Buyer beware

I have had a go at US International Trade Agreements before – poor drafting, poor understanding of legal concepts, litigious, disorganised – but after this week, I feel the need to have another rant.

But so as not to bore you with my exclamations I will fuel that energy into something positive and provide you with a buyer beware list of tricky things to look out for when dealing with US suppliers, especially in their legal agreements. This has all stemmed from a protracted negotiation with a US supplier on behalf of one of my clients who is in the plumbing industry and who had already flown to the US to complete the training component of a licensing arrangement without agreements being signed. And so I give you the…

10 Top Buyer Beware Items when dealing with US International Trade Agreements.

(DISCLAIMER: Please be aware that this is generalising at its best and I acknowledge that not all US suppliers are the same).

1. Check both parties understand the Incoterm being used – US Suppliers may use FOB but mean EXW and you will need to clarify with them that FOB means they pay for things up to the ships rail and not just up to their front door.
2. Check Intellectual Property – ie. that patents, trademarks and other intellectual property that is being licensed to you is protected in Australia and not just in the US. (In our situation this week the supplier refused to indemnify my client if their product breached a third party’s intellectual property in Australia).
3. Check Payment Terms – you need to be sure of currency prices are expressed in, credit terms being offered and whether prices may change and these should be written in the agreement.
4. Check Dispute Resolution Options – US Suppliers will often have a clause that you pay their costs of litigation if you lose and that’s about it. Try to insert an alternative dispute resolution clause in your Agreement.
5. Check Warranties – do the products meet Australian standards? Will the supplier give a manufacturer’s warranty?
6. Check Indemnities – will the supplier indemnify you against claims from third parties arising because of the supplier’s wrongdoing? Suppliers can often want you to indemnify them but not return the favour.
7. Check details of the parties – have they used the correct company details or just used a business name?
8. Check clause numbers – obvious but you would be surprised! Check especially for references to Exhibits or Annexures that don’t actually exist.
9. Check type of agreement – I have seen distribution agreements that refer to agents commission which is legally impossible as the two relationships are distinctly different.
10. Check that you are signing what you agreed to – some suppliers can get cheeky and in the midst of the mess that is “track changes” sneak in amendments that you didn’t know were there.

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Lynda Slavinskis is an outgoing, intuitive and commercially savvy lawyer. She has worked in-house at Sussan Corporation and Tattersall’s and now assists small and medium businesses with import, export, leases, franchising, employment and general business advice as principal solicitor of Lynda Slavinskis Lawyers & Consultants. Lynda is on the Victorian State Government’s Small Business Advisory Council.