Remedies For Supplier Screw-ups, Part I
PurchTips edition #245
Which Contractual Remedies Do You Use?
If a supplier's product fails to comply with acceptance criteria, there are five common contractual remedies that procurement professionals use: replacement, supplier repair, self-repair, refund, and contract termination. You can negotiate for a specific remedy or the option to choose from a list of remedies at time of failure.
For each possible remedy, there are things that should be contractually specified to avoid disputes. In this edition of PurchTips, we've provided two checklists to help you determine what to agree upon with your supplier when drafting the contract if replacement and/or supplier repair are among your preferred remedy options. A future edition of PurchTips will provide checklists related to the other remedies.
If replacement is your chosen option:
- Do you need to return the defective item or can you simply dispose of it?
- If you need to return the defective item, does the supplier need to receive the defective item prior to shipping the replacement?
- If you need to return the defective item, who pays for the shipping of the defective item and the shipping of the replacement?
- If you need to return the defective item, what shipping options (e.g., next day air, ground shipping, etc.) are acceptable for shipping the item back to the supplier?
- How quickly must the supplier deliver the replacement (including any shipping time)?
If supplier repair is your chosen option:
- Who pays for the shipping of the defective item from your organization to the supplier and for the shipping of the repaired item back to you?
- What shipping options (e.g., next day air, ground shipping, etc.) are acceptable/required for shipping the item back to the supplier then back to you?
- How quickly after receipt of the defective item must the supplier deliver the repaired item (including any shipping time)?
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