Many of you use purchase orders. That is, you first present a new customer with a written purchaser order setting forth the schedule of protection, services, and applicable charges. You then ask your customer to sign the purchase order, committing to the order and terms. Then, once the purchase order is signed, you later present your customer—for the first time—with your industry contract (containing a Limitation of Liability Provision, Indemnification Provision, and other key terms and provisions) and insist that your customer sign it before you are to perform any of the work/services on the purchase order. While this can be an efficient way of selling a new job, be very careful — there is a trap and pitfall here.
Make no mistake about it, a signed purchase order may very well be a binding and enforceable contract. Once that purchase order is signed, you may be contractually (legally) bound to perform the work/services identified on that purchase order in accordance with its terms and only its terms (and purchase orders rarely contain all of the essential terms of your industry contract). Even if your new customer is willing to sign, and does later sign, your industry contract, there is a real risk that a court may refuse to enforce the terms of the industry contract because it lacks legal consideration (that is, you already had a pre-existing duty to perform under the terms of the purchase order). Hence, you run the very real risk of losing the protection of the key business-saving provisions in your industry, like the Limitation of Liability Provision and the Indemnification Provision.
Here is my recommendation on how to tighten things up and avoid this trap and pitfall:
If you use a purchase order (which certainly is an efficient way of conducting business), be sure to add language at the end, directly above the signature line, that makes it clear that the purchase order is subject to all of the terms and conditions of your industry contract and will be binding on your company only if 1) the customer signs the purchase order; and 2) signs your industry contract.
Michael J. Revness, Esq., is a founding partner and chairs the security alarm department at Kurtz & Revness, P.C. For questions, comments, or requests for legal service, please call Mr. Revness at (610) 688-2855, or drop an e-mail to michael.revness@kandrlaw.com. This article is for information purposes only and does not constitute, and should not be relied upon as, legal advice.