LEGAL ASPECTS

OF
PURCHASING CONTRACTS:

Understanding and Negotiating

Leslie S. Marell
Attorney at Law
RENTAL OF ONE HORSE FOR ONE
YEAR FOR THE SUM OF $15,000 BY
CASHIER’S CHECK MADE PAYABLE
TO OWNER AT TIME OF DELIVERY
OF THE HORSE.

OWNER RENTER
___________________ _____________________
August 9, 2006 August 9, 2006
 The ESSENCE of writing
a good contract:

• Clearly define the DEAL…..

• Address real world “WHAT IFS”…

(what could go wrong?)
IF IT’S AS EASY AS THAT…

WHY DOES THE CONTRACT

TAKE SO LONG
TO NEGOTIATE?
THREE MOST CONTENTIOUS
CONTRACT (LEGAL) ISSUES

• DAMAGES

• WARRANTIES

• INDEMNIFICATION
 TWO IMPORTANT
BUSINESS CLAUSES

• TERM AND TERMINATION

• PRICE PROTECTION
 DAMAGES
• What are consequences of late delivery?
* CONSEQUENTIAL DAMAGES

6. What if Renter rents another horse for $20K?

* COMPENSATORY DAMAGES

8. What if R pays $2.5K to expedite delivery?

* INCIDENTAL DAMAGES
 DAMAGES
Compensatory, Consequential, Incidental are
REMEDIES AT LAW
(Buyer’s Automatic Rights)

Only one way for Seller to limit liability:

Seller shall not be liable to Buyer for incidental or

consequential damages. Seller’s maximum liability
will not exceed the price of product.
 WARRANTIES
(PROMISES, PROMISES)

WARRANTY = QUALITY
Promise by Seller about the condition,
quality, characteristics of product/ service.

• Zorro’s lineage
• 2 years old, all its teeth, in good health
• Runs mile “consistently” in less than 2 min
 WARRANTY TIPS
•Be Specific
•Resolve Discrepancies
•Write into the Contract all your:
Requirements, Descriptions, Seller’s
Promises
•REMEMBER:
If it’s not in the Contract,
It’s not part of the deal
 INDEMNIFY:
To Hold Harmless, Reimburse

*IMPORTANT*
Each party is “on its own” if a third
party claims injuries (sues)
……UNLESS:

An INDEMNITY clause is in
the Contract
 TERM AND TERMINATION
Contract law does not give the automatic right
to terminate contract…………….even for a
legitimate business purpose.

*IMPORTANT*
Insert Termination clause into all contracts

Beware: Automatic renewal clause in your

supplier contracts
 PRICE PROTECTION

“Locks in” pricing for long term contracts

Typical Supplier contract states pricing will

be adjusted to “then prevailing rates”

Ties into Term clause