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1
Contract
Law
Update for the Procurement & Contracting Professional
Ernest
G. Gabbard, J.D., C.P.M., CPCM
2
Contract/Procurement
Law - AGENDA
Essential
Contracting Principles
Contract
Formation
Written
vs. oral contract
Electronic
contracts
Terms and
Conditions
Battle of
the forms
What terms
apply?
Contracts
for Services
Applicable
law(s)
Legal differences
Contract Law
- ISM-FASMG -June 2004
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Essential
Contracting Principles
Uniform Commercial
Code (UCC) :
is not a
code - state legislatures enact a version
is not uniform
- nominal variations by state (except LA)
creates substantial
implied rights
warranties
damages
applies to
purchase/sale of 00oods00/font>
N/A to services
contracts
N/A to software
contracts?
Contractual
and legal rights may be waived if not enforced or reserved
4
Contract
Formation
Written vs.
oral contract
State
laws generally require 00riting00IF:
Sale of
goods over $500.(changing to $5,000);
Promise to
pay debt of another;
Sale of land
or interest therein;
Contracts
not performed within one year;
UCC also
requires 00ignature00for contract formation (UCC 2-201)
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Contract
Formation - UCC
Written vs.
oral contract
UCC 2-201
00riting00
requirement satisfied IF the intent to contract is apparent in communications;
therefore,
exchange of correspondence adequate
however,
writing must be 00igned00by party required to perform
Writing
and signature must be 00angible00/font>
HOWEVER,
UCC revisions are being proposed!
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Contract
Formation - UCC
Written vs.
oral contract
UCC revisions
being proposed(not yet enacted):
00riting00
replaced with 00ecord00 and specific reference to 00lectronic
record00/font>
00ignature00
replaced with 00ign00 which now includes 00lectronic sound, symbol
or process00/font>
new 2-211
provides for legal recognition of contract established by electronic
record.
Valid
contracts may therefore be formed by electronic communications -
what about e-mail?
7
e-Contracts
- New Laws
What NEW
laws also address e-contracts?
Uniform
Computer Information Transactions Act (UCITA)
computer
information only
adopted in
2 states; 1 pending
Uniform
Electronic Transactions Act (UETA)
all 00ransactions00
sale of goods only ?
adopted in
43 states; 2 pending (+ USVI)
Electronic
Signatures in Electronic Commerce Act (E-SIGN)
Federal statute
for interstate & international commerce
applies to
commodities, services, software, etc.
does not
apply to intrastate transactions
Concern remains
with lack of uniformity/consistency
8
e-Contracts
- Challenge
Lack of uniformity
in laws
UCC changes
will take years to enact in all states
What about
purchase of services (not UCC) ?
What about
purchase of software (UCITA) ?
What about
intrastate sales of goods (not ESIGN) ?
No court
interpretations available on new laws
Recommend
Electronic Commerce Agreement until legal requirements are well established
pre-agreement
to contract by electronic media
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Contract
Terms and Conditions
Battle of
the Forms
Purchaser
sends Purchase Order with Terms and Conditions (T&C)
Seller acknowledges
order - disagrees with Purchaser T&C
Whose terms
prevail?
UCC 2-207
governs where no agreement
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Whose
Terms Prevail?
Buyer00
P.O. Contains:
00cceptance
of order. This order is buyer00 offer to seller.
Seller00 acceptance is expressly limited to the terms of the
order and buyer hereby objects to any additional or different
terms in seller00 acceptance. Seller accepts this order as written
by executing and returning to buyer the acceptance or acknowledgement
copy of the order, or by beginning performance.00/font>
Seller00
Acknowledgement Contains:
00eller00
acceptance of this order is expressly made conditional on buyer00
assent to the additional (or different) terms incorporated herein by
seller.00/font>
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Sample
Response
Subject: PO Number
Dear (Seller):
Purchaser
has received Sellers sales form, including terms and conditions which
Seller proposes to apply to our subject purchase order.
This
letter will remind Seller that the referenced order was specifically
limited to the terms and conditions printed on the subject order.
Therefore, terms and conditions submitted by Seller on Seller00 sales
form are hereby rejected.
Whose
Terms Apply?
Seller terms
do NOT apply
Purchaser
terms apply to extent NOT conflicting with Seller terms
In event
of conflict, Purchaser & Seller terms negate each other
UCC provisions
are utilized to fill in any resulting gaps
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Service
Contracts
Legal
distinctions (From commodities)
UCC does not apply:
No clear, uniform law
requires
more documentation
Battle of forms result uncertain
00uyer
favored00clauses not available
no UCC
warranties of merchantability or fitness for purpose
no incidental
or consequential damages
Standard
Purchase Order is generally NOT appropriate for services
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