Dealings between a constructor and a material or equipment supplier can be tricky. A multitude of documents go back and forth. Each contains its own terms, sometimes conflicting with others. But, there is agreement regarding price, quantity and delivery terms. The product is purchased and incorporated into the project. What happens, however, if there is a problem or dispute? At what point is a binding agreement formed? Which terms and conditions govern the transaction?

In a recent Texas case, a subcontractor’s purchase order included precise specifications for the material it was buying. The supplier responded “per your [purchase order].” The material didn’t comply with the specifications. The supplier said it never agreed to the specifications. Under industry custom, contended the supplier, acknowledgment of a purchase order establishes price and quantity, but does not acquiesce to the terms and conditions of that purchase order.

Other cases this week addressed an arbitration clause and the ability to introduce evidence of settlement negotiations. The use of the word “may” rather than “shall” rendered arbitration voluntary instead of mandatory. And, when a prime contractor raised a “pay-when-paid” clause as a defense to subcontractor claims, the sub could testify about a settlement the prime negotiated and received from the project owner.