When it comes to supply, manufacturing, or other product or service transactions and arrangements (purchase orders, service agreements, sale terms and conditions), it is surprising how many companies rely on the “handshake” approach and either do not have any terms to govern the transaction or blindly accept the other party’s terms. Without any written terms, the default terms of the Uniform Commercial Code (UCC) may apply, which could drastically impact the perceived intent of the business relationship. Whether a company is the “little” or “big” guy in a business transaction, having a written, negotiated agreement is best practice. Below are our top ten tips to navigate day-to-day contract negotiations:

1. Power of the Pen: Have your own template form terms / agreement and push to use such form where applicable. You can set your terms up to be more conservative, knowing that there is wiggle room to “give” on negotiations with the other party. However, this requires balance – you do not want a form that is too one-sided. That may cause the other party to want to start with a more neutral form (or set the wrong tone from the beginning).

2. Strong First Round of Revisions: If not starting with your own form, go heavier on the first round of revisions. There may be less important issues you may be able to give on the next round of revisions to show a good faith progression in negotiations while not having to give up issues that are more important to you.

3. Pricing/Business Points Argument: For any sticking issues, argue that your pricing and other deal terms are based on minimizing risk on these important issues. If concessions cannot be made, you can consider changing business terms to cover these risks (i.e., increase pricing, lower warranty period, or having a longer term).

4. Dissemination of Terms: A fully executed agreement takes the cake and is the ultimate best practice. However, if executing an agreement will not be feasible or practical, you can also attach terms and conditions to your estimates, orders, and invoices and/or incorporating terms and conditions on your website, provided you have very strong acceptance language for either.

5. Battle of Forms Provision: Sometimes vendors or other third parties will try attaching or incorporating their standard terms and conditions on purchase orders, invoices, or other similar communications. This can create inconsistencies with other terms and conditions that you have offered and cause confusion about which terms control. Having a battle of forms provision in your agreement/terms can help combat this issue.

6. Warranty Exclusion: If you offer any limited or full warranty of products or services, make sure you have clear and conspicuous warranty language that not only includes the mechanics, time limitations, or procedure of your warranty but also has clear and strong exclusions (for misuse, use of third party products, storage issues, etc.).

7. Inspection Mechanics: If there will be any deliverables or products, make sure you have clear/strong inspection mechanics and procedures for any nonconforming goods. Make sure your liability is limited exclusively to repairing or replacing such nonconforming goods that have been properly claimed as nonconforming.

8. Indemnification: Always include an indemnification provision (can be one way or two ways) to protect yourself from third party claims that are due to the other party’s acts and omissions.

9. Limitation of Liability: Always include a limitation of liability provision that both (a) limits the type of damages that the other party can seek (excluding indirect and less foreseeable type of damages like loss of profit) and (b) limits the total amount of damage the other party can obtain from you (typically some percentage of the amount paid to or by you under the agreement).

10. IP/Confidentiality Protections: To the extent any of your confidential information or proprietary information is being used, stored, or disclosed in the relationship, you need to make sure you have adequate confidentiality and intellectual property protections.

GCT can help you put together template terms and conditions, order forms, website terms, and full agreements together for you. In addition, GCT can help review and negotiate any terms and agreements you receive from any third party and give as light or thorough review as you see fit.