Purchasing goods and services in foreign jurisdictions can be both advantageous and disadvantageous for a potential buyer. Often, the pros of purchasing in a foreign jurisdiction include lower costs, speed of delivery of the goods and/or services and less restrictive terms and conditions. On the other hand, the cons of purchasing in a foreign jurisdiction have the potential to be more extensive. Some of these issues include, but are not limited to, determining the governing law of the contract, communication between the parties, upfront payment for the goods and/or services without mitigating the risk of receiving compliant goods, and culture/language limitations. The key to the purchasing of goods and/or services in foreign jurisdictions is to address the aforementioned issues prior to entering into the agreement, to the extent possible (particularly, structuring a payment schedule that will limit your risk exposure). Addressing these issues can potentially limit confusion with the terms of the agreement at a later date.

To borrow a famous expression, “Nothing great lasts forever”. Although business terms within a contract may remain consistent over time, generally, auto-renew provisions are not recommended for inclusion within a purchasing agreement. Auto-renew provisions extend the duration of an agreement on the same terms and conditions after the expiration of the initial contract period. Overall, the inclusion of an auto-renew provision avoids the need for the parties to renegotiate the terms of the agreement after the expiration of the initial contract period. This provision can be advantageous with respect to agreements that are low risk and do not require re-negotiation at the conclusion of the contract period. However, for those complex or high-risk transactions where pricing and other important terms are subject to change over time, an auto-renew provision is not ideal. Ultimately, before including an auto-renew provision in a purchasing agreement, you should evaluate whether the terms relating to the services, goods or products being procured are subject to change at the conclusion of the contract period. If you decide to include an auto-renew provision, you should ensure that a provision that allows you to terminate without cause is included in the purchasing agreement in case your initial assessment was incorrect.

Form agreements should be reviewed every three (3) to six (6) months to ensure that the terms of the form are consistent with current trends in the market and law. As a general rule, every time you attend your bi-annual dental check up, it should serve as your cue to review your forms. Also, legal and purchasing departments should ensure that revised and updated forms are distributed promptly within their department and identify those outstanding agreements that contain problematic terms and conditions requiring amendment. Remember, form agreements that are updated periodically will allow early identification of problematic provisions and limit the number of executed agreements containing such provisions.

Form agreements provide a uniform template for low risk business transactions. However, a “penny saved” by using forms is not always a penny used in your best interest. Because every transaction is unique, it is imperative to know when the use of a form agreement is appropriate. Generally, form agreements are not appropriate when dealing with specialized or high risk business transactions where generic terms and conditions could be ambiguous or detrimental (i.e., technology, human resource, consulting and long-term master services agreements). If using a form agreement, prior to signing, please read the form for each transaction to determine if the terms and conditions are consistent and/or applicable with the business deal.

Welcome to Procurement Corner, a blog sponsored by The Flowers Counsel Group, LLC, that is designed to provide our clients, procurement managers and those executives in supply chain management with an effective online resource. Our firm encourages you to express your procurement concerns and experiences in this online forum and our attorneys, along with your colleagues in various in sectors and industries, will provide you with guidance and feedback from time-to-time. This is just one of many ways that our firm is “redefining the legal landscape” by using technology to focus on your daily procurement needs.

As usual, if you require any legal assistance, please do not hesitate to contact us. We hope this blog will become part of your daily procurement routine!