The Order Is Reviewed. The Contract Isn’t.
Manufacturers already run a formal review before they accept an order. It asks whether they can build the thing on time — not what the paper commits them to if something goes wrong.
Many manufacturers already run a version of contract review before they take an order, and for a large share of the industry it’s a formal requirement. Any supplier certified to ISO 9001 — or to AS9100 in aerospace and defense — has to review a customer’s requirements before committing to supply: confirming it understands the specifications, can hit the delivery date, and has the capacity to do the work.[1] Shops without a certificate on the wall tend to do some version of the same thing, because accepting an order they can’t fill is a fast way to lose a customer.
But that review answers one question: can we build this? It was never meant to answer the other one: what are we agreeing to if we do? The purchase order or supply agreement riding along with the order carries terms — how much the manufacturer can be made to pay if a part fails, how long it stands behind the goods, whether it gets paid on time, what happens if the customer cancels early — and those terms tend to pass through order acceptance unread, because the people confirming the plant can hit the date aren’t the ones trained to weigh an indemnity clause.
The paper belongs to the customer, and it sets the risk
A purchase order or supply agreement almost always arrives on the customer’s template, written to protect the customer’s plant, schedule, and budget. That is ordinary and expected. It also means the terms that protect the manufacturer are in the document only if someone puts them there before signing.
These aren’t obscure terms. They’re the ones both sides fight over most. In World Commerce & Contracting’s yearly study of the terms companies negotiate hardest, limitation of liability ranks as the single most negotiated term in contracts worldwide — ahead of price — with indemnification, warranty, termination, and payment all near the top.[2] They rank there for a reason: they are where the money moves when a deal goes wrong, and a customer’s standard paper tends to nudge each one toward the customer.
On incoming paper, that usually shows up in a few predictable places.
Liability and consequential damages. A limitation-of-liability clause should cap what the manufacturer can owe at something proportional to the deal — the contract value, the required insurance, or a set number of months of fees. Customer paper often omits the cap, or sets it high, and adds consequential damages back in, so a single late or defective part can expose the manufacturer to the customer’s downtime and lost production — a figure many times the value of the order.
Warranty. A warranty is a priced promise, and it should be bounded: a fixed period, a remedy limited to repair, replacement, or refund, and a clear disclaimer of implied warranties and of coverage for components the manufacturer bought rather than built. Leave the implied warranties of merchantability and fitness standing, or drop the end date, and the exposure runs years past what the quote assumed.
Payment and termination. Net-30 terms keep cash where the pricing expected it; terms stretched out, or made contingent on the customer collecting from its own customer, quietly finance someone else’s business. And if the customer cancels for its own convenience, the manufacturer should recover what it has already committed — labor, materials, long-lead purchases — rather than eat it.
Why it gets past capable people
The gap isn’t competence. It’s aim and volume.
Aim, because that review points at production feasibility, not legal risk. Catching a one-sided indemnity is a different skill, and at a lot of smaller manufacturers there is no legal department to carry it — the contract lands on the CFO, who reviews and negotiates it alongside running finance, simply because there is no general counsel to hand it to.[3] So an order can clear as buildable and on schedule and still reach signature without anyone weighing the terms as terms.
Volume, because a manufacturer doesn’t sign one agreement — it signs a steady stream, each under pressure to book. When a purchase order looks clean on specs and price, the terms behind it get treated as boilerplate and signed, and most of the time nothing comes of it. The cost lives in the exceptions, and in aggregate it isn’t small: World Commerce & Contracting estimates weak contracting practices erode value equal to roughly 9% of annual revenue for the average company, and more in complex industries, through exactly this kind of leakage — cost overruns, scope disputes, missed entitlements, and terms nobody caught until they mattered.[4]
Reviewing the contract, not just the order
This is the part I spend my time on now, and it isn’t a case for slowing down or for treating the customer as an opponent. The point is simpler: a plant already reviews whether it can build an order, and the same discipline belongs on what the order commits it to — without bolting a second bottleneck onto the process.
That is where a contract-review tool fits. LegalSifter ReviewPro reads an incoming purchase order or supply agreement against the manufacturer’s own positions, in minutes, inside Microsoft Word, and marks the terms that fall outside them: a missing or oversized liability cap, consequential damages added back in, a warranty with no end date or implied warranties left standing, payment past net 30, a cancellation clause with no cost recovery, a flow-down to a prime contract nobody has seen. It’s a first-pass review, not a legal opinion — routine terms handled, real issues flagged — so a small contracts or legal team spends its time on the orders that actually need judgment, and gives the hundredth order of the month the same read as the first.
What it checks against is a playbook: the positions the manufacturer settles on once and applies the same way across every customer, product line, and plant. Those positions don’t start from a blank page. The standard defaults are built from the manufacturer’s side of the table and cover both goods and services agreements — term and renewal, orders and specifications, acceptance, warranty, liability and indemnity, force majeure, change orders, termination and cost recovery, and the rest — and a company tunes them to its own approval thresholds. Manufacturers that would rather not run the reviews in-house can hand them to our team to run against the same playbook.
Some paper won’t move — a major OEM’s terms, a national account’s master agreement, a flow-down from a prime. Reading it still changes the decision. The manufacturer books the order knowing which terms it’s accepting, and can price the risk, staff around it, or escalate it, instead of finding it after something has already gone wrong.
The order review confirms the plant can build it. A contract review confirms the plant can afford to. Both belong before the order is accepted — because the moment it is, every term in the paper is real.
See how ReviewPro reviews purchase orders and supply agreements for manufacturers →
Notes
- ISO 9001:2015, clause 8.2.3 (“Review of the requirements for the products and services”), requires an organization to review customer and other applicable requirements before committing to supply, and to confirm it can meet them. The aerospace and defense standard AS9100D carries the same requirement. International Organization for Standardization, ISO 9001:2015. https://www.iso.org/standard/62085.html ↩
- World Commerce & Contracting, Most Negotiated Terms 2024: limitation of liability is the most negotiated contract term — ahead of price/charge and indemnification — with warranty, termination, and payment also among the most negotiated. https://www.worldcc.com/resource/most-negotiated-terms-2024-report.html ↩
- At companies without an in-house general counsel — common among small and mid-sized businesses, which describes much of the manufacturing base — the CFO is typically the executive asked to manage legal matters, including reviewing and negotiating contracts, often with little or no legal training. Wolters Kluwer, “CFO: Managing legal matters without a General Counsel,” https://www.wolterskluwer.com/en-gb/expert-insights/cfo-managing-legal-matters-without-a-general-counsel ; “Managing Legal Risks Without a General Counsel,” CFO.com (2022), https://www.cfo.com/risk-compliance/legal/2022/03/legal-risks-cfo-general-counsel-commercial-contracts-governance ↩
- World Commerce & Contracting, “Poor Contract Management Continues to Cost Companies 9% of Their Bottom Line”: inadequate contracting erodes value equal to roughly 9% of annual revenue on average — and 15% or more in complex industries — through cost overruns, disputes, delayed delivery, and missed entitlements. https://www.worldcc.com/Resources/Content-Hub/details/Poor-Contract-Management-Continues-To-Costs-Companies-9-Of-Their-Bottom-Line ↩
ReviewPro is not legal advice. Confirm your positions with your counsel and your contracts or risk-management team.