You’re general counsel of Widgetco, the world’s leading supplier of widgets. When anyone needs widgets, they come to you!
But you’re also a big buyer of widgets. The primary raw material for widgets is … widgets!
You have one contract template for selling widgets and another for buying widgets. How do they differ? Bear in mind we’re not talking about, say, computer equipment—just widgets.
3 thoughts on “The Difference Between Selling Widgets and Buying Widgets”
Are you asking what is legally necessary to distinguish them, or simply what choices a person might make to tilt the ice towards WidgetCo given its leverage in the market?
If legally necessary, I think both contracts could be substantially identical (though this also feels like a trick question, leading me into a trap!).
If trying to make each contract favourable to WidgetCo, there are probably a ton of things I haven’t thought of, but a few are:
– better trade credit for WidgetCo than its customers get, especially with respect to payment timing, to help ensure that WidgetCo has time to receive payment from its customers before having to pay its suppliers
– retention of title and registrable security interest for unpaid widgets in the sale contract but not in the purchase contract
– statements of fact as to quality of widgets and application of implied warranties in purchase contract, and a waiver of all warranties in sale contract
– requirement for manufacturer in purchase contract to extend warranty to end-users and indemnify WidgetCo from consumer claims
– favourable timing for passing of risk in widgets (e.g. Risk passes on actual delivery in the purchase contract, and passes when widgets are transferred to the carrier for delivery on the sale contract)
Thanks. I had in mind the different negotiating positions involved.
I assumed that you were trying to get at the common practice among commercial transaction lawyers to have at least 2 precedents for the same transaction (depending on whether they are acting for purchaser or vendor). I don’t do that but start from 1 precedent and include all choices that I might make in that one document. However, from your response to 1 comment I guess that is not what you were getting at.
The thing I sometimes find myself reminding clients (especially since all purchases involve something more complicated than a widget and particularly so where the bulk of the value is in goodwill or other intangibles) is that the purchaser tends to be much more interested in the actual wording of the agreement. This is because there are always various aspects of the widget that matter to the purchaser (description, quality, fitness for purpose, after purchase warranties, etc.) that the purchaser relies on the wording of the agreement to get assurance/protection. Conversely, the Vendor is typically less interested the specific drafting (other than for sections that might attach significant liability for the vendor which are usually easy to spot) and more interested in the mechanics of how they get paid (also typically easy to spot). Probably, most purchases terms are cash on delivery (not financed) so the payment provisions in a contract tend to be pretty straight forward compared to the provisions the purchaser is interested in. The purchaser has to consider whether all relevant protections are there (what is missing is potentially more important than what is already included) whereas the vendor just has to read what the purchaser proposes and decide if the vendor can live with the requested protections. Obviously, this is a huge over generalization of the difference between being a vendor and a purchaser. However, unsophisticated purchasing clients can sometimes be bamboozled by a vendor into thinking that little attention needs to be paid to the contract because the vendor appears to be paying little attention to the details of the contract. Explaining it this way can sometimes get a purchasing client to recognize the client’s greater susceptibility to a poor contract and get them more engaged in thinking about the contract details.