Thursday, February 16, 2012

Battle of the Forms & Writing

Battle of the forms describes is a situation that occurs when a purchase order is issued and an acceptance or confirmation is sent with additional or different terms and the work is still performed. Contractually the acceptance or confirmation with the different terms is a counter offer that should be accepted or rejected by the buyer. However since performance has occurred there is a contract, it’s just not clear what the real terms are. If there is a problem the buyer argue that only their terms should apply. The supplier would argue that their performance was based upon their acceptance or confirmation. The courts or an arbitrator would need to decide which applies and would look at things like standard practices in the industry and prior dealings between the parties to determine who wins in the battle of the forms.

When you have a contract you can eliminate the potential for any battle of the forms and usually both parties are willing to do that. The way this is done is by simply including language in the contract to the effect that any additional or differing terms in either buyer’s purchase order or supplier’s acceptance shall be void unless accepted in writing by both parties. This protects the Supplier from having to be vigilant and closely review every order to make sure the buyer hasn’t changed or added terms. This also protects the buyer from having the supplier include additional or different terms in their confirmation or acceptance. It eliminates any potential battle of the forms. It doesn’t prevent the parties from agreeing to something different. It does require the change or additional requirements be agreed be in writing by both parties to the agreement.

Having a document be actually signed in writing by both parties can be cumbersome and slow. That doesn’t work well in today’s real-time world. Contractually the parties can agree to establish alternative method of agreement that constitutes “a writing signed by both parties”. I worked with a group that had a electronic quoting tool that allowed authorized parties of the supplier to access to the tool to provide quotes and updated pricing. As prices changed frequently and new items were constantly being added that would have required a blizzard of paperwork to get mutual agreements in writing on each change. To make this more efficient I included language in our contracts that establish an alternative method for changing pricing. The suppliers agreed their placement of a quote in the tool was a written offer to make that change. Then we established that our acceptance in writing would was accomplished by either an email or by our issuance of a purchase order at the quoted price. If we didn’t agree with the pricing the supplier inputted we would negotiate with them and have them re-input the new pricing into the tool. To close the loop and not be totally dependent upon electronic files we required that there be a periodic print out of all prices that were in effect at a specific date and had both parties sign that to reaffirm the agreed pricing. We were able to manage it that way because the access to the quote system was limited to only employees of the supplier that were authorized and the system allowed us to track when changes were made and who made the changes.