Superseding agreements and Purchase Orders - What Terms Govern - December 17, 2016
SUPERSEDING AGREEMENTS AND PURCHASE ORDERS - WHAT TERMS GOVERN
We are going to order new Fire All in One and the other All in One agreements soon. Can you add an additional term that basically states that our contract supersedes any terms or conditions of a purchase order or any other document issued by the customer/subscriber?
Sometimes a purchase order is issued after the contract is signed with terms and conditions and the customer tries to go back to those as binding. Typically when we receive something like this, after the contract is signed, we follow up with emails stating our contract supersedes the terms on the PO since the PO was issued after the fact.
It would be helpful if the issue were already addressed in the contract.
Also, you mentioned that many contractors and others want us to sign hold harmless or other forms. Could that be addressed as well, that our contract supersedes the others?
This is a complex issue. The Commercial All in One does in fact have this provision:
"To the extent this agreement is inconsistent with any other document, agreement, purchase order or understanding between the parties, the terms of this agreement shall govern"
The Fire All in One [and I know that's your primary business so it's the form you use most often] does not have that provision. I just added it per your request and it will be included in the updated Fire All in One.
But you still need to be careful because other agreements that you sign may be inconsistent and have contradictory provisions that specify that that document supersedes prior documents. Also, even though you don't sign a subsequent Purchase Order or expressly consent to contradictory terms and conditions, your acquiescence to the changed terms may be implied and you may end up being bound by unintended terms.
We have had cases where the alarm company's contract is signed and the subscriber's form contract is signed. They contradicted each other. One case was even more complicated because there were at least 6 contracts signed. How did it turn out? The last contract signed was determined to govern. Good thing too, because that was one of the alarm contracts.
The law is a bit murky because different fact scenarios will have different outcomes. There is a uniform law in most states, the Uniform Commercial Code [specifically section 2-207] and that applies to merchant to merchant contracts of sale. The reasoning would no doubt influence if not apply in merchant to consumer for sale of goods or services, but we are still left with issues of fact that are usually unique to each situation.
You enter into a Commercial All in One for a burglar alarm system. During or after installation the subscriber calls and asks for additional points of protection to be installed. You get sloppy and don't use the Supplemental Agreement we sent you with the Commercial All in One. The customer follows up with a Purchase Order confirming the sale, installation and price you quoted. You install the additional equipment. A loss occurs and it is alleged from the beginning that it was one of the addition points of protection that was breached. You get sued for more than your insurance and more than you're worth. You have trouble sleeping.
So you [and your insurance carrier] try to rely on your contract and its protective provisions. But your customer takes the position that the contract does not cover the additional installation because that work was covered by the Purchase Order. The Purchase Order does not contain any protective provisions for you and in fact has a few provisions that greatly benefit the customer in the dispute.
Your defense team concludes that your contract isn't changed by the PO. But they don't know that you confirmed the PO by signing and returning it to the customer before doing the additional work. You didn't note on that confirmation that only the terms of your contract govern.
I don't know how the above turns out, but the outcome would change if the factual scenario changes and there are countless versions possible.
How do you avoid the problem? Well it's not by simply including the provision that subsequent POs won't change the terms of your agreement. It's a good start, but you still need to be careful what you agree to and how you conduct your business. The best advice is that you should not do any work, perform any service, ANY, with using a Standard Form Agreement along with the Riders and Supplemental forms we provide and the separate Disclaimer Notice. Using these forms will avoid issues of whether competing forms supersede your contract terms.