Legal Concepts Relate to Supply Chains

Transcription

1 Legal Concepts Relate to Supply Chains 745 East Mulberry Avenue Suite 500 San Antonio, Texas (210) (210) David F. Barton ISM San Antonio Board Meeting April 28, 2016

2 Est Gardner Law James F. Gardner FBI and AF JAG Gardner Law (210)

3 Gardner Law Areas of Law Agriculture Law Business Transactions Commercial Litigation Construction Law Corporate Law Employment Law Environmental Law Government Procurement & Compliance Real Estate Law Water Law Gardner Law (210)

4 Topics Covered Today Purchase Orders Key Terms to Include in PO Key UCC Provisions Key Incoterms Carmack Amendment Gardner Law (210)

5 Purchase Orders What Are Purchase Orders Content of PO What s there? Can you read it? What should be there Battle of Terms Do you have a Contract? Gardner Law (210) dbarton@gardnertx.com 5

6 PO What Is It? Gardner Law (210)

7 PO Is a Contract A purchase order (PO) is a commercial document and first official offer issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. Acceptance of a purchase order by a seller forms a contract between the buyer and seller, so no contract exists until the purchase order is accepted. Gardner Law (210) dbarton@gardnertx.com 7

8 1. Offer to sell Content of PO Number of items Type of items Price Delivery date and location 2. Acceptance of Offer signature Gardner Law (210)

9 Content of PO Offer + Acceptance + Consideration ($) = Contract Is that enough? Gardner Law (210) dbarton@gardnertx.com 9

10 What is not stated? What are the terms and conditions of performance? First Line of Defense How can you enforce your rights? What are your rights? Gardner Law (210)

11 Sale of Goods Controlled by Uniform Commercial Code TX. Bus. & Commercial Code Gardner Law (210)

12 Key UCC Provisions Definitions (10) Conspicuous written, displayed, or presented such that a reasonable person ought to have noticed it Gardner Law (210) dbarton@gardnertx.com 12

13 Conspicuous Are the terms Conspicuous? Can you read it? Written, displayed, or presented in a way that a reasonable person ought to have noticed it Headings Font size Fine Print May not be enforceable Gardner Law (210) dbarton@gardnertx.com 13

14 Conspicuous Must be Conspicuous to be enforceable Conspicuousness determined by examination of entire document American Eagle Ins. Co. v. United Tech Corp. 48 F 3d 142 (5 th Cir. 1995) A disclaimer contained in text undistinguishable in typeface, size or color not conspicuous unenforceable Unless buyer had actual knowledge Cate v. Dover Corp, 790 SW 2d 559 (Tex 1990) Gardner Law (210) dbarton@gardnertx.com 14

15 Key UCC Provisions Statute of Frauds Contract for sale of goods > $500 not enforceable unless in writing Signed by party to enforce agreement against Between merchants written confirmation sufficient unless notice of objection to contents within 10 days after received Gardner Law (210) dbarton@gardnertx.com 15

16 Key UCC Provisions Parol Evidence Outside 4- corners of agreement Parties intend the agreement final terms May be explained by course of performance, course of dealing, or usage of trade Gardner Law (210)

17 Key UCC Provisions Implied Warranty Merchantability- Usage of Trade Goods merchantable is implied in contract Unless Excluded Needs to be Conspicuous Merchantable meets contract requirements, fit for ordinary purposes Gardner Law (210)

18 Key UCC Provisions Implied Warranty Fitness for Particular Purpose Seller has reason to know buyer requires goods to meet particular purpose Buyer relying on seller s judgment to select and furnish suitable goods Unless Excluded Needs to be Conspicuous Action for implied warranty for PP Proof of defect not required Seller knew of PP and buyer relied on seller to provide suitable goods Gardner Law (210) dbarton@gardnertx.com 18

19 Key UCC Provisions C.I.F & C.& F. Terms C.I.F. means price includes lump sum cost of goods, insurance and freight C.&F. means price includes cost of goods and freight to named destination Unless otherwise agreed seller turn goods to carrier, get receipt from carrier, obtain insurance cert forward to buyer Gardner Law (210)

20 Key UCC Provisions Statute of Limitation Action for breach must commence within 4 years after cause of action accrued Agreement can reduce period to not less than 1 year Gardner Law (210) dbarton@gardnertx.com 20

21 Key Terms and Conditions to Include in PO Delivery Delays Payment Changes to PO Warranties Goods are defective Remedies Title Transfer Risk of Loss Gardner Law (210)

22 Key Terms and Conditions to Include in PO Indemnification, Defense and Hold Harmless Clause SHOULD BE IN ALL CAPS Indemnify against claim, damage, loss, consequential loss, cost, expense as a result of goods supplied or breach of contract Insurance and Liability Inspection, Testing, Acceptance Quality Std. Gardner Law (210) dbarton@gardnertx.com 22

23 Key Terms and Conditions to Include in PO Force Majeure Intellectual Property Infringement Compliance with Laws and Regulations Gardner Law (210)

24 Key Terms and Conditions to Include in PO Termination and Default Disputes and Governing Law Subcontracting of service Notice Gov t contractor FAR Clauses Which Terms Control Gardner Law (210) dbarton@gardnertx.com 24

25 How do you incorporate all this? Include a statement on PO Attached Terms and Conditions Apply to this PO Provides flexibility and defense Gardner Law (210) dbarton@gardnertx.com 25

26 Battle of Terms Do you have a Contract? Need Meeting of the Minds Contract for the sale of a "mustang", the buyer thinks he will obtain a car and the seller believes he is contracting to sell a horse, there is no meeting of the minds and the contract will likely be held unenforceable. Gardner Law (210) dbarton@gardnertx.com 26

27 Is Counter Offer a Contract? Seller offers to sell 1000 cases bolts, $30 per case Delivery 10 days Buyer counters 1200 bolts, $25 per case Delivery 7 days Gardner Law (210) dbarton@gardnertx.com 27

28 Counter Offer If Seller accepts counter offer 1200 bolts, $25 per case Delivery 7 days Contract complete If Seller rejects No contract and Buyer not entitled to original terms Gardner Law (210) dbarton@gardnertx.com 28

29 INCOTERMS 2010 Set of three-letter standard trade terms most commonly used in international contracts for the sale of goods Provide internationally accepted definitions and rules of interpretation for most common commercial terms Gardner Law (210)

30 INCOTERMS Defines obligations, costs and risks involved in the delivery of goods Gardner Law (210)

31 INCOTERMS by themselves DO NOT: Constitute a contract; Supersede the law governing the contract; Define where title transfers; nor, Address the price payable, currency or credit terms. These items are defined by the express terms in the sales contract and by the governing law. Gardner Law (210) dbarton@gardnertx.com 31

32 INCOTERMS 11 Terms 2 Classes of Terms Mode of transport Terms for Any Transport Mode Terms for Maritime Only How many of you have received instruction on this You can read these, but if your supply chain has an international component you likely have an already established preference The important thing is be aware of who is responsible for what and when Gardner Law (210) dbarton@gardnertx.com 32

33 INCOTERMS Any Transport Mode EXW - EX WORKS (... named place of delivery) The Seller's only responsibility is to make the goods available at the Seller's premises. The Buyer bears full costs and risks of moving the goods from there to destination. FCA - FREE CARRIER (... named place of delivery) The Seller delivers the goods, cleared for export, to the carrier selected by the Buyer. The Seller loads the goods if the carrier pickup is at the Seller's premises. From that point, the Buyer bears the costs and risks of moving the goods to destination. CPT - CARRIAGE PAID TO (... named place of destination) The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage. CIP - CARRIAGE AND INSURANCE PAID TO (... named place of destination) The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage. The Seller, however, purchases the cargo insurance. Gardner Law (210) dbarton@gardnertx.com 33

34 INCOTERMS Any Transport Mode DAT - DELIVERED AT TERMINAL (... named terminal at port or place of destination) The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer's disposal at a named terminal at the named port or place of destination. "Terminal" includes any place, whether covered or not, such as a wharf, warehouse, container yard or road, rail or air cargo terminal. The Seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination. DAP - DELIVERED AT PLACE (... named place of destination) The Seller delivers when the goods are placed at the Buyer's disposal on the arriving means of transport ready for unloading at the names place of destination. The Seller bears all risks involved in bringing the goods to the named place. DDP - DELIVERED DUTY PAID (... named place) The Seller delivers the goods -cleared for import - to the Buyer at destination. The Seller bears all costs and risks of moving the goods to destination, including the payment of Customs duties and taxes. Gardner Law (210) dbarton@gardnertx.com 34

35 INCOTERMS Maritime FAS - FREE ALONGSIDE SHIP (... named port of shipment) The Seller delivers the goods to the origin port. From that point, the Buyer bears all costs and risks of loss or damage. FOB - FREE ON BOARD (... named port of shipment) The Seller delivers the goods on board the ship and clears the goods for export. From that point, the Buyer bears all costs and risks of loss or damage. Gardner Law (210) dbarton@gardnertx.com 35

36 INCOTERMS Maritime CFR - COST AND FREIGHT (... named port of destination) The Seller clears the goods for export and pays the costs of moving the goods to destination. The Buyer bears all risks of loss or damage. CIF - COST INSURANCE AND FREIGHT (... named port of destination) The Seller clears the goods for export and pays the costs of moving the goods to the port of destination. The Buyer bears all risks of loss or damage. The Seller, however, purchases the cargo insurance. Gardner Law (210) dbarton@gardnertx.com 36

37 Carmack Amendment 49 U.S.C et.seq. Imposes absolute liability upon carrier for the value of goods lost or damaged during shipment Narrow exception allows carrier to limit its liability to value established in written agreement between carrier and shipper Carrier must give shipper reasonable opportunity to choose 2 or more levels of coverage Gardner Law (210) dbarton@gardnertx.com 37

38 Unsuspecting Buyer Potential Harm Seller of used equipment NY Buyer in TX Buys $ 500K piece of equipment Seller arranges shipment Buyer asks carrier insured yes Certificate of ins thought $100k coverage Gardner Law (210) dbarton@gardnertx.com 38

39 Unsuspecting Buyer Potential Harm Equipment damaged in shipment Who s responsible? How much insurance is available? Gardner Law (210) dbarton@gardnertx.com 39

40 Unsuspecting Buyer Potential Harm Buyer unaware Seller scheduled shipment through freight broker do not have liability of a motor carrier Carrier had terms limited liability small print on insurance certificate: Small print - Limit Liability - $100,000 for new cargo and $10,000 for used cargo. Bill of Lading - Buyer did not see - failed to identify value of equipment and stated subject to limited liability Gardner Law (210) dbarton@gardnertx.com 40

41 Handle in Future Question liability limits Seek private insurance Question if dealing with broker or carrier so you understand who is the responsible party Gardner Law (210)

42 Conclusion PO Terms and Conditions First Line of Defense Defines performance and obligations Fine Print Probably Not Enforceable Incorporate with reference to attachment Gardner Law (210)

43 Thank You David F. Barton Gardner Law 745 East Mulberry Ave, Suite 500 San Antonio, TX Ph: Gardner Law (210)