Supply Chain World - Volume 7, Issue 3 - 19

CONTRACTS

ditional terms to a commercial contract,
it does not take out the uncertainty.
Parties to the contract will still likely
argue whether the additional terms
contradict already established terms or
simply clarify or supplement the already
established terms.
It is this uncertainty that leads to
disputes. Again, that uncertainty can be
resolved through litigation, but because
of the uncertainty, predicting success
through litigation is more difficult, making the litigation riskier and generally
more costly. Thus, it is best to understand how the UCC affects contracting
and plan accordingly.
+ Be Proactive - Include the terms
and conditions you want in your
purchase orders and/or invoices.
Limit the other side's acceptance to
the terms offered in your purchase
order or invoice.
+ Read - Read the terms and conditions included in the purchase order
and invoices sent to you. Understand
what is in them and what is not.
+ Speak up - If the terms and conditions offered are unacceptable,
promptly notify the other party in
writing of your rejection of those
terms and conditions.

Terms to Consider
While the UCC provides contract-fillers
when necessary, it also defers to the
parties' express terms in the contract.
Businesses should analyze which terms
and conditions they should incorporate
in their commercial contracts. Below are
a few terms and conditions that businesses should consider.
+ Venue and Jurisdiction - You may
want to include a term selecting the
county and state where any legal
action will take place in the event
a dispute arises. This term gains
more significance in contracts between parties from different states.
Including a venue and jurisdiction
selection of your choice will prevent
the possibility of litigating the dispute in an inconvenient location.
+ Governing Law - Similarly, you likely
want to include a term selecting
the state law that will govern the
contract. Here, you want to select the
state law that you are most familiar
with or is most favorable to you.
+ Attorneys' Fees - Costs are an
important consideration when deciding whether to initiate a lawsuit.
Thus, you may want to shift those
costs to the losing party by includ-

ing a term that entitles the prevailing party in any lawsuit concerning
the contract to its attorneys' fees
and costs. Now, if you are the party
that is more likely to breach the contract, you may not want to include
such a clause. But if you are likely to
perform on the contract, you likely
want this clause, so that there is a
potential to recover the fees spent
enforcing the contract.
+ Limitation of Liability - You may
also want to consider limiting your
liability in the event you do breach
the contract. Limitation of liability
clauses set the maximum exposure
that you will face if you are found
liable for breaching the contract.
Including these clauses caps your
liability and therefore also provides more certainty when you are
facing litigation.
+ Exclusion of Warranties - As stated
above, the UCC attaches warranties
to goods sold by merchants. But
you can expressly waive or disclaim
any warranties, including implied
warranties. Thus, if you do not want
to be bound by the UCC's warranty
provisions, you should specifically
disclaim them.

Conclusion
It is important to understand the terms
and conditions expressly included in
a contract, but equally important to
understand the terms that are added
into the contract by operation of law.
Written offers and written acceptance
can provide certainty by not only
controlling the terms and conditions
expressly included in the contract, but
also limiting the impact the UCC may
have on the contract.
Patrick Kelly is a partner in the Los Angeles office of
Snell & Wilmer. His practice is concentrated on business
and commercial litigation, with an emphasis on contract
disputes and claims relating to corporate, franchise and
partnership disputes. Visit www.swlaw.com for more
information.

VOLUME 7, ISSUE 3 Supply Chain World

19
Supply Chain World - Volume 7, Issue 3

Table of Contents for the Digital Edition of Supply Chain World - Volume 7, Issue 3
