02 - Order Confirmation

What has to be considered, when confirming the order? Even after extensive negotiations with contractors, and suppliers, all larger companies order services, via their own order system, with the request, to confirm the content of this order, by means of an order confirmation. However, it is very often the case that the text in the purchase order, does not fully reflect the results of the negotiations. The following typical deviations can be found regularly, without the customer specifically pointing out such changes:

• Additional or changed content in the commercial terms.
• References to systems that have not yet been addressed.
• Insufficient reference to contract documents (e.g. email from 03/15).
• Incorrect or incomplete summary of the agreement.
• Wrong prices or dates.
• Changed delivery conditions.

How should one deal with these deviations? Absolute caution is required here. At the moment, when the contractor returns this order signed, without a comment, a valid contract has been concluded, in which the contractor has accepted the changes.

An attentive contractor will of course recognize these deviations, and adjust the order confirmation accordingly, before signing it. But what happened now? The changes in the order confirmation, are nothing more than a counter offer to the customer. In such cases, the buyer should confirm this changed order confirmation, in order to achieve a defined contract conclusion. A contract is concluded, when one party submits an offer that the other party accepts, without comments or requests for changes. The problem often arises in such situations that the exact date, when a contract was concluded, can only be determined through interpretation, so that the further dates of the contract, that depend on this date, are not initially clearly defined.

Very often, the reference to the general terms and conditions (GTC), forms the basis of such dispute. Every party insists on the applicability of their own GTCs. It is recommended, to repeat this theoretical ping-pong game, over and over again, so that the reference to the own terms and conditions, is always up to date. In the Anglo-American legal system, this is a recognized procedure: the one, who last used his terms and conditions as the basis for the contract, whose terms and conditions shall apply. In the German legal system, however, this is not always the case, so that a judge may come to a different decision.

Let us look at the typical order process with the question, whether a binding contract may have been concluded, at different stages? Initially, the parties usually negotiated the offer and came to an agreement. If the agreement would have been recorded, in a related negotiation protocol and signed by the parties, a valid contract would have been concluded. However, buyer’s formal system requires that the buyer issues an order and requires the contractor to return an order confirmation. Such an approach is interpreted by the legislation, as the indication that no contract was concluded.

If the prerequisite for the order confirmation was not included in the minutes of the contract negotiations, it is already a legally binding contract, after the award negotiations. This is actually often intended, so that the subsequent order, is only intended to confirm the agreement. This fact is important, if there are deviations in an order, from the wording of the contract negotiations. In these cases, the question arises, as to whether it is a counter offer by the buyer, or a desire, to change the concluded contract.

If the return of the recipient of the contract offer, is intended as acceptance, but includes additions, restrictions or other changes that are not included in the contract offer, neither a contract nor a rejection of the offer can be assumed.

In contrast to Section 150 of the German Civil Code (BGB), the UN Sales Convention differentiates, according to whether the modifications contained in the order confirmation, significantly changes the content of the offer or not (cf. Art. 19 CISG).