In yesterday’s post, we noted that one of the workshops being offered in the 2nd NLPA Conference is on the Hidden Risks of Terms & Conditions. We noted that this is an important topic because terms and conditions are the concealed weapons of the legal world and a big hidden risk in your supply chain that you are likely not aware of.
There are more risks in an average set of terms and conditions then just the one-two knock-out punch of just Force Majeure and sole-source. Other risks that can be hiding in your contracts include:
- buyer beware
if you do not take the time to properly specify acceptance (testing) procedures, the goods will be yours the minute they are unloaded into your warehouse and/or a warehouse worker issues a goods receipt
if you do not insure that there are no appropriate no-subcontracting clauses, your supplier could be sub-contracting services that are only to be supplied by certified companies or individuals (which is critical in health care, etc.), critical services could be subcontracted out, leaving you liable
- weak confidentiality clauses
if the clause doesn’t specifically indicate that confidential information may only be revealed to non-identified parties in the case of an official legal request, and that any request must be reported to you before such information is revealed, who’s to say that the information won’t be released without your knowledge upon an informal inquiry by someone asking for related information
- increased liability
if the contract does not specify a minimum insurance requirement for your supplier, who is performing sub-contracted services on your behalf, and does not mandate that they provide proof of such insurance on a regular basis, then a mistake on their part could result in increased liability on your part, beyond any limits specified in the contract
- no termination clause
just because you think you can end the contract for non-compliance doesn’t necessarily mean that you can, if it is sole-source for a guaranteed time, the supplier can argue Force Majeure, lack of quality requirement, etc. to negate any non-compliance claim you may bring forth
And this is just the tip of the iceberg. That’s why poorly negotiated contracts are note just the concealed weapons of the legal world, they are minefields!