Customer Agreements should be Cleverly Structured

//Customer Agreements should be Cleverly Structured

A modular approach should be followed.  Each Customer Agreement should be made up of:

  1. one or more Orders (this is defined to include a goods, licence, services or work order); and
  2. Customer Relationship Terms.

All the commercial terms are in the Order and all the general terms are in the Customer Relationship Terms (no commercial or variable terms are in the Customer Relationship Terms).

One or more Orders can then be executed with the customer depending on the goods and services that are to be provided by you.  Each Order contains the commercial terms that are relevant to the goods or services that are to be provided.  An Order can have one or more schedules or annexures that specify, in detail, the goods and services to be provided.

This has numerous benefits:

  • The business people only need to consider the short Order and therefore the Order gets signed faster without getting into a protracted negotiation.
  • The parties can dispense with the general terms necessary for conducting business at the beginning of their working relationship.  This means that the parties needn’t worry about concluding the general terms every time a specific service is required by the customer. In other words, the general terms allow for an ongoing relationship between the parties, which facilitates a productive working relationship.
  • It is not necessary to conclude a further agreement after an Order has been accepted.
  • The commercial terms, which are of most interest, are easy to find.
  • Amendments only have to be made to the Order, reducing the number of mistakes and unauthorised amendments.
  • The other party thinks that the Customer Relationship Terms are not negotiable, thereby reducing the time to sign the agreement.
  • The Customer Relationship Terms do not need to be signed or initialled by the parties – they are incorporated into the Order by reference. It is faster and easier to conclude a Customer Agreement.
  • Flexibility is achieved.  As and when new goods or services are to be provided, the parties need only conclude a new Order.  The parties are able to agree on specific terms that are to apply to specific goods or services in Order.
  • Vendor is able to increase its offerings (and the Customer can procure any goods or services) and still use the same contractual structure.  For example, if a Vendor only provides services and then decides to start offering goods, this is covered in the Customer Relationship Terms.

By |2019-08-22T14:08:35+02:00April 30th, 2010|Categories: Contracts|Tags: , , , |