This is of great interest to me, as our legal department has prepared a new set of terms and conditions for our stand-alone order, which essentially reflects the terms and conditions of our standard framework contract. This means that the new terms and conditions are complete and one-sided in our favour. It`s also three times longer than the general terms we currently use for standalone POs. I am torn between the desire to protect our business by using a comprehensive set of terms and conditions for all our transactions and the desire to use a shorter set of terms and conditions to expedite our standalone PO transactions, most of which are low risk. I would like to know what you think. But you need to consider transaction costs. Through a framework agreement, the parties decided that together they would do enough business to guarantee in advance the transaction costs of negotiating a framework contract. On the other hand, for a stand-alone order, you`re dealing with a single transaction – it probably wouldn`t bear the same level of transaction costs. So what is your vision of the general conditions in an autonomous order compared to those of a framework contract? Should they be just as comprehensive or should those that, in a stand-alone command, address fewer topics in a more concise and regular manner? I can understand that the same terms and conditions apply to purchases under a framework contract and to purchases under individual orders: their concerns as buyers are the same in both contexts. And it pretty much follows that if a full set of terms and conditions in a standalone order results in BetaCo incurring disproportionate transaction costs, closing the deal would also result in additional transaction costs for Acme in discussions with BetaCo.
At present, the terms and conditions of my company`s framework contracts are intended to be complete, but those of our stand-alone orders are shorter. One of the main reasons for this is that the inclusion of general conditions in an order imposes requirements on the supplier. As the terms and conditions of our stand-alone POs have not been negotiated in advance with the supplier, they are a source of delay, as the supplier must read them and can then object to one or more of the terms and conditions. And the longer the terms and conditions, the greater the likelihood of a delay and the greater the risk that the supplier will decide not to want to conclude the agreement given the choice of additional unilateral words. Sometimes we have to negotiate; In other cases, we agree with the supplier that we resolve disputes in accordance with the Single Commercial Code. In contrast, Acme and BetaCo choose to purchase Acme widgets from BetaCo with standalone POs. Acme orders 1,000 widgets for 10,000 $US with an order that contains the same terms and conditions as those used in the framework contract with AlphaCo. The abandoned order to BetaCo is worth 1% of the expected purchase value under the framework agreement with AlphaCo. As you know, goods or services can be purchased through orders placed under a framework contract or through orders that are not made under a framework contract – I call these “autonomous” POOs. They can be issued for one-off purchases or regularly as part of an ongoing relationship. It is therefore possible that, in order to reduce betaCo and Acme`s transaction costs, the terms and conditions of each stand-alone order issued to BetaCo are significantly reduced and made less one-sided.
That is why I understand the idea that, for the purposes of stand-alone orders, it makes sense to reduce a number of general terms used in a framework contract and make them less unilateral, although they reflect legitimate concerns. Of course, BetaCo`s transaction costs could be significantly reduced the next time Acme deposits a standalone order.