General Terms and Conditions, frequently referred to as “Boilerplate,” defines how the Client and Consultant will relate to each other in a business relationship without regard to a specific project. The following is a critical “Boilerplate” item that if not clearly and equitably stated will likely result in misunderstandings and confrontational situations:
Purchase Orders – If the Client intends to use Purchase Orders to manage its procurement process, this needs to be addressed in the contract. The main problem for the Consultant with Purchase Orders is that they almost always contain a very broad Warranty section in the pre-printed terms and conditions. The following is typical of Warranty provisions found in Purchase Orders:
“Supplier warrants that for a period of two years after the delivery of or performance of the Items, the Items will (a) be of merchantable quality; (b) be fit for the Company’s specified purposes; (c) be of high quality, and be free from defects in material and workmanship; (d) comply with the most stringent of Company’s or Supplier’s specifications, performance guarantees, and requirements; and (e) comply with all nationally recognized codes and established industry standards.”.
Acceptance of the Warranty provisions of a Purchase Order can nullify the beneficial Standard of Care language that is so important in contracts for professional design services. While requiring that the Consultant carry professional liability insurance, clients are frequently unaware that the Warranty provision of a Purchase Order effectively nullifies the professional liability insurance, which only covers the negligent acts of the Consultant. Further, Purchase Orders almost always contain very broad indemnification requirements, which also may not be insurable.
It is essential that a contract for professional design services clearly state that the pre-printed terms and conditions of a Purchase Order do not apply to the contract.