Legal Lifesavers

Legal Lifesaver
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"a concise piece of legal information that might save your assets."

 

Murray Gottheil heads up Pallett Valo LLP's Business Law Practice and Family Business Law Group.

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www.pallettvalo.com




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Danger Lurks in Dark Places and Purchase Orders

Here are some of the provisions which I have recently found lurking in purchase orders:
 

  1. The purchase order replaces every provision in the vendor’s quotation and invoice.

  2. The provisions of the purchase order include terms set out on the purchaser’s website, which the purchaser may change at any time, and all changes will be binding on the vendor.  It is the vendor’s responsibility to monitor the purchaser’s website to see which new terms have been imposed on it. 

  3. The purchaser is a “most favoured customer” and the vendor promises that no other customer has been given or will be given any more favourable terms than were given to the purchaser, including price, incentives, discounts, marketing assistance and warranties.  The purchaser has the right to audit the vendor’s financial and customer records to ensure compliance. 

  4. The purchaser may impose a penalty if a shipment arrives early or late, or may simply return a shipment that arrives late to the vendor at the vendor’s expense.

  5. Allegedly defective goods may simply be destroyed by the purchaser or returned to the vendor without notice or a return authorization, and at the vendor’s cost. 

  6. The purchaser may inspect the vendor’s premises, employee records and financial records pertaining to the manufacture of the goods. The vendor is not allowed to make a change to its premises used to manufacture the goods without 30 days advance notice to the purchaser.

  7. The vendor is not allowed to subcontract any of the work.

  8. The purchaser will be the joint owner of intellectual property developed by the vendor to produce the products. 

These provisions are illustrative of provisions found in documents of close to 40 pages in length and made part of the purchase order by reference to the purchaser’s website in the purchase order.

Some purchase orders provide that simply acknowledging receipt of the purchase order will indicate acceptance of the terms of the purchase order.  Other purchase orders will provide that shipping the goods indicates acceptance of the terms of the purchase order.

 

Vendors have to be aware of the terms on which they are selling their products and have procedures in place to respond to purchase orders which contain unreasonable terms.  

 

Murray Gottheil
Pallett Valo LLP

 

 

Photo by Maureen T. McKay