by Fred Abramson on July 12, 2010
A good supplier agreement is to designed to keep you out of court. It can also help you win a lawsuit if there is a dispute. If you have an ongoing relationship with a supplier, a well-drafted agreement is crucial. One especially thorny issue is creating a way to easily end a contract. If you have an arrangement with a supplier, there is normally an umbrella agreement which is succeeded by purchase orders.
Here is what you need to know when drafting an umbrella agreement:
- Gauge the volume and frequency of the supplies you will require. You should specifically identify the goods that are to be delivered. You should also leave room for anticipated problems, such as a downturn in the economy which could limit your ability to purchase goods.
- Is the contract exclusive or non-exclusive? Suppliers usually favor exclusive agreements.
- Negotiate a termination clause.
- Negotiate a way to limit liability. If you are supplying goods like food, you don’t want to be held liable for damages for lost profits if you fail to make a delivery on time.
- Term of the agreement. You should be wary of entering into an agreement for over 3 years. Who knows what your business will look like a decade later?
- Confidentiality. You probably don’t want your competitors to know the terms of your agreement. Any information gleaned from a supplier agreement can be used for competitive advantage.
PURCHASE ORDERS
- Identify each order and state that it is subject to the umbrella contract.
- Create a purchase order that you can re-use. It is best to leave time and quantity blank.
- Date the purchase order.
Be aware that problems with supplier agreements is a major source of litigation. I recently litigated a case between a supplier and a franchisee which was a result of a poorly drafted umbrella agreement that cost the franchisee $250,000.00.
If you questions regarding supplier agreements, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.
by Fred Abramson on April 29, 2010
I have written extensively about the potential problems employers can have by misclassifying their workers as employees. The IRS has been cracking down on companies that try to pass off regular employees as independent contractors. It now may become a crime.
Congress is about to act on a bill entitled the Employee Misclassification Prevention Act that would impose criminal penalties on companies that misclassify workers. It appears that both the House and Senate is behind the bill, so it is likely to become law.
If this new law is passed, it would impose finds of $5,000.00 for each worker that is misclassified as an independent contractor. According to the American Bar Association Journal, the new law would also require employers to provide new hires with notice concerning their rights
There is an excellent and lengthy article on the subject by the large law firm Pepper Hamilton, LLP.
The new law is a natural progression of the Obama administration focus on cracking down on employers who improperly classify employees as independent contractors.
I would suggest that companies review all of their employment classifications to avoid potential criminal liability. You may be able to minimize the risk to your company by:
- Wholesale review of all of your workers.
- Restructuring the relationship that you have with your independent contractors that fall within a gray area of the law by re-classifying them as employees. I would suggest that you should err on the side of caution and classify your workers as employees if you are not sure.
- Draft written agreements with all of your workers stating their employment status.
- If you want to limit the workers that you classify as employees, you may have a third-party such as a staffing agency performing the hiring.
If you have any questions regarding independent contractor agreements or classification of employees, contact me at the Law Office of Frederic R. Abramson at 212-233-0666.
