Auerbach Procurement

8/8/2019 Auerbach Procurement

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Procurement

Conditions

Checklist

May 2006

Prepared By:

Robert Auerbach

Email: [email protected]

Website: www.marketnewzealand.com/auerbach

Procurement Conditionschecklist

Disclaimer:These checklists are provided for information purposes only and are no

substitute for professional advice, which should be sought prior to

entering into any transaction. New Zealand Trade and Enterprise

(NZTE) has not verified these checklists and makes no representations

as to the completeness, correctness, currency, accuracy or fitness for

purpose of the information, or the person that prepared the information.

Accordingly, NZTE will not be responsible for any damage or loss

suffered by any person arising from the information whether that damage

or loss arises from negligence or otherwise.

This document is one of a series of free information tools for exporters to assist businesses

through every stage of the export process.

For the protection of Robert Auerbach's clients, all names in this document are fictitious. Any

resemblance to actual people or companies is purely coincidental.

For information or advice, visit www.marketnewzealand.com, ring NZTE on 0800 555 888 or

contact your Client Manager.


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contents

general.................................................................................. 3documentation..................................................................... 3conformance with requirements........................................4delivery.................................................................................4cancellation..........................................................................5damages/liability .................................................................6partial shipments, split deliveries quantities ...................7price...................................................................................... 7rejection/return of goods....................................................8confidentiality ......................................................................8insolvency............................................................................9governing law ....................................................................10passage of title ..................................................................11risk of loss/insurance .......................................................11intellectual property/proprietary rights........................... 12shipping terms...................................................................13warranty .............................................................................14variations to order requested by buyer ..........................14scope of supply.................................................................15payment terms...................................................................15testing and inspection of goods...................................... 15assignment and sub-contracting.....................................16force majeure.....................................................................16mediation/arbitration.........................................................17verbal instructions ............................................................17retentions/offsets..............................................................17compliance with law..........................................................18ethical dealing ...................................................................18privacy act..........................................................................19rescheduling delivery dates............................................. 19other clauses.....................................................................20


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general

Procurement conditions normally begin with an introductory clause. Such a clause establishes

when a contract arises. It also determines which set of conditions shall prevail in the event of a

conflict between the Buyers procurement conditions and the Sellers Conditions of Sale.

Finally, an introductory clause may require all shipments to be subject to a Purchase Order. For

example, the Seller must ask the Buyer for a Purchase Order number before shipping on the

strength of a verbal order.

Sample Clauses:

Company A will not accept responsibility for any goods and services rendered unless it be issued

on a Company A official Purchase Order and duly signed, or recognise any variation of the order

unless such variations have been approved in writing.

All purchases by us from you shall be subject to the conditions in this Purchase Order. These

Purchase Order conditions supersede any other terms and conditions in conflict therewith,

including your conditions of sale. Your shipment of the products shall constitute your acceptance

of these conditions. To modify these conditions, both parties must sign an agreement to that

effect. Our agents and representatives have no authority to make any representations,

statements, conditions or agreements that conflict with these conditions. Any such unauthorised

representations, statements, conditions or agreements shall not bind us nor shall they be taken

to form part of any contract between us.

All purchases by us from you are subject to these Purchase Order conditions. These conditions

override any other conditions in conflict therewith, including your own conditions of sale.

However, they do not override any specific conditions that we have agreed with you in writing. A

firm and binding contract shall arise between us when you confirm in writing your acceptance of

our order. However, in the absence of your written confirmation, your shipment of the goods

shall constitute your acceptance of our offer subject to these conditions.

A firm and binding contract shall arise when Buyer receives Sellers written acceptance of this

Purchase Order. The Buyer shall have the absolute right to cancel or modify this Purchase

Order prior to Sellers acceptance thereof.

documentation

The Buyer may have specific documentation requirements in order to process a shipment. For

example, the Buyer may demand a detailed packing slip. The Buyer may require specific

information to appear on all invoices, delivery advices and other communications.


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Sample Clauses:

All goods and services supplied must be accompanied by a packing slip.

The Purchase Order, Line No. and our I.P.N. must be stated on all Delivery Advices, Packing

Slips, Invoices and all Correspondence.

All deliveries must be accompanied by a detailed packing schedule.

conformance with requirements

A Buyer may stipulate that the goods conform with the Buyers drawings and specifications. The

Buyer may stipulate that the goods conform with a sample. The Buyer may specify other

requirements that the goods must meet. The Buyer may reject non-conforming goods

Sample Clauses:

All goods and services supplied must be in accordance with Company A specifications and

drawings.

Company A reserves the right to reject any article found to be defective or inferior in quality eitheron receipt or during any process in its works. In the absence of specifications or samples all

goods or material supplied must be of the best of their respective kinds and subject to Company

A approval. Any deviation from the specification or accepted sample will give Company A the

right to cancel the whole order.

Any goods received which do not comply with our specification, drawing or sample will be

returned to the Vendor and any charges incurred will be to the Vendors account.

delivery

In this clause, the Buyer may emphasise the importance of meeting specific delivery dates and

the consequences of failing to meet them. The Buyer may specify that time is of the essence.

The Buyer may reserve the right to cancel an order because of late delivery. The Buyer may

also specify damages recoverable on account of late delivery.

Sample Clauses:

Company A requested delivery date must be adhered to. Failure to deliver this order by the datespecified will render this order liable to cancellation.


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Deliveries: Because Buyer must meet tight delivery schedules imposed by its customer, and will

sustain damages for late delivery, time is deemed to be of the essence of this Purchase Order.

Accordingly, in the event of late delivery, Seller shall pay Buyer, or Buyer may credit against the

Purchase Price, a late delivery charge of 1% of the Purchase Price per week. Buyer shall have

the right to cancel this Purchase Order on account of late delivery. In such event, Buyer shall be

entitled to recover from Seller all sums paid to Seller, late delivery charges accruing to the date

of cancellation, and actual damages suffered by Buyer as a result of Seller's failure to perform ina timely manner, to the extent actual damages exceed the accrued late delivery charges.

cancellation

This clause specifies the circumstances under which the Buyer may cancel an order. Such

circumstances might include:

Failure to make timely delivery.

Defective goods.

Non-conforming goods.

In addition, this clause may specify that all orders are revocable. That is to say, the Buyer may

cancel the order without cause.

Sample Clauses:

With Cause:

Company A requested delivery date must b e adhered to. Failure to deliver this order by the date

specified will render this order liable to cancellation.

Company A reserves the right to reject any article found to be defective or inferior in quality either

on receipt or during any process in its works. In the absence of specifications or samples all


As approval. Any deviation from the specification or accepted sample will give Company A the


Deliveries: Because Buyer must meet tight delivery schedules imposed by its customer, and will

sustain damages for late delivery, time is deemed to be of the essence of this Purchase Order.

Accordingly, in the event of late delivery, Seller shall pay Buyer, or Buyer may credit against the

Purchase Price, a late delivery charge of 1% of the Purchase Price per week. Buyer shall have

the right to cancel this Purchase Order on account of late delivery. In such event, Buyer shall be

entitled to recover from Seller all sums paid to Seller, late delivery charges accruing to the date

of cancellation, and actual damages suffered by Buyer as a result of Seller's failure to perform in

a timely manner, to the extent actual damages exceed the accrued late delivery charges.

Cancellation With Cause. Buyer has the right to cancel this Purchase Order at any time, forcause, if Seller is in default of any provision thereof, and fails to remedy such default within 10


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days of notice thereof. In such event, Seller shall reimburse Buyer for Buyers damages resulting

from Seller's default, including Buyers reasonable legal fees and expenses.

Without cause:

Buyer has the right to cancel this Purchase Order, without cause, at any time before the date of

delivery. In such event, Seller shall recover the following amounts from Buyer:

Seller shall recover the value of all work performed, including both labour and materials, up

to the date of cancellation.

Seller shall recover the value of outstanding commitments for labour and materials that it

cannot break.

Buyer shall thereupon have no additional liability to Seller.

damages/liability

This clause addresses the subject of damages that the Buyer may recover from the Seller. It

also addresses the issue of Sellers liability and the Buyers remedies.

Sample Clauses:

Deliveries. Because Buyer must meet tight delivery schedules imposed by its customer, and will

sustain damages for late delivery, time is of the essence of this Purchase Order. Accordingly, in

the event of late delivery, Seller shall pay Buyer, or Buyer may credit against the Purchase Price,

a late delivery charge of 1% of the Purchase Price per week.

Buyer shall have the right to cancel this Purchase Order because of late delivery. In such event,

Buyer shall recover the following sums from Seller:

a. Buyer shall recover all sums paid to Seller.

b. Buyer shall recover late delivery charges accruing to the date of cancellation.

c. Buyer shall recover actual damages suffered by Buyer as a result of Seller's failure to

perform on time, to the extent actual damages exceed the accrued late delivery

charges.


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Insurance and Liability. Seller indemnifies and holds Buyer harmless against all claims, whether

for personal injury, property damage or otherwise, arising out of the items supplied by Seller

under this Purchase Order. Seller shall carry public and products liability insurance with a $2

million limit. Where work on-site is included within this Purchase Order, Seller shall also carry

Contractors All Risk Insurance with a $1 million limit. Evidence of insurance coverage shall be

furnished to Buyer upon request.

Cancellation with Cause. Buyer has the right to cancel this Purchase Order at any time, for

cause, if Seller is in default of any provision thereof, and fails to remedy such default within 10

days of notice thereof. In such event, Seller shall reimburse Buyer for Buyer's damages resulting

from Seller's default, including Buyer's reasonable legal fees and expenses.

Reclamation of Buyers Property. If this contract is terminated by Buyer on account of any

default or breach by Seller which is not cured within ten days after notice thereof by Buyer, in

addition to any other rights Buyer may have under this contract or by law, Buyer shall be entitled

to immediately reclaim any of Buyers property, both personal and intellectual, then in Sellers

possession and, if necessary, enter upon Sellers premises for that purpose.

partial shipments, split deliveries quantities

Some Buyers insist upon accepting goods on an all or nothing basis. Such Buyers expressly

prohibit partial shipments and split deliveries.

Sample Clauses:

Quantities specified must be adhered to unless otherwise agreed prior.

Seller shall first obtain Buyer's written approval before making a partial delivery. Buyer's

approval of a partial delivery shall not constitute a waiver of late delivery charges. Buyer shall

recover any such late delivery charges in the event that complete delivery does not occur by the

date of delivery specified on the front of this Purchase Order.

price

This clause may indicate what the price includes (i.e. freight, insurance, taxes, duties, etc.). It

may also stipulate what the price does not include.

This clause may prohibit any price changes following confirmation of the order. It may also state

that the Seller must give the Buyer most favoured customer pricing at all times.


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Sample Clauses:

No Deliveries or Services shall be made at a higher price than stated on the Purchase Order,

without first obtaining the consent of the purchaser.

rejection/return of goods

This clause specifies the circumstances under which the Buyer may reject and return goods to

the Seller. It may also specify the consequences of such rejection.

The clause may allow the Seller to repair and replace such goods or it may allow the Buyer to

cancel the order and recover damages.

Sample Clauses:

Company A reserves the right to reject any article found to be defective or inferior in quality either

on receipt or during any process in its works. In the absence of specifications or samples all


As approval. Any deviation from the specification or accepted sample will give Company A the


Any goods received which do not comply with our specification, drawing or sample will bereturned to the Vendor and any charges incurred will be to the Vendors account.

Buyer may reject any items ordered that fail to operate within their specifications under actual

operating conditions. Buyer may demand that Seller repair or replace such rejected items at

Seller's cost and expense. Otherwise, Buyer may return such rejected items to Seller at Seller's

risk and expense, and recover from Seller any damages suffered thereby, including Buyer's

reasonable legal fees and expenses

confidentiality

If the purchase entails the disclosure of confidential information by the Buyer to the Seller, the

Buyer may wish to add a confidentiality clause to its procurement conditions.

Sample Clauses:

All orders placed by Company A are strictly confidential. The Vendor or Manufacturer must not

or cause to be published by any means whatsoever any specifications, drawings or any detail

concerning the goods, the subject of this Purchase Order, without written consent from CompanyA.


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Confidential Information refers to all non-public information in whatever form belonging to

Company A. Confidential Information includes the Proprietary Rights, financial information,

trade secrets, technical information, know-how, marketing information, ideas, inventions, models,

patent information, product information, prototypes, research and development and

specifications.

The Supplier shall use the Confidential Information solely for the purpose of supplying products

to Company A. The Supplier shall not use the Confidential Information to supply products to

anyone but Company A. Without limiting the generality of the foregoing, and for the avoidance of

doubt, the Supplier shall not use the Confidential Information to supply products to any customer

or former customer of Company A.

Under no circumstance shall the Supplier use the Confidential Information in a manner that

would be detrimental to Company As business.

The Supplier shall not use the Confidential Information to compete with Company A or to confera competitive advantage upon a third party.

The Supplier shall not disclose the Confidential Information to customers or competitors of

Company A.

The Supplier shall only disclose the Confidential Information to those of its trusted employees

and agents who require it for purposes of supplying products to Company A. The Supplier shall

fully inform its employees and agents of their obligations to Company A concerning the

Confidential Information. The Supplier shall be responsible for making sure that its employees

and agents understand and comply with such obligations.

The Supplier shall not disclose the Confidential Information to any third party unless it first

obtains Company A's written consent. Company A may condition its consent upon such third

party entering into confidentiality undertakings for Company As protection similar to those

contained herein.

The Supplier shall not copy or otherwise reproduce the Confidential Information unless it first

obtains Company As written consent. Notwithstanding the foregoing, the Supplier may retain

one archival copy of any materials comprising the Confidential Information for purposes of quality

assurance.

The Supplier shall return the Confidential Information to Company A, upon request. The Supplier

shall dispose of the Confidential Information in such manner as Company A may direct.

insolvency

This clause specifies the Buyers rights if the Seller becomes insolvent before shipping the

goods.


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Sample Clauses:

If the vendor shall have a Receiver appointed of the whole or part of their assets or if an order is

made or a resolution is passed for winding up the Vendors business, then, unless such order or

resolution is part of a scheme of amalgamation or reconstruction, Company A shall be at liberty:

a. to cancel the order summarily by notice in writing without compensation to the vendor,

and/or;

b. to withdraw all the Company A owned materials, tools, jigs, fixtures, artworks and

drawings, and/or;

c. to give any such Receiver or Liquidator or other person the option of carrying out the

order.

Insolvency. Buyer may, at its option, cancel this Purchase Order immediately in the following

circumstance. Seller suffers or permits the appointment of a receiver or liquidator of its assets,

or otherwise seeks relief pursuant to any insolvency or bankruptcy law.

Upon such cancellation, Buyer shall recover the following amounts from Seller:

Buyer shall recover all advance payments on this Purchase Order.

Buyer shall recover compensation for damages it suffers resulting from its cancellation of this

Purchase Order.

Buyer shall recover its reasonable legal fees and expenses.

governing law

This clause may be relevant if the Seller is based overseas.

Sample Clauses:

New Zealand Law.

New Zealand law shall govern the construction, validity and performance of this Purchase Order.


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passage of tit le

Usually, the Sellers conditions of sale will contain a Romalpa clause. With a Romalpa clause,

title does not pass from Seller to Buyer until the Buyer pays for the goods in full. Such a clause

is acceptable to most Buyers. However, a Buyer may wish to negate, or at least limit, the

application of the Sellers Romalpa clause. If so, the Buyer should specify when title to the

goods passes from the Seller to the Buyer.

Sample Clauses:

Title to the goods shall pass from Seller to Buyer upon delivery to the Buyer.

risk of loss/insurance

This clause specifies when risk of loss passes from Seller to Buyer. It also specifies which party

has the obligation to insure the goods, and for what risks. Finally, this clause may determine the

liability of the Buyer and the Seller in certain circumstances specified therein.

Sample Clauses:

Seller bears the risk of loss, and responsibility to insure against that risk, up until the time that theitems ordered arrive at the place of delivery specified on the front of this Purchase Order. In the

case of an "ex-works" contract, Seller bears the risk of loss, and the responsibility to insure

against that risk, up until the time that Seller loads such items for transportation. Buyer bears the

risk of loss, and responsibility to insure against that risk, after the arrival of such items at the

place of delivery specified on the front of this Purchase Order. In the case of an "ex-works"

contract, Buyer bears the risk of loss, and responsibility to insure against that risk, after Seller

loads such items for transportation.

Seller indemnifies and holds Buyer harmless against all claims, whether for personal injury,

property damage or otherwise, arising out of the items supplied by Seller under this Purchase

Order. Seller shall carry public and products liability insurance with a $5,000,000 limit. Wherework on-site is included within this Purchase Order, Seller shall also carry Contractors All Risk

Insurance with a $1 million limit. Seller shall furnish evidence of insurance coverage to Buyer

upon request.

Risk of Loss During Shipment. Risk of loss, theft or damage to the goods shall pass from you to

us according to the relevant shipping term (such as CIF or FOB) specified in the Contract. The

parties incorporate herein Incoterms 1990 published by the International Chamber of Commerce.


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intellectual property/proprietary rights

If the purchase may entail the disclosure of the Buyers intellectual property to Seller, the Buyer

may wish to include a clause protecting such intellectual property from misuse or exploitation by

the Seller.

Sample Clauses:

Proprietary Rights refers to Company As materials, ideas and creations forming the basis of its

products and components. Proprietary Rights includes Company As samples, drawings

(mechanical and electrical), designs and lay-outs, product specifications (including all

measurements and dimensions), software (including the source code), all company literature and

its brands.

The Supplier shall use the Proprietary Rights solely for the purpose of supplying products to

Company A. The Supplier shall not use the Proprietary Rights to supply products to anyone but

Company A. Without limiting the generality of the foregoing, and for the avoidance of doubt, the

Supplier shall not use the Proprietary Rights to supply products to any customer or former

customer of Company A. Supplier shall promptly refer all inquiries from such customer or former

customer to Company A.

The Supplier expressly acknowledges Company As ownership of the Proprietary Rights. The

Supplier disclaims any right, title or interest in the Proprietary Rights other than the right to supply

products to Company A.

The Supplier shall at all times respect the Proprietary Rights. The Supplier shall use all

reasonable endeavours to safeguard the Proprietary Rights. The Supplier shall take no action in

derogation of the Proprietary Rights.

Under no circumstance shall the Supplier use the Proprietary Rights in a manner that would be

detrimental to Company As business.

The Supplier shall not use the Proprietary Rights to compete with Company A or to confer a

competitive advantage upon a third party.

The Supplier shall not disclose the Proprietary Rights to Company As competitors, customers or

former customers.

In all other respects, the Supplier shall not use the Proprietary Rights to Company As

competitive disadvantage.

The Supplier shall not modify or adapt the Proprietary Rights to supply products to others. The

Supplier shall not use the Proprietary Rights to supply products to others under a different brand.


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The Supplier shall not use the Proprietary Rights in any other manner that has the effect of

depriving Company A of the exclusive benefits thereof.

The Supplier shall not copy any information comprising the Proprietary Rights unless it first

obtains Company A's written consent. Notwithstanding the foregoing, the Supplier may retain

one archival copy of any materials comprising the Proprietary Rights for purposes of qualityassurance.

Drawings and Specifications. Buyer shall be deemed the copyright owner of all designs,

drawings and specifications (Copyrighted material) furnished to Seller pursuant to this contract.

Seller shall not use the Copyrighted Material except in connection with the performance of this

contract.

Seller shall keep all Copyrighted Material confidential and shall not disclose the same to anyoneelse except as may be necessary in connection with Sellers performance of this contract.

The Seller shall be responsible for protecting the confidentiality of any Copyrighted Material

disclosed to third parties.

Upon completion of this contract, or its termination, Seller return all Copyrighted Material to the

Buyer, if the Buyer so requests, and Seller shall not thereafter infringe upon the Copyrighted

Material.

Seller shall indemnify Buyer against copyright, trademark of patent infringement claims arising

from plant and equipment, or parts thereof, supplied by Seller to meet Buyers specifications but

which was not designed by Buyer.

shipping terms

This clause specifies the relevant shipping terms that will apply to the transaction.

Sample Clauses:

Unless otherwise noted, on a domestic purchase, the purchase price includes all shipping costs

free into store. You bear the risk of loss or damage to the products while in transit. We bear the

risk of loss or damage to the products after their delivery to us. Our shipping terms on a

purchase overseas shall be subject to prior written agreement. You are responsible for

inspecting the products before shipment. You will immediately notify us of any visible defects or

other deficiencies before shipment.


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warranty

Normally, the Seller provides a warranty on the goods. However, there is nothing to prevent the

Buyer from specifying the warranty that it requires from the Seller and inserting that warranty in

the Buyers procurement conditions.

Sample Clauses:

Warranty. Seller warrants: 1) all items ordered shall be free of defect in materials and

workmanship; and 2) all such items shall be built to the specifications of Buyer, when furnished.

This warranty covers both parts and labour. The term of warranty shall be 12 months from

completion of commissioning by Buyer's customer or 18 months from the date of delivery,

whichever occurs first. All warranty repairs shall be made on the site of Buyer's customer.

Absent an express written warranty from Seller that Buyer has accepted, Seller shall supply the

goods described in this Purchase Order subject to the following warranty. Seller warrants: 1) all

items ordered shall be free of defect in materials and workmanship; and 2) such items conform to

the specifications of Buyer, when furnished. This warranty covers both parts and labour. The

term of warranty shall be 12 months from completion of commissioning by Buyer's customer or

18 months from the date of delivery, whichever occurs first. Seller shall make all warranty

repairs on the site of Buyer's customer provided such customer resides in New Zealand. If the

customer resides overseas, Buyer shall arrange the warranty repair as agent for Seller. Buyer

shall charge Seller the reasonable cost of such warranty repair.

variations to order requested by buyer

This clause allows the Buyer to vary its procurement conditions. For example, it may reschedule

the delivery date, add to, or subtract from, the procurement conditions. This clause discusses

the consequences of any such variation.

Finally, it may be important for the Buyer not to permit any variations from the Seller without the

Buyers consent.

Sample Clauses:

At any time before delivery, Buyer may request variations in this Purchase Order. Such request

shall be in writing and include a full and accurate description of the variations. Seller shall advise

Buyer: Whether it can make the variations; when it can make the variations; and whether (and if

so, by how much) the variations will increase or reduce the purchase price. If Buyer accepts

Seller's quotation, as outlined above, the variations shall thereupon become an integral part of

this Purchase Order. Buyer and Seller shall modify the scope of supply, purchase price, delivery

dates and other terms as appropriate. No variations shall be permitted unless both parties agree

to them in writing.


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Seller shall not vary this Purchase Order unless it first obtains Buyers written approval.

scope of supply

In large transactions, a Buyer may seek to specify in greater detail the scope of supply as well as

any exclusions from the scope of supply. The scope of supply might include such criteria as

design specifications, performance specifications, packaging specifications and compliance with

standards. Obviously, theres not room to specify these criteria within the confines of the small

print on the reverse side of a Purchase Order. However, the Buyer may wish to reference such

criteria and attach them to the Purchase Order. So referenced, the Buyer may require the Seller

to comply with them.

Sample Clauses:

This Purchase Order is subject to any design specifications, performance specifications,

packaging specifications and standards that the Buyer may attach hereto. All such attachments

shall be collectively referred to as the Scope of Supply.

All goods shall conform with the Scope of Supply.

The Seller shall expressly note any exclusions to the Scope of Supply before acceptance of this

Purchase Order is deemed to have occurred. Failure to note any such exclusions shall

constitute Sellers acceptance of the Scope of Supply.

payment terms

The Buyer may specify its payment terms in this clause.

Sample Clauses:

Unless otherwise agreed in writing, our payment terms are the twentieth of the month following

the month in which delivery occurs.

testing and inspection of goods

The Buyer may wish to test and inspect the goods on the Sellers premises before shipment. If

so, the clause should specify relevant details concerning the goods to be tested, the test protocol

to be followed and the date of the test.


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Sample Clauses:

The Seller shall fully inspect and test the goods before shipment.

The Buyer also reserves the right to inspect, test and approve the goods before shipment. If the

Buyer wishes to exercise such right, the Buyer shall provide the Seller with reasonable notice

thereof. In such event, the Seller shall not ship the goods until the Buyer so inspects, tests and

approves them.

Subject to any express written agreement concerning the testing and inspection of the goods, the

Buyer may perform such tests and inspections on the goods, and apply such test criteria, as the

Buyer may determine in its sole and absolute discretion.

The Buyers approval of the goods before shipment shall not constitute a waiver of the Buyers

right to reject the goods pursuant to any relevant clause in this Purchase Order or to make

warranty claims in respect to the goods.

assignment and sub-contracting

The Buyer may only wish to buy goods manufactured by the Seller. In that case, the Buyer may

wish to restrict the Sellers right to assign or sub-contract the manufacture of the goods.

Sample Clauses:

Seller shall not assign the whole or any part of this contract without Buyers prior written consent

and then only if the assignee assumes in writing Sellers obligations under this contract.

force majeure

The Buyer may wish to delay a shipment due to circumstances beyond the Buyers control. Aforce majeure clause would specify those circumstances. A force majeure clause is more

common in a Sellers conditions of sale than it is in a Buyers procurement conditions.

Nonetheless, there is no reason why a Buyer should not have a force majeure clause too.


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Sample Clauses:

We shall not be liable for any failure or delay in accepting the products resulting from

circumstances beyond our reasonable control, including, without limitation: Unavoidable delays

in production; delays in the delivery of raw materials; default by sub-contractors; default by

component suppliers; strikes and labour unrest; shipping delays; shortages; war; government

intervention; fire; flood; accident; natural disaster; or any other event commonly referred to as an

"act of God".

mediation/arbitration

This clause really speaks for itself. It specifies a dispute resolution procedure for the parties to

follow. Absent such a clause, the parties would seek redress through the courts.

Sample Clauses:

We shall settle any controversies or disputes with you by arbitration according to the provisions

of the Arbitration Act 1908. The place of arbitration shall be , New Zealand.

verbal instructions

Following placement of an order, the Buyer and Seller will, in all likelihood, engage in verbal

communications with each other. This clause determines the effect of such communications

upon the order.

Sample Clauses:

You shall immediately confirm, in writing, all verbal instructions and orders. We may wait until

you do so before executing your verbal instructions and orders. If we do not wait, we shall

execute your verbal instructions and orders entirely at your risk. In that case, we accept no

responsibility for errors and omissions.

retentions/offsets

Invariably, the Sellers conditions of sale will prohibit the Buyer from claiming an offset against

the purchase price. This may be unfair when the Seller is in breach of the contract. Often, taking

an offset, or threatening to take one, is an effective means of getting the Seller to perform. This

clause would allow the Buyer to exercise a right of offset, or retain money, in certain

circumstances.


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Sample Clauses:

If the Seller commits a default, the Buyer may retain any sums due the Seller until the Seller

cures such default.

The Buyer reserves the right to offset against sums due the Seller the value of any claims that

the Buyer may have against the Seller, or damages that the Buyer has incurred, or is likely to

incur, as a result of the Sellers default.

compliance with law

The Buyer may wish to insert this clause if the goods must comply with certain legal

requirements. Such requirements might include certification from a regulatory authority,

standards and approvals.

Sample Clauses:

The Seller represents and warrants that the goods comply with all relevant laws, ordinances,

regulations and standards.

The Seller, at its cost, shall obtain any required permits, licences, certifications, authorisations or

other regulatory compliances for the goods.

ethical dealing

A Buyer may insert this clause if they wishes to discourage the Seller from engaging in un-ethical

or illegal conduct with the Buyers staff. Such conduct might consist of back-handers, rebates,

gifts and other inducements.

Sample Clauses:

Ethical Dealing. The Seller shall not engage in unethical acts or practices in respect to its

dealings with the Buyer.

The Buyer strictly enforces its policy against unethical business conduct, including without

limitation: Collusive activity; the giving of kick-backs, back-hands, gratuities, bribes or

unearned commissions. Any of the foregoing acts, if committed by the Seller, shall constitute a

material breach of this Purchase Order. In such event, the Seller may pursue its rights and

remedies to the full extent specified in this Purchase Order.


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privacy act

Sometimes, the Seller will include a clause in its conditions of sale stating that the Buyer waives

its rights under the Privacy Act. This allows the Seller to disclose personal information about the

Buyer, including the Buyers credit history. The Buyer may wish to retain the protection of the

Privacy Act and thereby prevent the Seller from disclosing such personal information.

Sample Clauses:

The Buyer reserves all rights to privacy under the Privacy Act 1993. The Buyer shall not be

deemed to have waived any rights or remedies under the Privacy Act 1993 unless the Buyer

signs an express, written waiver to that effect.

The Seller shall not disclose any personal information about the Buyer to a third party in

contravention of the Privacy Act 1993. Without limiting the generality of the foregoing, the Seller

shall not disclose credit information concerning the Buyer to any third party, except with the

Buyers express written consent.

rescheduling delivery dates

Some Buyers need lots of flexibility when it comes to delivery dates. Such Buyers are likely to

include a clause expressly giving them the right to reschedule delivery dates. For other Buyers,this is not particularly important.

Sample Clauses:

The Buyer may cancel this Purchase Order, in whole or in part, or reschedule shipment dates.

The Buyer may do so, without penalty, provided the Buyer gives the Seller at least 30 days

written notice before the shipment date to which such cancellation or rescheduling relates. The

Seller acknowledges that this would give the Seller sufficient time to unwind its commitments

without incurring any cancellation charges or expenses. If the Buyer gives the Seller less than

30 days written notice of cancellation, the Buyer shall reimburse the Seller for its direct materialand labour costs incurred up to the date of cancellation. If the Buyer gives the Seller less than

30 days written notice of rescheduling, the Buyer shall reimburse the Seller for its reasonable

costs and expenses incurred as a result of such rescheduling. The Seller may treat any

rescheduling, or successive rescheduling, that extends the original shipment date by more than

six months as equivalent to an order cancellation.


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other clauses

The clauses mentioned in this checklist certainly do not exhaust the universe of clauses that

might appear in a Buyers procurement conditions. This is your opportunity to add to the list.

Think in terms of what mischief the Seller might engage in and how you can prevent the Seller

from doing so. What recurring problems have you encountered with one or more Sellers? What

types of conduct by Sellers particularly irks you? Specify these issues in the contract.

Prepared by:

Robert Auerbach

P.O. Box 34-555

Birkenhead, Auckland 1330

New Zealand

Tel: +64-9-419-2214

Fax: +64-9-418-3651

E-mail: [email protected]

Website: www.marketnewzealand.com/auerbach

Disclaimer:These checklists are provided for information purposes only and are no

substitute for professional advice, which should be sought prior to

entering into any transaction. New Zealand Trade and Enterprise

(NZTE) has not verified these checklists and makes no representations

as to the completeness, correctness, currency, accuracy or fitness for

purpose of the information, or the person that prepared the information.

Accordingly, NZTE will not be responsible for any damage or loss

suffered by any person arising from the information whether that damage

or loss arises from negligence or otherwise.

Auerbach Procurement

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Transcript of Auerbach Procurement