Legal/Finance

Supply procedures: where does your company stand?

Supply procedures: where does your company stand?

13th October 2011

Email: richard.maynard@newburynews.co.uk

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with Chris Felton, of Gardner Leader

How many times do business people curse “T’s and C’s” as unnecessary and something that they never use, let alone read? Here is a great example of what impact they can have. Chris Felton, dispute resolution partner at Gardner Leader, explains the case and how unclear contract terms can lead to liability and substantial expense.

Terms are a set of instructions and information that need to be considered by suppliers and clients before entering into an agreement. When a supplier is quoting for goods and services, it is often the case that the quotation is accepted on proof of a purchase order, stating the standard terms the agreement is under.
A contract is formed when a party makes an offer and the other party accepts that offer, but conflict can occur when the terms of the agreement are not clear or when the two parties do not agree on which set of terms they have been working from, the suppliers or the clients.
A great example of this is the recent case of Trebor, Sweet Manufacturers v. ADT, Fire and Security Company. ADT quoted for the installation of a fire prevention system, subject to their terms. This quote was accepted using a purchase order which stated that the contract was to be on Trebor’s standard terms.
Shortly after the work was carried out a fire broke out and destroyed the Trebor factory. As a result of this, ADT was sued By Trebor, and this is where the conflict occurred. ADT’s terms stated a limited liability of £14,000 but Trebor was claiming for £110m.
Although ADT claimed that they had supplied Trebor with a revised specification and quote after the work had started, there was no evidence to this effect. Although this was argued, it was not enough and ADT was left with a £110m liability.
This is prime example of how small errors can lead to large conflict and losses.  The case is also a reminder to make sure that the terms of a business are actually communicated to the other party, it is not enough to just say they exist. The best advice must always be to provide a copy of terms or, at the very least, to say exactly where they can be viewed.
n If questions  are raised through this example as to how your business’s terms are set up and dealt with, please contact Chris Felton at Gardner Leader for further advice on (01635) 508080.