What’s in the Fine Print and Why: P.O. Terms and Conditions Michael Bevis, CPPO, C.P.M., PMP Presented at the Spring 2008 VGAP Conference Richmond, Virginia

First Things First This presentation is not meant to provide legal advice and you are strongly advised to seek competent council before changing any legal documents. The Purchase Order used for this is the result of a comparison of several of the Purchase Orders in use by jurisdictions throughout the country, as modified for the City of Naperville, Illinois. The Purchase Order used for this is a purchase order for the purchase of goods, it is not intended for use for construction/work or for the purchase of services. Each of these areas requires specific documents to protect the buyer. The Training Manual.

The Heading The following General Terms and Conditions shall apply to all purchases by or on behalf of the City of Naperville unless specifically provided otherwise on the front of this document:

The Heading The following General Terms and Conditions shall apply to all purchases by or on behalf of the City of Naperville unless specifically provided otherwise on the front of this document: This introductory statement establishes the applicability of the Terms and Conditions. It also establishes the “order of precedence” as it relates to the terms stated on the front of the Purchase Order. These terms and conditions apply to all purchases made with a Purchase Order. Special care should be taken to insure that vendors that provide oral or written quotes are aware of these terms because they will apply to the resulting order. To change of modify these Terms and Conditions in any way, or to accept a vendor Terms and Conditions you must do two things: Get prior approval from Purchasing, upon review purchasing may determine that we also need a legal review; and, Be sure that any changes are clearly described in the body of the Purchase Order, i.e. on the front side. Please bear in mind that these terms and conditions are standard terms and are used, in various forms, across the country. Any vendor should be familiar with them and should accept them. If a vendor has a problem with these Terms and Conditions there may be reason to re-evaluate their ability to perform.

Tax Exemption The [Jurisdiction Name] is tax exempt, ID # E

Tax Exemption The [Jurisdiction Name] is tax exempt, ID # E The [Jurisdiction Name] is Exempt from State of [BLANK] Sales Tax by virtue of Exemption Certificate No. [NUMBER]. [STATE] Retailers’ Occupation Tax, Use Tax, and Municipal Retailer’s Occupation Tax do not apply to materials purchased by the [Jurisdiction Name]. Vendors must not charge for any of these taxes, if we are billed for them we will short pay the invoice.

Acceptance of Contract This order is the City’s offer to purchase the goods and/or services described on the reverse side from the Vendor. The City’s placement of this order is expressly conditioned upon Vendor’s acceptance of all the terms and conditions of purchase contained on or attached to this purchase order.

Acceptance of Contract This order is the City’s offer to purchase the goods and/or services described on the reverse side from the Vendor. The City’s placement of this order is expressly conditioned upon Vendor’s acceptance of all the terms and conditions of purchase contained on or attached to this purchase order. This provision establishes that the Purchase Order is an “offer” and that by fulfilling the order the vendor “accepts” the Purchase Order and all of its terms and conditions. This provision effectively establishes that it is the [JURISDICTION NAME] Terms and Conditions and not the vendor’s terms and conditions that control the performance of the contract.

Amendments No agreement or understanding to modify this contract shall be binding upon the City unless in writing and signed by the City’s authorized agent. All specifications, drawings, and data submitted to the Vendor with this order are hereby incorporated and made a part hereof.

Amendments No agreement or understanding to modify this contract shall be binding upon the City unless in writing and signed by the City’s authorized agent. All specifications, drawings, and data submitted to the Vendor with this order are hereby incorporated and made a part hereof. This provision establishes that there is a clearly defined process for the modification of a Purchase Order. Any attempt to modify a Purchase Order without prior written approval of the [Jurisdiction’s Name] authorized agent is invalid. In Naperville, there are only two possible authorized agents, the City Manager and, for purchases under $25,000.00, the Purchasing Manager. This provision also incorporates drawings and specifications into the contract created by the vendor’s acceptance of the Purchase Order.

Uniform Commercial Code All applicable portions of the [JURISDICTION/STATE] Uniform Commercial Code shall govern contracts with the [JURISDICTION NAME].

Uniform Commercial Code All applicable portions of the [JURISDICTION/STATE] Uniform Commercial Code shall govern contracts with the [JURISDICTION NAME]. In order to ensure that there is no conflict as to which laws apply to the sale of goods to the City, especially since a vendor may be from out of state, this provision requires that the [YOUR STATE] Uniform Commercial Code shall govern the agreement. The [YOUR STATE] Uniform Commercial Code governs the offer, acceptance and other terms of the agreement between the City and the vendor which are not specifically set forth in the agreement. See also Laws Governing page 13.

Delivery All prices must be F.O.B. destination, freight prepaid. Time is of the essence on this contract. If completed deliveries are not made at the time agreed, the City reserves the right to cancel or purchase elsewhere and hold vendor accountable. If delivery dates cannot be met, Vendor agrees to advise the City, in writing of the earliest possible shipping date for acceptance by the City.

Delivery All prices must be F.O.B. destination, freight prepaid. Time is of the essence on this contract. If completed deliveries are not made at the time agreed, the City reserves the right to cancel or purchase elsewhere and hold vendor accountable. If delivery dates cannot be met, Vendor agrees to advise the City, in writing of the earliest possible shipping date for acceptance by the City. F.O.B. destination means that the vendor is responsible for arranging shipping, paying for shipping and for any damage that may occur in transit. We also put in language that makes “time of the essence”, meaning that if the vendor is unreasonably late we can cancel the order and seek alternate performance. It also defines the vendor’s responsibilities as they relate to notice and our right to accept, or decline, changes in the delivery date.

Risk of Loss Regardless of F.O.B. point, Vendor agrees to bear all risk of loss, injury, or destruction of goods and materials ordered herein which may for any reason occur prior to acceptance by City. No such loss, injury or destruction shall release Vendor from any obligations hereunder.

Risk of Loss Regardless of F.O.B. point, Vendor agrees to bear all risk of loss, injury, or destruction of goods and materials ordered herein which may for any reason occur prior to acceptance by City. No such loss, injury or destruction shall release Vendor from any obligations hereunder. This provision defines the contract’s delivery requirements. It makes clear that the vendor is responsible for the costs of shipping and for the items purchased. This responsibility does not end until the goods are delivered and accepted. If something happens in shipment, it is the vendor’s responsibility, not ours.

Inspection Goods and materials must be properly packaged. Damaged goods and materials will not be accepted, or if the damage is not readily apparent at the time of delivery, the goods shall be returned at no cost to the City. The City reserves the right to inspect the goods at a reasonable time subsequent to delivery where circumstances or conditions prevent effective inspection of the goods at the time of delivery

Inspection Goods and materials must be properly packaged. Damaged goods and materials will not be accepted, or if the damage is not readily apparent at the time of delivery, the goods shall be returned at no cost to the City. The City reserves the right to inspect the goods at a reasonable time subsequent to delivery where circumstances or conditions prevent effective inspection of the goods at the time of delivery This provision defines our right to inspect goods and makes clear that there may be times when inspection cannot occur at the time of delivery. Through this provision we reserve the right to inspect and reject deliveries after they have been delivered. It also and describes the situations where we may exercise that right.

Patents and Copyrights If an article sold and delivered to the City hereunder shall be protected by any applicable patent or copyright, the Vendor agrees to indemnify and save harmless the City, from and against any and all suits, claims, judgments, and costs instituted or recovered against it by any person whomsoever on account of the use or sale of such articles by the City in violation or right under such patent or copyright.

Patents and Copyrights If an article sold and delivered to the City hereunder shall be protected by any applicable patent or copyright, the Vendor agrees to indemnify and save harmless the City, from and against any and all suits, claims, judgments, and costs instituted or recovered against it by any person whomsoever on account of the use or sale of such articles by the City in violation or right under such patent or copyright. This provision protects the City from suits and other claims for violating patent or copyright protections by using certain goods or services. It further establishes that if we violate such protections and are found liable, the vendor will indemnify us for any damages.

Non-Waiver of Rights No failure of either party to exercise any power given to it hereunder or to insist upon strict compliance by the other party with its obligations hereunder, and no custom or practice of the parties at variance with the terms hereof, nor any payment under this agreement shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof.

Non-Waiver of Rights No failure of either party to exercise any power given to it hereunder or to insist upon strict compliance by the other party with its obligations hereunder, and no custom or practice of the parties at variance with the terms hereof, nor any payment under this agreement shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof. The “you can’t keep getting away with that!” clause.

Material Safety Data Sheets: (MSDS) Proper Material Safety Data Sheets, in compliance with OSHA’s Hazard Communication Standard, must be provided by the Vendor to the City at the time of purchase.

Material Safety Data Sheets: (MSDS) Proper Material Safety Data Sheets, in compliance with OSHA’s Hazard Communication Standard, must be provided by the Vendor to the City at the time of purchase. This provision makes clear that the applicable MSDS must be provided at the time of purchase and that they may not be waived under any of the OSHA requirements.

Compliance with Laws The Vendor certifies that in performing this contract they will comply with all applicable provisions of the federal, state and local laws, regulations, rules and orders.

Compliance with Laws The Vendor certifies that in performing this contract they will comply with all applicable provisions of the federal, state and local laws, regulations, rules and orders. This provision ensures that a vendor will comply with any applicable laws to the agreement that are not specifically set forth in the agreement. In other words, it places the responsibility to comply with applicable laws squarely on the vendor and not the City.

Laws Governing This contract shall be governed by and construed according to the laws of the State of [JURISDICTION]. Venue for any action related to this agreement shall be in the [JURISDICTION].

Laws Governing This contract shall be governed by and construed according to the laws of the State of [JURISDICTION]. Venue for any action related to this agreement shall be in the [JURISDICTION]. Similar to the [STATE] Uniform Commercial Code provision, this provision requires that the laws of the State of Illinois shall govern the agreement, which is important considering that many vendors may be from out of state and would want to see that particular state’s laws govern. Also contained in this provision is a requirement that any action under the agreement be brought in [FILL IN] County. This protects the City from having to defend or bring an action where a vendor’s business may reside. See also U.C.C., page 5.

Prevailing Wage It shall be the responsibility of the Vendor to comply, when applicable, with the Illinois Prevailing Wage Act 820 ILCS 130/01 et seq. It shall be the responsibility of the Vendor to monitor the prevailing wage rates as established by the Illinois Department of Labor for any increase in rates during the project and adjust wage rates accordingly.

Prevailing Wage It shall be the responsibility of the Vendor to comply, when applicable, with the Illinois Prevailing Wage Act 820 ILCS 130/01 et seq. It shall be the responsibility of the Vendor to monitor the prevailing wage rates as established by the Illinois Department of Labor for any increase in rates during the project and adjust wage rates accordingly. This provision ensures that a vendor will comply with the Illinois Prevailing Wage Act. It places the responsibility to comply with the Act squarely on the vendor and not the City. Not all vendors must comply with the Act, however. The Act only applies to contractors who perform work on public works projects for the City, such as building construction. It does not apply to vendors who supply goods. It is not likely that this provision will apply to this type of agreement. If the Act applies, compliance is mandatory and the City is required to make a contractor aware of the Act. That is why this provision is placed in the Agreement.

Payment All invoices shall be addressed to Accounts Payable, [NAME AND ADDRESS], as indicated on the front of this purchase order and must include vendor’s name and phone number, and clearly list quantities, item descriptions and units of measure.

Payment All invoices shall be addressed to Accounts Payable, [NAME AND ADDRESS], as indicated on the front of this purchase order and must include vendor’s name and phone number, and clearly list quantities, item descriptions and units of measure. This provision describes our accounts payable requirements. If an invoice does not meet these requirements it is not a valid invoice and the 2% 10/net 30, time calculation does not start. It is the vendors responsibility to meet these requirements. Refer to “Payment Terms”.

Warranty The Vendor warrants to the City that all goods and services furnished hereunder will conform in all respects to the terms of this order, including any drawings, specifications or standards incorporated herein, and/or defects in materials, workmanship, and free from such defects in design. In addition, Vendor warrants the goods and services are suitable for and will perform in accordance with the purposes for which they were intended.

Warranty The Vendor warrants to the City that all goods and services furnished hereunder will conform in all respects to the terms of this order, including any drawings, specifications or standards incorporated herein, and there are no defects in materials, workmanship, and/or design. In addition, Vendor warrants the goods and services are suitable for and will perform in accordance with the purposes for which they were intended. This provision establishes the warrantees that many vendors seek to eliminate through the “battle of the forms.” It re- establishes those warrantees that vendors often seek to eliminate through disclaimers.

Non-Discrimination The Vendor shall comply with the Illinois Human Rights Act, 775 ILCS 5/ et seq. (2000), as amended and any rules and regulations promulgated in accordance therewith, including, but not limited to the Equal Employment Opportunity Clause, 5 Ill. Admin. Code § 750 Appendix A. The Vendor shall also comply with the Public Works Employment Discrimination Act, 775 ILCS 10/0.01 et seq. (2000), as amended. It shall also be an unlawful employment practice for the Vendor (1) to fail or refuse to hire or to discharge any individual or otherwise to discriminate against any individual with respect to their compensation, or the terms, conditions, or privileges of their employment, because of such individual’s race, color, religion, sex, age, handicap or national origin; or (2) to limit, segregate, or classify their employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect their status as an employee, because of such individual’s race, color, religion, sex, age, handicap or national origin. Vendor shall comply with The Civil Rights Act of 1964, 42 U.S.C. sec et seq. (2000), as amended.

Non-Discrimination The Vendor shall comply with the Illinois Human Rights Act, 775 ILCS 5/ et seq. (2000), as amended and any rules and regulations promulgated in accordance therewith, including, but not limited to the Equal Employment Opportunity Clause, 5 Ill. Admin. Code § 750 Appendix A. The Vendor shall also comply with the Public Works Employment Discrimination Act, 775 ILCS 10/0.01 et seq. (2000), as amended. It shall also be an unlawful employment practice for the Vendor (1) to fail or refuse to hire or to discharge any individual or otherwise to discriminate against any individual with respect to their compensation, or the terms, conditions, or privileges of their employment, because of such individual’s race, color, religion, sex, age, handicap or national origin; or (2) to limit, segregate, or classify their employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect their status as an employee, because of such individual’s race, color, religion, sex, age, handicap or national origin. Vendor shall comply with The Civil Rights Act of 1964, 42 U.S.C. sec et seq. (2000), as amended. The Illinois Human Rights Act and the Civil Rights Act of 1964 apply to vendors, with limited exceptions, and it is good practice of the City to let vendors know of the applicability of these acts to vendors. In fact, the provisions of the Illinois Human Rights Acts automatically become a part of every contract entered into by the City pursuant to state law. 775 ILCS 10/2. Compliance rests solely with the vendor.

What’s in the Fine Print and Why: P.O. Terms and Conditions Michael Bevis, CPPO, C.P.M., PMP