Taking Orders: Business Risks in Orders for Service

Apr 19, 2016

Companies want orders for their products and services. But, there can be risks involved when taking written orders. Prudent companies that provide products and services to their customer’s will have a master agreement in place that includes all of the pertinent legal terms and conditions. These agreements are usually drafted, reviewed, and negotiated with he assistance of legal counsel. However, unwary companies may be accepting orders from customers where there is a master agreement in place, but the order happens to bypass the master terms. One particular scenario that can easily occur is where the order makes no reference to the master agreement. This can create major risks because the parties could be effectively working outside of the master agreement terms.

Orders should be treated like any other commercial contract. If a company does not want to pay for a legal review of an order, then it should at least be diligent enough to ensure that no legal terms are contained in the order. Another scenario that can create risks is where an order contains language that directly conflicts with the master terms, or even worse, supersedes the master terms completely. 

Here is a list of the essential items that should be included in an order:

  1. Reference to the master agreement (include the agreement name and effective date);
  2. The legal name and contact number of each party;
  3. The start and end dates for services;
  4. The name, description, and price of each product or service;
  5. Delivery locations for products (or where services will be performed); and
  6. Payment terms (such as net 30).

Conflicts between orders and a master agreement can be avoided by including the right clauses into a master agreement that will address how orders are treated. These clauses should be tailored to the particular business needs and the types of orders it would receive. 

Consulting an attorney to review a master agreement can be helpful to ensure that conflicts with order are avoided. In addition, order reviews can be quick and cost effective, especially if onerous terms are detected and revised before additional liability is created upon executing the order.