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How good are your terms and conditions of sale?

Unless you carefully spell out your terms and conditions of sale, it is simply a question of time until serious problems and large legal liabilities occur.

When the order comes in, your customer usually indicates that it is subject to his terms and conditions of sale, frequently printed on the back side of the purchase order form. How closely do you read this fine print, put together by a battery of lawyers? You had better read it carefully or there could be big problems later on if something goes wrong with the job.

However, foundries often ignore the customer's acknowledgement form that accompanies his purchase order and use their own so as not to be bound by the customer's terms. One tactic widely used by foundries is to first get a big rubber stamp for the order acknowledgement form that says the order is accepted subject to your terms, shown on the back of the acknowledgement form.

Following the "last piece of paper" doctrine, this usually works. But not always, and you could have serious difficulties later. Generally, you really don't have a contract unless both you and your customer agree to one set of terms--an unusual situation.

What is the best course to follow? By all means, use the rubber stamp, or otherwise prominently indicate on your acknowledgement that the order is accepted subject to your terms.

In addition, make sure your terms and conditions are adequate and reflect your foundry's current policy. It is not important that they follow standard industry practices because there is no such thing. In fact, standardizing terms now constitutes restraint of trade and thus, can be considered a violation of the antitrust statutes. Obtain good legal advice and make sure your counsel understands the potential problem areas involved in the legal relationship between you and your customers. As a minimum guideline, your terms should cover the following key points:

* pattern and tooling delivery, quality, markings;

* casting finishing, weight, quantity;

* rejects and replacement;

* machining charges;

* limits of liability for nondelivery;

* blueprints, tolerances, variations;

* order changes, cancellations;

* overruns, underruns;

* delivery charges, boxing, crating;

* FOB terms, losses in shipment;

* pattern storage, maintenance, liability;

* pattern checking, modification;

* credit terms;

* price increases;

* use and excise taxes;

* warranties.

Legal effectiveness of your terms will depend to a considerable extent not only on their content but on their layout. The best and most effective forms will be easily understood without needing legal interpretation. Shown somewhere in your terms should be the statement that your foundry is not necessarily bound by the customer's terms.

You should be aware that different states have varying statutes on terms of sale. Those that are applicable in your state don't necessarily apply to a customer in another state. However, most states comply with the Uniform Commercial Code, which is intended to simplify the jurisdictional problem. From an antitrust standpoint, companies have had to either accept this code or face the consequences of violating it.

Unfortunately, many of our industry's major customers are continually changing their terms. So, don't take for granted that terms on the current order are the same as they were on the last order. It's a decision call as to whether you discuss discrepancies in terms with your customer. This might open up a can of worms because his terms are often a matter of rigid corporate policy, which in a large organization can be very difficult to get changed, even if the buyer is interested in having the revisions made.

Carefully reviewing your terms and conditions periodically is only smart business. Make sure they are adequate and establish a good procedure for being alerted to sign to significant differences between your terms and those of your customers. Then you will be able to make decisions before the fact rather than after--when disagreements can be potentially very expensive.

For more complete outline of the elements that should be included in your terms and conditions, contact the author at 813/947-5073, or write to P.O. Box 800, Estero, Florida 33928.
COPYRIGHT 1993 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Warden, T. Jerry
Publication:Modern Casting
Date:Jun 1, 1993
Words:668
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