Are you a supplier of goods? Or do you purchase goods from a supplier on a regular basis? A number of court cases recently decided lend credence to the notion that buyers and suppliers of goods should enter into long-term supply contracts as opposed to engaging in the confusing and somewhat reckless “battle of the forms” practice.
The Court Case:
In Nice-Pak Products Inc. v. Univar USA, Inc., decided by the U.S. District Court, Southern District of Indiana, a supplier’s invoice contained the supplier’s standard terms and conditions, which included an arbitration clause. In this Nice-Pak Products case, the supplier’s invoice was received by the buyer ten (10) days after delivery of a defective product. The Court held that these terms were thus additional terms introduced in the course of the parties’ dealings.
Normally, said terms would be deemed accepted by performance (i.e. the buyer accepting the delivered product), but the buyer’s purchase order terms and conditions, which the Court held was the offer, provided that each shipment received by the buyer shall have been considered to be made only upon the terms of the buyer’s original terms and conditions and that the buyer, through the use of its purchase order terms and conditions, specifically rejected any different or additional terms and conditions “proposed” in the supplier’s invoice. Thus, the normally effective “last shot” by the supplier in tendering the buyer with additional terms and conditions was defeated. This ruling may have been different depending on the jurisdiction and the Court presiding over the case.
The Real Issue:
Why would a supplier or buyer put their company in a position where they may have to spend thousands of dollars arguing whether a certain set of terms or conditions apply? If a buyer is purchasing product or a supplier is selling product, it is in the best interest of both parties to negotiate a long-term supply contract on the front-end of the parties’ relationship as opposed to engaging in the expensive “battle of the forms” fight should an issue arise.
For strategies to avoid problem situations like those illustrated by the case of Nice-Pak Products Inc. v. Univar USA, Inc., or more information about how to protect your company with a long-term supply contract, please contact attorney Ryan Schulz, Kahn, Dees, Donovan & Kahn, LLP at (812) 423-3183 or via email at rschulz@KDDK.com.
About the Author
Ryan M. Schulz, an attorney at Kahn, Dees, Donovan & Kahn, LLP, who is licensed to practice in Indiana and Kentucky, focuses his practice on business law, real estate law, construction law, estate planning, and litigation and trial services. Ryan has helped counsel clients through complicated business and construction transactions and can be of assistance to any company in reviewing, negotiating and drafting contracts, and handling litigation involving a variety of business transactions, including construction, manufacturing, real estate and other business contracts.
