Every purchase order and invoice should have them. What are they? Terms and conditions.  The print may be small but look for it, read it and understand it. It could save your business costly litigation down the road.

The legal system is littered with companies suing each other over adherence to terms and conditions. The terms and conditions are legally binding and the buyer will have them usually printed on the back of a P.O. (purchase order). With more and more companies adopting electronic invoicing it is important to document whether the terms and conditions were received and if the language is acceptable. For example, many buyers will “pay on scan” which is really consignment. Guess what is not eligible under a line of credit or factoring? Consignment since it is not a true sale.

Buyer versus Seller – Terms and Conditions

The buyers could have completely conflicting terms and conditions so to resolve the potential problem, some invoices contain language that states this is the complete agreement and any terms contained in the buyer’s paperwork that is inconsistent will be automatically rejected. If there is a conflict and the companies look to the courts to make a decision, more than likely the court will not enforce either one.  It would be time consuming and difficult to reconcile the competing terms and conditions.

Terms and Conditions – What to think about

What information should your terms and conditions contain? Below is a checklist of issues to address.
• Due Date of Invoices
• Discounts
• Extension of Credit/Requirements
• Default in Payment
• Default/Adequate Assurance/Cancellation
• Taxes
• Warranty
• Claims
• Limitations of Liability
• Contingencies
• Inspection
• Inspection and Acceptance
• Returned Goods
• Cancellation or order change
• Governing Law, Assignment and Jurisdiction
• Costs of Collection
• Waiver
• Termination
• Whole Agreement
• Authority to Contract

Don’t go overboard

Terms and conditions should be carefully worded.   The goal is to do business and if your terms and conditions are too aggressive, no one will want to buy from you. Remember, you are in the business to sell something not litigate every sale.