I just read the PO Terms from a potential customer. Not only were the terms outrageous, but were written just short of telling my client to pay the vendor for the privilege to do business. There were overly heavy handed confidentiality clauses, market rate clauses, insurance, inspection, indemnification and to top it all off, a line that said the terms of the PO could be changed at their discretion. The Terms were about 20 pages, and my client's Business Manager was just going to sign it without reading, because he just didn't have the "energy". I think that's also a tactic that this customer uses. So, how do you handle dealing with this type of customer?
What do you do when the Purchase Order Terms are outrageous
Answers
It has been a pleasure working with you towards a business partnership that I am sure could benefit both of our firms/companies. Unfortunately, we will not be able to sign the Purchase Order as the terms do not reflect a fair partnership. We are open to discussion of a revision of the terms so we may both move forward with this beneficial plan/order/sale/business...
Wayne
Can your client talk to someone at the other company other than their procurement/legal office and explain they'd like to do business, but cannot afford the risks of this PO. Esp if it's for services, there may be a way to exchange a letter of agreement or SOW that simply replaces the PO.
If that "other person" wants your client to provide services, they need to help find a way to do business.
Either that, or make it COD/pay on order, and if that doesn't work, walk away.
Regards
Len
Thanks Sara & Len.... I've done this in the past with mixed results...
Wayne
You are right, sometimes it works, other times...the juice just ain't worth the squeeze!
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Hi Wayne,
Simular experiences here...
First reply would be to send them your Terms and Conditions with the message that your company is studying theirs.
Secondly you need to know who at the customer's can sign off adjusted terms and conditions.
Thirdly get the exchange going, by striking out Terms that are 'over protective'. All depends what kind of products/services you plan to offer. Legal documents are drafted to protect to whatever might happen. Therefore they are 'to general'.
From experience the customer wants your product/service and often they are also harrassed by their own T+C's.
I had one who subcontracted their invoices and this company refused to pay unless we signed the T+C's. I refused to do this, threatened to take it further as there's no excuse for not paying services or products rendered.
They are now paying without us signing their terms.
Ok, it takes a lot of energy, but in the end it's worth it.
1
Thanks, good advice.
Just for future consideration, it sounds as though what they sent was a Master Sales Agreement in disguise. That is something that requires significant negotiation at a high level. The problem is the time required to negotiate a reasonable MSA. Make it clear you will only proceed with a negotiated MSA (so they don't send the same purchase order next time), and that if it takes too long you will be forced to do business with someone else. I have done dozens of MSAs and, in the end, they are worth the effort because terms do not change on you from month to month.
I also like the idea of checking with your advocate on the other side. They are not going to be happy to see their deal go away because of someone that is clearly out of control on their side.
Sometimes , these terms are just cut and paste from a template. When you raise an objection is when they get edited . You should go ahead and talk to them.
We have done it many times and then we come to common ground. Also , the vendor knows that they are not dealing with ignorant/lazy people here.
We let this be a legal to legal issue rather than a customer/supplier. We tell the customer: Our lawyers will need to talk to your lawyers about out mutual terms and conditions. 99%of the time, it ends up a win/win.
I worked in Supply
If the product was hard to obtain or sole sources, we would accept the vendors T & C's.
If the product was not hard to obtain, we would move on to a vendor that would accept our T & C's.
Software and license agreements are more difficult and are a totally different animal.
Vendor Agreements and Contracts easily run 20 pages long and the wording in those documents can overwrite everything else if so stated. Our PO's would state that the T & C's in the contract override the T & C's on the PO.
I agree with Larry. I have seen cases where the T&Cs in the Acknowledgement superseded the T&Cs on the PO. I suggest you formally acknowledge every PO with the T&Cs you are willing to do business under and preferrably get a signed acknowlegement back. In many cases the PO T&Cs are boiler plate, often in small print of the back of standard POs. A conversation with your contact about your concerns can often lead to an acknowledgement of your terms. Changing boiler plate on standard POs can be a big deal requiring their legal department interaction. This in itself can create significant delays while both legal departments debate and wordsmith non-standard language. In any case, you have to weigh the consequences of your action and the financial impact should their PO T&Cs prevail.
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