• World Commerce & Contracting
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:
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:
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.
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.
I think the most likely answer is that it will be based on timing - so subsequent agreements may amend the original. However, that also depends on what the core agreement - eg MSA - says regarding the amendment process - for example, does any amendment require formal acceptance? If so, are subsequent documents signed or unsigned? Is acceptance deemed as a result of supply or acceptance?
Agree with the first post. Depends on timing. Does your PO contain language that the PO supersedes any other agreements? If so, the PO just superseded your MSA.
We have specific language in our MSAs that state that no POs or other forms of agreement can apply. You could also add that language to your sales order or quote documents so the MSA does not get trumped if there is no order of precedence language in your master.
"No terms and conditions contained in any purchase order or other electronic notification or contract shall be of any force or effect."
on top of what my colleagues said in the previous posts. if the term of the PO differs from the term of the MSA and the other party agrees to it then it will be binding.
• Victorian State Government
Contact Andrew Jacopino IACCM member
I would be curious to know this as well. My main question would be around how to measure the outcome.
• University of Tennessee
The University of Tennessee has done significant research in this areas and has online courses, white papers and books on the topic. The result of their research is known as the "Vested" methodology/business model and it has been successfully put into practice by over 50 organizations in over 80 deals. You can find several case studies on UT's dedicated website on the topic at www.vestedway.com
Let me know if you have any questions...you can ping me on Linkedin and we can chat if you have questions.
(lead researcher and faculty for UT's Vested work)
• Avon Cosmetics Ltd
Thank you Paul Kruspe and Kate Vitasek, I will follow up on your recommendations.
When contracting goods that need to be specifically designed/developed for customers, we usually have Statements of Work in place where you describe the content and the milestones you want to contract. The better the outcome is described the easier the supplier will find the bidding.
I would be careful how risk transfer is handled and how a potential change can be managed, i.e. you need a change management process and clause.
• World Commerce & Contracting
With regard to technology, Docusign and others have fairly secure systems in place to ensure the integrity of e-signature contracts. Some organisations, however, still try to arrange in person signings where possible. In these circumstances, though, you will need to ensure that all signed contracts are stored safely and in a searchable repository as finding signed contracts remains a perennial problem for many who do not have comprehensive document repositories deployed.
With regard to your second question, many organisations have their legal functions handle the contract signature process. The larger the organisation, however, the more impractical such a set up can often be, as there are just not enough resources. Many organisations still have the sales function handling the signature process. There should be strict guidelines and processes in place to help ensure integrity and to prevent mistakes such as wrong versions being signed etc.
Hello, this is the type of contract structure my company has used for a while, Master terms, often evergreen, with annual Product and Service Agreements falling under it. I find it really helps create flexibility for purchases through sub agreements since anything that falls under the Master tends to be a shorter document. Generally, the Master governs unless it's a service or product specific term that the Master does not speak to, but we make that all very clear in the body of each section of the agreement. We also make it clear that any agreement falling under the Master only stays in effect as long as there is a Master in effect; though I have seen agreement terms that state until the end date of the sub agreement the Master terms still govern even if that Master has expired.
For Order of precedence I've seen it done with a list, as already mentioned, we try to keep things as uncomplicated as possible, so sub agreements just refer back to the specific Master, which supersedes any PO terms, and each sub agreement only speaks to one topic.
I don't have much of an issue with PO/SOW (for me, service agreement) alignment, ours is a pay at the beginning of the term, after agreement execution, so PO creation can occur after the service term has been set, but I would imagine there should be some sort of language you could include in your SOW that would address that concern...
• World Commerce & Contracting
Hi, I would be willing to have a chat about this. I am a lawyer with more than 20 years experience and although I have not worked extensively with modular contracting, I should be able to provide some advice. Please reach out to me at firstname.lastname@example.org.
If I understand the question correctly, it is asking about the benefits and challenges of breaking contract terms into, for example, POs/SOWs, Master Agreements, Terms of Service, Data Processing Agreements, etc. This has certainly become the norm in the technology industry allowing for multiple purchases under a single master agreement, with the added benefit of allowing companies to amend the ancillary agreements on notice or website updates. Most deal with the order of precedence by listing the agreement order. It may, however, be better to set the order based on the nature of the term, so that updates to data processing agreements take priority over all other agreements. With respect to survival, the most common approach is to extend contractual terms until the expiration of the last PO or SOW or some period following such expiration.