On Terms & Conditions – Watch Out!!

During a discussion with one of our customers yesterday, they broached the subject of the Terms & Conditions one of their suppliers imposed and of which they had not been aware.

The issue arose because they had approached another supplier in the same industry with a view to appointing them.  The potential new supplier advised them that there is a “secret clause” in the agreement between our customer and their current supplier and that no-one knew about it.

We then proceeded to review the Agreement and Terms & Conditions attached to it.  You know the Terms and Conditions that are in miniscule type on the back of the various documents from the suppliers that you generally get?

On review of these we found the following clauses (and I have not detailed the company – yet):

Term – subject to [where the supplier terminates on 30 days notice], the Agreement is for a term from Commencement until Expiry, or, if unspecified [which it always is], for a term of 5 years from execution. [Supplier] will renew the term for a further 60 months on the same conditions (including automatic renewal) (at [supplier’s] option), unless by written notice: (i) Customer advises [supplier] not more than 120 days but not less than 60 days before the end of the Term, that it does not intend to renew the Agreement…

Services – During the term, [supplier] will provide Services in accordance with this Agreement…and  Customer agrees to obtain all [services] exclusively from [supplier] except to the extent that a pre existing service agreement is in place. The Customer agrees that on the expiry of the pre existing agreement it will use [supplier] exclusively.

Now, I don’t know about you, but I would have thought that a supply agreement that effectively signs you up to rolling five year engagements with termination only possible in a three month window in a very specified time frame should be discussed with the supplier. In this instance, our customer assures us it wasn’t.

Does this constitute unconscionable conduct? Would an ethical and moral business seek to engage and lock in customers without disclosing this requirement and obligation?

I know our customer is furious. They are going to fight this as they were never made aware of it on commencement and would not have engaged with the supplier on these terms.

My question above however remains: Would an ethical business operate under processes like this?

If you would like to know who the supplier is, send me an email…

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