We recently sat down with Jonathan Lewin, Commercial Director of Simoco Wireless Solutions Pty Ltd.

Simoco Wireless Solutions specialises in building wireless communications networks for sectors where reliability, integrity and clarity are paramount, from utilities to government, public safety to transport.

In this Q&A, Jonathan shares his thoughts on the importance of having an effective set of terms and conditions for use with suppliers.

What are supplier terms and conditions?

Supplier terms and conditions set out the basis on which a business and a supplier to that business will transact with each other. 

While a business will usually have a set of terms and conditions for use with its customers or clients, many businesses do not have their own terms and conditions for use with their suppliers.

Why are they important and what is the advantage of having them?

It is important that a business has its own supplier terms and conditions because a business’ own terms of supply are likely to be more favourable to the business.  This is particularly important for regular or high-value suppliers.  If a business does not have its own supplier terms and conditions:

• the supplier’s terms and conditions (which will typically be more favourable to the supplier) will usually apply; or
• if neither party has any relevant terms, the terms of the agreement between the business and the supplier will need to be determined in other ways (e.g. from correspondence between the parties, general legal principles etc), which can lead to uncertainty, which in turn can lead to costly disputes.

While it may not always be possible for a business to engage a supplier on the business’ own supplier terms, the advantage to the business of having such terms is that:

• it will generally allow these terms to at least be proposed as the basis of engagement with the supplier; and/or
• used as a basis for negotiating better terms of supply from the relevant supplier. 

Sometimes, if a supplier insists on using their own terms and conditions, the business can also use its own supplier terms and conditions as a guide for requesting changes to the supplier’s terms and conditions that may be more favourable to the business.

In your experience, what are the most negotiated terms or concepts in a supplier’s terms and conditions of trade?

In general, I usually find that the most commonly negotiated terms with suppliers are:

• price; and
• the time it will take for the relevant goods or services to be provided. 

After that, other areas of focus are usually concepts relating to when risk in the goods or services passes from the supplier to us, termination rights, indemnities and limitations on liability.

In your experience, what can be some of the worst outcomes for a business if it is not able to use its own supplier terms and conditions or at least negotiate some more favourable terms in the supplier’s terms and conditions?

I have had experiences where a business has either had to:

• pay a supplier for items that were not built to specifications; or
• pay the supplier despite the goods being delivered late (with the flow on effects of late delivery being that the business’ ability to fulfill its own obligations to the end customer was affected). 

Because the supplier’s terms and conditions limited the supplier’s liability for such things, there was limited recourse for the business and as such the business decided to “settle” the matter by paying an agreed amount to the relevant supplier (as it wasn’t worth it for the business to engage in a lengthy dispute resolution process with the supplier).

I have also been involved in a situation where a business ordered goods from a supplier under the supplier’s terms and conditions, where the goods were required for a high-value contract with the end customer.  The supplier delivered some but not all the goods which caused the business to be in breach of its contract with the end customer.  Because of the non-delivery of the goods, the business withheld payment for the goods.  The supplier then made payment claims against the business (notwithstanding the fact that it failed to supply the majority of the goods that were ordered).  The business was then forced into a semi-litigious battle with the supplier which resulted in significant loss and damage to the business.  This may have been mitigated if the business had used its own supplier terms and conditions or a more favourable version of the supplier’s terms and conditions.

Thanks to Jonathan for his time and for sharing these thoughts and tips.

If you are a business that requires wireless communications network solutions, get in touch with the team from Simoco Wireless Solutions (https://www.simocowirelesssolutions.com/).

If you are a business owner and have any questions on the legal aspects of your customer or supplier terms and conditions, or if you require assistance with preparing a set of customer or supplier terms and conditions, please get in touch with one of the Sierra Legal team.