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Whitepaper warns distributors of potential pitfalls in contracts, supply agreements

The National Association of Electrical Distributors (NAED) has released “Terms & Conditions: Reading the Fine Print,” a whitepaper focused on the complicated wording often found in contracts and supply agreements.

The whitepaper, available on the NAED Learning Center, is aimed at helping distributors protect themselves and their businesses from the consequences that can come with signing a contract that you don’t understand.

“Some of our members have learned the hard way that what look like typical order forms are in fact over-burdensome liability agreements,” said NAED President and CEO Tom Naber. “We initiated Terms & Conditions to help businesses in our industry better protect themselves by understanding the legal implications of the contracts they sign and the ways to negotiate more effectively.”

The NAED Education & Research Foundation’s Channel Advantage Partnership commissioned the research project. Attorney and industry analyst Bernie Heinze, president and CEO of the Heinze Group L.L.C., conducted the research.

In the whitepaper, Heinze covers:

  • Warranties and remedies, including clauses that hold distributors liable for defective-product costs, lost labor and profits, as well as attorney fees and contractor, project owner and employee injuries; 
  • The battle of the forms, which can come into play when conflicting terms and conditions are added to purchase orders, invoices and supply agreements at different stages of the sale;
  • Pay-if-paid/pay-when-paid clauses, in which distributors agree to collect payment if or when an electrical contractor is paid;
  • Extended warranty, in which the parties agree to enact the warranty period once the project is “substantially completed,” and other topics. 

“The best contracts are honestly negotiated – as opposed to being unilateral demands imposed by one upon the other without understanding and due consideration,” Heinze wrote in the whitepaper. “This project demonstrates that the rules of engagement have changed as distributors described the difficult circumstances they face just to get an order.”

In addition to the whitepaper, Heinze is conducting three upcoming webinars, the first of which takes place on June 12 at 2 p.m. Eastern. To register or see the first two sessions, visit naed.org.

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