inadvertently enter into a contract on a purchaser's terms.

It is common for suppliers to print the Terms on the back of invoices. However, one should note that the Terms are not incorporated into the contract as invoices are usually delivered only after the contract has been made. In order to maximise its chances of successfully incorporating the Terms into the contract, suppliers should make the purchaser aware of the Terms at the earliest opportunity before delivery. As such, suppliers should set out the Terms in documents such as catalogues and other sales literature, quotation lists, order forms and delivery sheets. When a supplier decides to incorporate new Terms, it should also dispatch a copy to all its clients and request a receipt acknowledging the same. It is vital to note, however, that this receipt may not necessarily constitute acceptance.

When Terms are printed on the reverse of order forms, quotation lists and other such documentation, suppliers need to state clearly that the Terms are printed on the reverse and that the same form part of the contract. If there are unusual features in the Terms such as exclusion clauses or limitation clauses, the supplier should draw attention to these on the face of the document.

A clause stating that the purchaser's terms prevail over terms issued by the supplier is generally ineffective. The Terms can still prevail over those of the purchaser's and the supplier should therefore respond in the usual manner enclosing the Terms whilst acknowledging the order, without assuming that it will be unable to impose its Terms on the purchaser in view of such a clause.

Consequently, it is very important that all sales staff to be fully trained in a company's contracting procedures and follow the same at all times to ensure that the company is properly contracting on the company's own terms.

Contact: xiaohanguo@city-law.net

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