Home > business, startups > Grand Rapids’ Businesses: Lessons from a Recent West Michigan Court Case- Read Those Terms and Conditions.

Grand Rapids’ Businesses: Lessons from a Recent West Michigan Court Case- Read Those Terms and Conditions.

Business owner – let’s say you just signed a purchase order and agreed to buy some product for your business.

The product is not what you expected. In fact, its not going to help you in your business at all.

You don’t pay for it.

You get sued.

You take the contract to your lawyer and at the bottom of the contract are the words“Subject to Seller’s Terms and Conditions”.

You can’t be bound by those terms you never even looked at (whatever they are), right?

W-R-O-N-G.

On September 8th a Court of Appeals case was issued stemming from a business dispute initially decided in the Kent County Business Court. The case: Naturipe Foods, LLC v Siegel Egg Company, Inc.

This case involved a business contract dispute.

Naturipe offered to sell Siegel Egg Co. frozen blueberries.

Seigel Egg wrote in under the Offer “Grade A” and crossed out the reference to Georgia Blueberries.

Near the end of the first paragraph of the opinion tells you what you need to know about this case: Below DaCruz’s signature read, “Subject to Seller’s Terms and Conditions.

Plaintiff contracted to deliver 316,800 lbs of frozen Michigan blueberries to Defendant.

Plaintiff delivered two shipments.

The Blueberries delivered were “sub grade A” – so Defendant refused to pay.

So, Plaintiff sued Defendant for breach of contract.

The Trial Court held Defendant was liable, and the parties had a jury trial on damages.

The Jury awarded Plaintiff $723,578.83 – broken down to include costs, interest, and:

$327,644.98 in damages

$201,900.65 in attorney fees (yes – a lawsuit is expensive!)

Defendant appealed. Defendant argued that the Trial Court erred when it held that Plaintiff’s “Terms and Conditions” were incorporated into the parties’ contract.

You can check out some of my prior posts on Terms and Conditions. “TnCs” are important to review closely. They “allocate risk” among the two parties to the contract.

In this case, the Defendant asked the question: Can a business just state in its contract that the contract is “subject to Seller’s Terms and Conditions”?

The Court of Appeals told us a resounding – YES.

Law: Terms and Conditions are Part of the Contract.

The Court of Appeals laid out the law for clearly:

“Where one writing references another instrument for additional contract terms, the two writings should be read together.” Forge v Smith, 458 Mich 198, 207; 580 NW2d 876 (1998). That is, “[i]n a written contract a reference to another writing, if the reference be such as to show that it is made for the purpose of making such writing a part of the contract, is to be taken as a part of it just as though its contents had been repeated in the contract.” Id. at 207 n 21 (citations and quotation marks omitted).

Where additional documents or terms are made part of a contract by reference, the parties are bound by those additional terms even if they have never seen them. (Emphasis added) See Ginsberg v Myers, 215 Mich 148, 150-151; 183 NW 749 (1921). “It is well settled that the failure of a party to obtain an explanation of a contract is ordinary negligence. Accordingly, this estops the party from avoiding the contract on the ground that the party was ignorant of the contract provisions.” Scholz v Montgomery Ward & Co, Inc, 437 Mich 83, 92; 468 NW2d 845 (1991).

Take Away on Terms and Conditions

  1. Read the Terms and Conditions

Enough said.

2. Implement Terms and Conditions

I recommend business clients to always include a Terms and Conditions page that is either attached to the back of their physical Purchase Orders, or is included in their Website and incorporated by reference. The Terms and Conditions will, essentially, allocate risk and liability, on such items like:

  • warranties (what is the provider guaranteeing and what isn’t it?)
  • payment terms (when and how is payment accepted? Late fees?)
  • remedies (what is your recourse in the event the goods aren’t what the buyer expected? Are your damages limited to a refund, or can you get related damages as well? Can attorney fees be covered?
  • Venue – (where can you bring your dispute? An arbitrator? Who pays the fees? Is the location of the arbitration specified?

3. Enforce Terms and Conditions

And of course, its important that a business enforces its terms. I have had clients who have been sued before and forgot of their advantageous language in their terms and conditions. If a business is sued and it waits too long in the litigation before raising its right to arbitration, the court very well might consider the business to have “waived its right” to arbitration. Although, “Waiver of a contractual right to arbitrate is disfavored” by the Courts. Best v Park W Galleries, Inc, No. 305317, 2013 WL 4766678 (Mich Ct App September 5, 2013), app den 495 Mich 979 (2014).

Questions?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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