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2020-08-11 11:31:08

Not Using Clauses that do Not Apply

Hi Guys,

I just got back a contract which was redlined by a supplier/contractor. There are a number of standard clauses which we use in our contract and some would not apply for this service with the supplier. For example, "it shall be responsible for the adequacy, stability and safety of all operations on the Company's premises and of all methods of installation and commissioning of the Goods and performance of the Services;"

With this service the contractor does not have to install and commission but only supply and we would be doing the installation and commissioning.

Question: Instead of us removing the clause entirely can I just leave it in and place (N/A or Not Used) at the beginning of the clause which do not apply?
 •  World Commerce & Contracting  •   2020-08-13 13:11:44
This is a common problem when we use master agreements or templates that are designed to cover a wide range of products or services. From the perspective of the template owner, it increases efficiency and reduces risk. But for the recipient, it creates the legitimate concern that maybe the clause could somehow become relevant.

Unless you are confident that you would never use this supplier for any other purpose, I would not mark the contract as you suggest because it runs the risk that you do place a future contract that needs these clauses and the earlier amendment will be forgotten. So my approach would be perhaps through an explanatory letter - something like:

Dear Supplier
I fully understand your concern regarding terms in the agreement that are not applicable to this particular transaction. In that context, please accept this letter as acknowledgement that, in respect of this transaction only, the following clauses do not apply:

(Identify clauses)

As you will appreciate, our agreement is designed to facilitate a continuing business relationship and I am sure you share our wish to avoid future complexity and delay. Therefore, I propose that we do not physically strike these clauses from the agreement, but instead leave them in place to cover possible future business between us.
 •  Dangote Industries Limited  •   2020-08-14 06:11:53
I would just delete the entire clause and in the space place 'Not Used' just to indicate that the particular clause, even though it remains in our template, does not apply to the contract in question. The issue that may arise with the letter that Tim suggests is that it is not signed by both parties and so the contractor might question enforceability in event of a dispute and also especially if the contract has an 'entire agreement' clause.
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