Sale and supply of goods and/or services — overview

Goods and/or services may be supplied by one party to another on a short term or one off basis, or by way of a long term arrangement. The former are likely to use the standard terms and conditions of one of the parties whereas, when two parties enter into a long term arrangement, it is likely that neither parties' standard terms will be sufficient to deal with all the matters that arise between the parties.

Usually a long form supply agreement will be used to ensure that the agreement between the parties is recorded in full.

Contracts for services will be subject to different considerations.

The agreement will invariably include negotiations concerning:

• price

  The supplier may also want to recoup costs involved in the start-up of the business. The customer will want to minimise the price as much as possible and increase the level of discounts and rebates available

• • inflation

  • third party costs

  • employment and transport costs

  • customer required changes to the product

  • development and improvement costs

• term and termination

• performance levels: the customer will usually want to set performance levels for the supplier using key performance indicators (KPI) and include mechanisms to

  The supplier will want to set the KPIs at reasonable levels, minimise the remedies available to the customer while maximising the potential incentivisation and deal with the effect of a force majeure event on the KPIs

• • remedy any failure by the supplier to reach and maintain the KPIs

  • incentivise the supplier

• volume

• development

• exclusivity

• dispute resolution

All of the above matters will be generally be commercially agreed between the supplier and the customer and the final position will depend on the bargaining power of the parties involved.

Part I of the Supply of Goods and Services Act 1982 (SGSA) implies terms relating to title, description and quality in respect of the goods provided while Part II implies terms to relevant service contracts where a supplier is acting in the course of business relating to the applicable level of care and skill, the time of performance and the price payable. The implied terms under the SGSA may be varied or excluded but any exclusion will be subject to the Unfair Terms in Contracts Act 1977 (UCTA).

As well as the SGSA and UCTA contracts for the supply of services and/or goods and services may be subject to the the Sale of Goods Act 1979, the Competition Act 1998, the Enterprise Act 2002 and relevant EC competition law.

It is assumed, in this overview, that contracts for the supply of goods and/or services will be business to business but they may be business to consumer. In which case, close scrutiny of the terms will be needed to ensure compliance with consumer protection legislation, regardless of whether trading occurs face to face or on-line.