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Automation Law Blog: Conflicting terms in PO and Proposal
Created By: Voigtmann, Mark On Sat, Mar 13, 2010 08:57 AM

Here is a question asked by a participant in last month's Webinar.  

Question:  "What takes precedence if the PO Ts and Cs are in conflict with the Proposal Ts and Cs when the PO refers to the Proposal document"? (Note:  Some liberties in paraphrasing this question have been taken) 

Answer: This is going to sound like a typical "lawyer answer," but it really depends.  First, it depends on whether either the PO or Proposal contains any "conflicting terms killer."  Such a killer would be a clause in the Proposal , for instance, that says:  "Any and all terms in the PO that conflict with this Proposal are hereby rejected."  The PO might also say something like that.  Or one of those "killers" might go even farther and say that any attempt to reject ANY of the Proposal terms would result in the lack of any deal.  So would you would first need to sort out is the effect of those sorts of clauses.  Second, you would want to address what--if anything--is the effect of the UCC (a uniform set of laws adopted in 49 out of the 50 states that govern some types of commercial transactions).  Sometimes the UCC provides that if the Proposal and the PO conflict that the contrary terms are BOTH knocked out, leaving the parties with ONLY the non-conflicting terms!  That can produce an interesting transaction, to say the least.

Another unanswered question in my next installment. 

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Paul: Typically the whole point of the indemnity section of a contract (or purchase order) is to protect against the claims of THIRD parties--not the parties to the contract themselves. So like many of these provisions, this one is really misnamed. But here is the real problem with that provision. While the other party to a contract always has the right to sue you for the breach of that contract, this so-called "indemnity" provision adds two not-insubstantial weapons to the Buyer's arsenal: (a) it allows the Buyer to hold the Seller responsible for even minor (non-material) problems with the operation of the system and (b) it allows the Buyer to collect its attorneys fees from the Seller (not the norm in American contracts)--which removes the "is it really worth it to me to pursue this?" impediment to the Buyer's eagerness to pursue a remedy. I would not agree to this provision, but that is easy for me to say--I am not running an integrator business!
Mark, I visited one of our members last week. They currently do not have their own terms & conditions - yes we are working on that! Their customers do not have master service contracts but supply the member with a Purchase Order which has fairly basic T & C's on the reverse side. The indemnity section states "Seller shall indemnify and hold harmless Buyer from any claims, losses, expenses, damages and liabilities, including but not limited to reasonable Attorneys fess arising out of or resulting in any way from, any of the operation of, or defects in the goods, materials, articles and work, and from any other act or omission of Seller in connection with or Sellers breach of this purchase order including but not limited to any act or omissions of Seller's employees, agents and subcontractors.
Any thoughts?
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