Terms and conditions
Terms and conditions are the legal provisions governing the buyer-supplier relationship, covering everything from delivery and payment to warranties, liability, and dispute resolution. Standard T&Cs establish clear expectations and protect both parties, while negotiations customize terms for specific relationships or transactions.
Examples
Standard purchase order terms: A buyer's standard terms on purchase orders specify FOB shipping point, Net 30 payment, warranty requirements, indemnification provisions, and the buyer's right to cancel without liability upon notice. These terms apply unless specifically negotiated otherwise.
Negotiated supply agreement terms: For a major supply relationship, the parties negotiate customized terms including volume commitments, pricing adjustment mechanisms, capacity guarantees, inventory ownership, and termination provisions that go beyond either party's standard terms.
Terms battle: A buyer issues a PO with their standard terms. The supplier acknowledges with their standard terms. Without explicit agreement, a "battle of the forms" exists that may be resolved by applicable commercial law, often favoring the last terms communicated.
Definition
Terms and conditions allocate risk and responsibility between parties. Every term represents a choice about who bears certain risks, who has certain obligations, and what happens when problems arise. Understanding T&Cs is essential for managing supplier relationships.
Common T&C topics include: pricing and payment, delivery and risk of loss, quality and warranties, inspection and acceptance, intellectual property, confidentiality, indemnification, limitation of liability, termination, and dispute resolution.
Procurement should understand their organization's standard T&Cs and know which terms are essential versus negotiable. Legal support helps evaluate supplier pushback on terms and identify acceptable alternatives when the buyer's preferred position isn't achievable.
T&C consistency matters. Using different terms with different suppliers creates complexity and potential exposure. Most organizations maintain standard T&Cs and document any negotiated deviations, ensuring awareness of non-standard obligations.
Frequently asked questions
What are terms and conditions in procurement?
Terms and conditions are the legal provisions governing the buyer-supplier relationship, covering delivery, payment, warranties, liability, and dispute resolution. Every term allocates risk and responsibility: who bears which risks, who holds which obligations, and what happens when problems arise.
What topics do purchase terms and conditions cover?
Common topics include pricing and payment, delivery and risk of loss, quality and warranties, inspection and acceptance, intellectual property, confidentiality, indemnification, limitation of liability, termination, and dispute resolution. Standard purchase order terms often specify items like FOB point, net payment terms, and cancellation rights.
What is the battle of the forms?
A battle of the forms occurs when a buyer issues a purchase order with its standard terms and the supplier acknowledges with its own standard terms, without either side explicitly accepting the other's. Applicable commercial law then resolves the conflict, often favoring the last terms communicated, which is why explicit agreement matters.
Why does consistency in terms and conditions matter?
Using different terms with different suppliers creates complexity and potential exposure, because nobody can track which obligations apply where. Most organizations maintain standard terms and document any negotiated deviations so non-standard obligations stay visible.
When should terms be negotiated rather than standard?
Major supply relationships often justify customized terms covering volume commitments, pricing adjustment mechanisms, capacity guarantees, inventory ownership, and termination provisions that go beyond either party's standard forms. Procurement should know which standard terms are essential and which are negotiable, with legal support to evaluate supplier pushback.