The Independent Counsel

Commercial


Don't Fall A Needless Casualty
in the "Battle Of The Forms!"


BY TOM L. PETERSON

With the advent of the fax machine, small companies sometimes needlessly lose a critical legal battle in which the law is stacked in their favor.

A Statute-Given "Contract"

The Uniform Commercial Code that is currently applicable in every state but Louisiana, applies statutory conditions to sales contracts that are very favorable to buyers with respect to important terms such as the applicable warranty.

Unless the parties expressly exclude the statutory warranty rights, goods are deemed warranted to be fit for the purposes for which they are ordinarily used or for which the seller should have known they were intended to be used by the buyer.

The buyer gets the benefit of such warranties and can also collect its lost profits and be indemnified against claims by third parties. No wonder lawyers for sellers are very forceful in advising their clients to always limit their warranty and remedy exposure in their sales terms and conditions as much as possible!

However, there is little a that seller can do to avoid the application of these very favorable statutory provisions if the buyer simply follows one rule: Never issue a purchase order without making it subject either to the statutory warranty and remedy provisions or including equally favorable "buyer's" terms and conditions.

The Buyer's Battle to Lose

This is because the UCC declares that, if the terms of the buyer and the seller contradict one another, the statutory provisions apply (an overzealous form of "consumer protection" for commercial buyers).

Unfortunately, buyers' terms and conditions are typically printed on the back side of the purchase order. The result in today's world, where faxing is not followed by mailing and not everyone in the purchasing function knows the legal rights they are giving away, is that only the FRONT side of the P.O. is sent to the seller, who may then simply send its terms and conditions with its confirmation. By not faxing the BACK side too, the buyer has lost the battle that was its to win!

Comment: Have well-drafted terms and conditions and use them properly in the battle of the forms whether you are the seller or the buyer, and always fax both sides of your form.

© ASSOCIATION OF INDEPENDENT GENERAL COUNSEL 1995; (all rights reserved). This article is not intended as legal advice. Consult a qualified attorney for assistance concerning a specific issue or problem.