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The following clauses are from contracts contained in the Purchaser’s Contract Forms diskette.

Want to "fight" the Battle of the Forms to win? If so, it is important that you follow the guidelines of the Uniform Commercial Code. You should insert a clause similar to the following in your purchase order terms and conditions.

This Purchase Order is limited to the terms and conditions contained on the face and reverse. Any additional or different terms proposed by Seller in any quotation, acknowledgment or other document are hereby deemed to be material alterations and notice of objection to them is hereby given. Any such proposed terms shall be void and the terms herein shall constitute the complete and exclusive statement of the terms and conditions of the contract between the parties.

The U.S. Copyright Act provides that copyright ownership initially vests in the author of a work (for instance, a software program, training program, design, or photographs). When your company retains an independent contractor, this will often mean that the independent contractor not your company will be the owner of the copyright in the work. This is the case even if your company pays the independent contractor all the non-recurring engineering required to develop the work.

If you expect that your company own the intellectual property in the work, you must have a clause in your contract that transfers ("assigns") the I.P. from the independent contractor to your company. You might use a provision such as the following:

Consultant agrees that all ideas, inventions, designs, ideas, discoveries, specifications, drawings, schematics, prototypes, models, inventions, and all other information and items made during Consultant’s performance of the Services under this Agreement ("Work Product") will belong solely to Company, and Consultant will retain no rights therein. Consultant further agrees to assign to Company all right, title and interest to such Work Product. Upon Company's request, Consultant agrees to assist Company, at Company's expense, to obtain patents or copyrights for such Work Product, including the disclosure of all pertinent information and data with respect thereto, the execution of all applications, specifications, assignments, and all other instruments and papers which Company shall deem necessary to apply for and to assign or convey to Company, its successors and assigns, the sole and exclusive right, title and interest in such Work

When on-time delivery or completion is critical, try using a Liquidated Damages clause. These provisions "fix" the amount of damages in the contract that may be deducted from the contract price if a supplier is late in delivering or performing.

While there is no legal requirementto provide a bonus for on-time or early delivery, it may make good business sense to include such a provision in some contracts.

For every hour or part thereof the Equipment or any component fails is inoperable in excess of the time between notification by Customer and the deadlines set out above, Customer shall receive, in addition to any other remedies Customer may be entitled to hereunder, a credit of [Insert either: Dollar Amount or Percentage of the monthly maintenance charge] to be applied to future maintenance invoices hereunder.

For use in a Construction Contract:

If Contractor fails to complete the work by the date specified in Exhibit A, the actual damages caused to Company for the delay would be large and difficult to determine and document. Therefore, in lieu of actual damages, the Company shall deduct from the Contract Price set forth in Paragraph 4, the amount of [Insert Dollar Amount] as fixed, agreed and liquidated damages for each day completion is delayed beyond the date specified in Exhibit A.

D. Price Protect On-Going Services

Whenever you have a need for ongoing services, make sure that you "Price Protect" the renewal of the prices for those services. The best time to negotiate price protection is at the acquisition stage of the Equipment.

You might want to use a clause such as the following in your Equipment Acquisition Contract:

There shall be no charge for maintenance services covered under this Agreement during the Warranty Period. Upon expiration of the Warranty Period, Buyer agrees to pay Seller for maintaining the Equipment, the sums set forth in Exhibit B for a period of twelve (12) months on a monthly basis. Maintenance services shall be automatically renewable from year to year for [insert number: eg., ten] years from the Date of Acceptance. When so renewed, the payment and any further charges pursuant thereto will be at Seller's then current rate, which rate shall not exceed the original rate set forth herein, increased by an amount equal to the change in the Consumer Price Index, published by the United States Bureau of Labor Statistics as of the date Seller notifies Buyer of the new rates. In no event shall the increase in any year exceed five percent (5%) of the prior year's rate. Notwithstanding the foregoing, Buyer shall have the right to terminate maintenance services at any time upon giving Seller at least thirty (30) days advance written notice thereof.

E. Language which Ties your P.O. Releases to the Blanket (Corporate) Agreement

Corporate Agreements are one way a Buyer can avoid the "battle of the forms". The idea is that the parties negotiate the terms that will govern their future purchases and sales and put those terms in the Corporate Agreement. Thereafter, the Buyer uses its purchase order as a release.

Each Purchase Order should refer to the Corporate Agreement but often does not. To ensure that all purchase orders are governed by the Corporate Agreement, consider including language such as the following in your Corporate Agreement:

Unless otherwise agreed by the parties in writing, this Agreement shall apply to all purchase orders and other documents issued by either Buyer or Seller (referred to as "releases") in connection with the purchase and sale of Products. No inconsistent or additional term or condition in any release shall be applicable to a transaction within the scope of this Agreement.

The parties agree to use reasonable efforts to place a legend on each release that refers to this Agreement. However, the terms and conditions of this Agreement shall apply to any such release whether or not such legend appears on the release.

F. Consigned Inventory Agreements

If you want your supplier to maintain products on a consignment basis at your facility, you will want to use clauses such as the following the establish such an arrangement:

Supplier will maintain the Products in the minimum quantities listed in Exhibit A at Buyer’s facility located at [Insert Address of Consigned Inventory]. Supplier shall be responsible for all transportation and other expenses associated with shipment of the Products to Buyer’s facility. Buyer will maintain, at its expense, a dedicated inventory storage area for the Products, which will be physically segregated from all other inventory and property during the term of this Agreement (the "In-Plant Store").

Whenever Buyer wishes to remove any Product from the In-Plant Store, it shall furnish Supplier with a purchase order. Buyer will transmit its purchase orders [eg. weekly] for all Products removed from the In-Plant Store during the prior [eg. week] and Supplier likewise will replenish the Product [eg. weekly] or as otherwise agreed. Buyer may, in its sole discretion, elect at any time to return any or all Products in the In-Plant Store to Supplier and Supplier shall accept return of said Product within [eg. five] business days from the date of initial notification issued by Buyer.

It has become a familiar scenario: As a result of the cyclic nature of business and reduced labor costs, more companies are retaining workers as independent contractors rather than employees. Although the independent contractor status is appropriate in some cases, classifying individuals as contractors when they should be employees has serious legal implications under employment and tax laws. The determination of independent contractor status is made by the Internal Revenue Service, which carefully monitors the tax returns filed by independent contractors and the employers that hire them, the ensure that organizations are not misclassifying employees to avoid payroll taxes.

Federal and state tax assessments can be staggering if your company misclassifies an employee as an independent contractor. There can be liability for retroactive federal, state, and/or local payroll taxes as well as social security and unemployment taxes. In addition, interest and severe penalties may be assessed.

In various case decisions, the courts have recognized several legal standards for determining independent contractor status. From these cases, the "common law" definition of employee and independent contractor evolved.

The Internal Revenue Service training manuals 8463 and 3142-01, in a chapter entitled "Employer-Employee Relationships," list 20 common-law factors to determine whether an individual is an independent contractor or an employee.

Although several criteria need to be considered, the most import factors are direction and control. A worker would be considered an employee if the company retains the right to direct and control the way the worker performs, both as the final results and the details of when, where, and how the work is accomplished. If the worker is chargeable only with the end result and not subject to control in how the work is carried out, he/she is more likely to qualify as an independent contractor.

In other words, the more control, the more the person looks like an employee. And in theory, with independent contractors, you should only be concerned with the results of the work, not the way the work is done.

Clearly, it is in your company’s best interest to document the independent contractor status. To help avoid being charged with being a "statutory employer," consider the following procedures:

If you wish to obtain further information about independent contractors, you can contact the IRS for copies of the training manuals noted above. In addition, your state’s chamber of commerce is often a good resource for material on this subject.

Pricing issues always influence your bottomline. Since you have the greatest leverage at the time of contracting, this is the time to protect yourself against excessive price increases and negotiate all of the hidden and future costs before you sign a contract. Various contract clause issues relating to price follows.

When a contract for products of a long-lead nature is signed prior to actual delivery, prices defined in the contract should be clearly protected for a fluctuation either upward or downward. Prices can increase due to reasons of allocation or increased costs of raw material.

Alternatively, prices may also decrease due to rapidly changing technology. If this occurs, you should negotiate the benefit of the decrease downward. An example follows.

" If seller’s published purchase price for any item of equipment delivered or any service provided shall be less on the date of delivery or performance than the price for such equipment or services as specified herein, this agreement shall be deemed to provide such lower price. If such price shall be higher, the prices set forth herein shall prevail."

Capital equipment and software require ongoing maintenance at the conclusion of the initial warranty period. The price of ongoing maintenance costs should be addressed up front. Consider the following price-protection provision which designates a fixed-percent increase by which your supplier may adjust the price:

"Upon expiration of the warranty period, the price of the twelve-month maintenance period shall be as set forth in Exhibit A. Each year thereafter, maintenance services shall be available at prevailing prices, which prices, however, shall not exceed the maintenance price for the proceeding year increased by five percent."

An alternate method is to tie any annual adjustment in price to the changes reflected for that year in an index, such as the Producer Price Index (PPI). However, if you select this alternate method, it’s advisable to put a maximum cap on the increase.

The original contract should list available expansion equipment and parts required for ongoing operation and current prices. The contract should provide for the continued availability at those prices or at later prevailing prices, subject to outside limits, such as a maximum of xpercent per year, or the increase of the CPI (for example) whichever is less. Consider the following example:

"For one (1) year subsequent to the final acceptance of the equipment by Your Company, the supplier shall make replacement components and your parts for the equipment available to Your Company at the original contract price. Thereafter, the price shall not be increase more than ____ percent (%) per year."

A strategic alliance agreement is a good vehicle by which to motivate your supplier to implement cost reductions. An example of an incentive sharing provision to reduce prices follow.

"The first x percent (X%) savings from productivity increases will be kept by the purchasing company. Benefits from productivity projects yielding annual savings greater than xpercent (X%) below base price levels will be kept by seller for the period following implementation after which time the base price will be reduced to the appropriate amount."

The most common way purchasers and sellers agree on a price for a long-term agreement in inflationary times is to use escalation clauses. An effective clause will address the following criteria:

1. Is the base price to which the escalation factor is to be applied clearly stated?

3. Does the clause specify the time from which changes in the price will be measured?

5. Are there any upper or lower limits on the adjustment? Don’t neglect to provide for downward adjustments as well as upward adjustments.

Before signing a contract, work-in-process should be clearly defined, as well as what kind of materials on order the purchaser is liable for should he/she terminate midstream. In addition, in a contract where you may wish to make future changes to the specification, negotiate the prices for those changes at the time of contracting. Remember, if you don’t get it up front and written into the contract, you probably won’t get it.

If these scenarios are all too common, then you have not cultivated your lawyer as a good resource.

It is a fact of business life that today’s purchasers must have an understanding of the legal issues involved in procurement. Your ability to make well-reasoned decisions and protect your company involves balancing all factors involved in a transaction: business as well as legal.

The more knowledgeable you are, the better questions you will ask of your attorney and the better advice you will obtain.

Attend seminars. Ask questions. Read purchasing newsletters and legal columns of magazines. Develop a greater understanding of contract law and the Uniform Commercial Code (UCC). The American bar Association (ABA) has a list of publications available to both lawyer and layman. Librarians at local university law libraries are also good resources. Your state’s chamber of commerce is an excellent source for publications dealing with environmental, OSHA, safety, and employment issues.

If your company does not have an internal legal department and you want to develop a working relationship with a lawyer, there are several ways to locate an attorney. One of the best ways is by referral. An excellent source of referrals for an outside lawyer is the inside council of a company within your industry. Attorneys in corporate legal departments are generally familiar with those lawyers who concentrate in areas of the law in which their companies are involved.

Another source of referrals is your local or state bar association, The ABA publishes a directory of all state bar associations which can be purchased for a nominal fee by calling the ABA at (312) 988-5000. Many bar associations offer limited consultations with an attorney on a no-fee or small-fee basis.

When retaining an attorney, inquire about his/her experience with your type of issues, and don’t discount the "comfort" factor. If you don’t have a good rapport or the attorney doesn’t return your telephone calls in a timely manner, it is likely that this is not the attorney for you.

The legal aspects of purchasing are becoming increasingly important. If you are not obtaining the appropriate legal advice, you need to change the situation and develop a better working relationship with your company’s attorneys.