Business deals can move at the speed of light. It is easy for business owners to focus so intently on the deal that they overlook legal nuances that bite them in the pocketbook later. A recent matter in our office – a truly cautionary tale – emphasized that fact.
Here is the all-too-common scenario: Buyer issued the Request for Quotation with standard Terms and Conditions (“T&C”). Seller provides quotation with it's own standard T&C. The parties negotiate the high points. Buyer issues a Purchase Order. Seller sends its Order Acknowledgement. Seller ships the goods and Buyer accepts shipment. Something falls apart and dispute arises (defective product, late delivery, lack of payment, etc.) Despite initial efforts, the dispute cannot be resolved. Now what?! Do you have a contract? What are the terms of the contract? Whose T&C is in control?
For businesses that require customized equipment, purchasing capital improvements can create a substantial liability. So, too, for vendors that manufacture the customized equipment – often investing significant manufacturing costs over a production period that can last several months. Vendors who cannot (or who will not) agree to carry the manufacturing costs will demand prepayment for its work and materials. What is the legal risk of prepayment?