Are your suppliers doing you favors?
Really big favors?
Often suppliers tell their customers what a big favor they are doing for them by holding a price even though a contract expired while they were negotiating a renewal. Nice guys, huh? I mean here you were dragging your feet and they held the price anyway. They didn’t take you to list.
Then there are times during negotiations that the supplier may say, “Hey, the contract expires in a week and you’ll revert to list price. I don’t want that to happen. You don’t want that to happen. Let’s wrap this up ASAP”! Under this sense of urgency you sign without fully examining the fine print. Big mistake.
As supply chain professionals we need to know that this is akin to someone telling you they're doing you a favor by not driving 50 mph on your street which has a speed limit of 25 mph. All they are doing is following the law. Telling you otherwise is plan old sales puffery. The Uniform Commercial Code (U.C.C.) establishes an implied contract under the “course of dealing” and/or “Usage of Trade” sections whenever the buyer continues to purchase goods when the parties have intended to make a contract and such contract is entered into within a reasonable time (code 2-205 states three months). Thus, the buyer is entitled to pay no more than the higher of the two contract prices during contract interims.
The point here is that buyers may (and should) refuse to pay an increase during a contract negotiation with an incumbent supplier that exceeds the offer for new pricing. During gaps in contract periods (not to exceed 3 months) the obligation is to pay the higher of the two contract prices, but no more. Buyers should never let an artificial deadline (technically known as “Fire Drills”) force them to make decisions without all appropriate due diligence being performed.
If a supplier has taken you to list during the 3 month period you are entitled to a refund. Demand it and you’ll get it. Organizations can usually go back 3 years and get refunds.
Often suppliers tell their customers what a big favor they are doing for them by holding a price even though a contract expired while they were negotiating a renewal. Nice guys, huh? I mean here you were dragging your feet and they held the price anyway. They didn’t take you to list.
Then there are times during negotiations that the supplier may say, “Hey, the contract expires in a week and you’ll revert to list price. I don’t want that to happen. You don’t want that to happen. Let’s wrap this up ASAP”! Under this sense of urgency you sign without fully examining the fine print. Big mistake.
As supply chain professionals we need to know that this is akin to someone telling you they're doing you a favor by not driving 50 mph on your street which has a speed limit of 25 mph. All they are doing is following the law. Telling you otherwise is plan old sales puffery. The Uniform Commercial Code (U.C.C.) establishes an implied contract under the “course of dealing” and/or “Usage of Trade” sections whenever the buyer continues to purchase goods when the parties have intended to make a contract and such contract is entered into within a reasonable time (code 2-205 states three months). Thus, the buyer is entitled to pay no more than the higher of the two contract prices during contract interims.
The point here is that buyers may (and should) refuse to pay an increase during a contract negotiation with an incumbent supplier that exceeds the offer for new pricing. During gaps in contract periods (not to exceed 3 months) the obligation is to pay the higher of the two contract prices, but no more. Buyers should never let an artificial deadline (technically known as “Fire Drills”) force them to make decisions without all appropriate due diligence being performed.
If a supplier has taken you to list during the 3 month period you are entitled to a refund. Demand it and you’ll get it. Organizations can usually go back 3 years and get refunds.
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The excerpts from the U.C.C., taken from www.law.cornell.edu/ucc, supporting this position follow:
The excerpts from the U.C.C., taken from www.law.cornell.edu/ucc, supporting this position follow:
U.C.C. - ARTICLE 2 – SALES PART 2. FORM, FORMATION AND READJUSTMENT OF CONTRACT
§ 2-204. Formation in General.
(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
§ 2-205. Firm Offers.
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
§ 2-206. Offer and Acceptance in Formation of Contract.
(1) Unless otherwise unambiguously indicated by the language or circumstances
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
§ 2-207. Additional Terms in Acceptance or Confirmation.
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
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