Terms and conditions
Terms and conditions are the legal provisions governing the buyer-supplier relationship, covering everything from delivery and payment to warranties, liability, and dispute resolution. Standard T&Cs establish clear expectations and protect both parties, while negotiations customize terms for specific relationships or transactions.
Examples
Standard purchase order terms: A buyer's standard terms on purchase orders specify FOB shipping point, Net 30 payment, warranty requirements, indemnification provisions, and the buyer's right to cancel without liability upon notice. These terms apply unless specifically negotiated otherwise.
Negotiated supply agreement terms: For a major supply relationship, the parties negotiate customized terms including volume commitments, pricing adjustment mechanisms, capacity guarantees, inventory ownership, and termination provisions that go beyond either party's standard terms.
Terms battle: A buyer issues a PO with their standard terms. The supplier acknowledges with their standard terms. Without explicit agreement, a "battle of the forms" exists that may be resolved by applicable commercial law, often favoring the last terms communicated.
Definition
Terms and conditions allocate risk and responsibility between parties. Every term represents a choice about who bears certain risks, who has certain obligations, and what happens when problems arise. Understanding T&Cs is essential for managing supplier relationships.
Common T&C topics include: pricing and payment, delivery and risk of loss, quality and warranties, inspection and acceptance, intellectual property, confidentiality, indemnification, limitation of liability, termination, and dispute resolution.
Procurement should understand their organization's standard T&Cs and know which terms are essential versus negotiable. Legal support helps evaluate supplier pushback on terms and identify acceptable alternatives when the buyer's preferred position isn't achievable.
T&C consistency matters. Using different terms with different suppliers creates complexity and potential exposure. Most organizations maintain standard T&Cs and document any negotiated deviations, ensuring awareness of non-standard obligations.
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