Quick Tip #16: Is deemed acceptance ever OK?
From a customer’s perspective, it’s important that the clause dealing with ‘payment’ for the services or goods being provided is appropriately linked to ‘acceptance’ of the services or goods in question. This is something that seems so obvious, yet we see disputes arise about this all too often. The risk of not ensuring that payment and acceptance properly speak to each other is that the customer could find itself in the tricky position of having to pay for services or goods it has not yet accepted. For this reason, a customer is in a much stronger position if payment follows acceptance only. Payment before confirmation of acceptance would most likely result in either a dispute over the repair, replacement or re-performance of the services or goods, or a dispute over a reduction or return of the payment.
Where payment is linked to acceptance, we frequently see contracts contain ‘deemed acceptance’ provisions where a customer is deemed to accept the goods or services by virtue of the passing of time of some other trigger event. From a supplier’s perspective, these terms are very useful because, time and again, customers take too long to acknowledge delivery and complete the acceptance process. Leaving the supplier having to wait an unacceptably long time before having to invoice the customer. From the customer’s perspective, these terms are dangerous because delivery can be accepted and invoiced before the customer has actually tested and confirmed that the goods/services are acceptable.
The simplest way to address this point is to ensure there is (a) sufficient governance in place to notify the appropriate representatives within the customer that a delivery is due for acceptance and (b) an escalation process if the customer has not accepted by the due date. Only after completing these procedures should supplier be capable of the benefit of deemed acceptance. However, deemed acceptance always poses a risk to the customer and customers should be cautious about offering this compromise unless it is necessary.