General Motors has announced that Effective July 15, 2013, its general terms and conditions for direct material, customer care & aftersales (CCA) and tooling purchases are changing. The new terms and conditions are part of GM’s implementation of its joint purchasing activities with PSA Peugeot Citroen and will be used for all GM purchases around the world and not only with PSA. GM will begin including the new terms and conditions in its request for quotes beginning on July 15, 2013. Only new contracts from and after July 15, 2013 will utilize these new terms. GM’s existing contracts with suppliers will not be amended to include the new terms.

The new terms contain significant changes. These changes include, but are not limited to, imposition of a greater compliance burden on seller, and expansion of buyer’s right to use a threatened or actual supply disruption as a basis for breach and injunctive relief. Below is a summary of some of the significant changes:

 

  1. Entire Agreement. The new terms expressly reject any terms and conditions proposed by seller, and seller’s acceptance of the contract is limited to the new terms and conditions.
  2. Changes. If changes are made to the original scope of work, buyer and seller will promptly discuss, reasonably and in good faith, any pricing adjustments (up or down) to be made in connection with such changes.
  3. Quality. Seller is now obligated to cause its subcontractors and suppliers to comply in all respects with buyer’s quality requirements.
  4. Non-Conforming Goods. Payment for nonconforming goods will not constitute an acceptance of the goods, limit or impair buyer’s right to assert any legal or equitable remedy, or relieve seller’s responsibility for latent defects.
  5. Ingredients Disclosure. Upon buyer’s request, seller will certify in writing the origin of any ingredients or materials in the goods so that buyer may comply with reporting requirements under applicable law regarding “conflict minerals.”
  6. Termination For Cause. Buyer has added a trigger for termination if seller states its intention not to perform. Thus, the mere declaring of an intention to not perform is a basis for contract termination.
  7. Insurance. Seller will name buyer as an additional insured or beneficiary on all liability policies.
  8. Intellectual Property. Buyer is now granted a nonexclusive license to all of seller’s IP rights in the event of a termination for cause, or any supply disruption.
  9. Intellectual Property Indemnification. In addition to the duty to defend and hold harmless against any actual IP rights violations, seller now has the duty to investigate any claims, and is liable to indemnify for merely alleged claims.
  10. Specific Performance. Seller acknowledges and agrees that money damages will not be sufficient for any threatened or actual breach of contract, and buyer is entitled to temporary, preliminary and permanent injunctive relief in connection with any action to enforce the contract without any requirement of a bond by buyer.
  11. Seller’s Assurance Of Performance. Buyer has the right to demand adequate assurances, and if not responded to within 20 days and to the satisfaction of buyer in its discretion, seller will be deemed in breach of contract.

This article is only a summary of some of the significant changes to GM’s terms and conditions. A seller should consult with its legal team for a full understanding of all the changes. In entering into new contracts with GM, it is critical that a seller is aware of these new terms. To the extent the seller’s bargaining power permits, a seller is well advised to have a strategy to negotiate these new terms prior to entering into any new contracts with GM. Merely relying on GM’s default terms puts the seller in a disadvantaged position if and when a dispute arises.