Understanding Product Change Provisions in Sales Contracts

Understanding Product Sales Contracts and Change Provisions

Product sales contracts describe the goods sold to the customer. This description may be from a catalog, a product datasheet, or the specifications attached to a purchase order or agreement.

Product change provisions explain how to deal with changes to the product’s manufacturing process, materials, or features.

Let’s say a customer is buying a widget to incorporate into its machine, with the widget in the center of the design. Should the vendor be able to change the widget? Can the customer require the vendor to make changes?

To answer, we look at the nature of the vendor relationship. If it is custom-built for the customer, the customer may be able to require some changes. But if it is off-the-shelf and sold to millions of other customers, that’s another story.

Key Considerations for Product Change Provisions

Here are four things to think about when reviewing product change provisions:

1. Who can initiate a change?
2. Does the other side have any right to say no? If so, under what circumstances? Is the standard in its sole discretion or on an objective basis?
3. Are there limits around how much the vendor can change? Who pays extra costs?
4. Does the change affect the warranty, intellectual property rights, or indemnity?

If you want to learn more about product change provisions, check out these resources:

• Sample clauses:  https://www.lawinsider.com/clause/product-change
• Changes Clauses and Disputes in Contracts by Richard Long and Andrew Avalon:  www.long-intl.com/blog/directed-change-changes-clauses-disputes/