Remedies For Supplier Screw-ups, Part II

PurchTips edition #247


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What Remedies Do You Have With Product Suppliers?

When contracting with product suppliers, you should plan what will happen if products fail to comply with acceptance criteria. You can negotiate for a specific contractual remedy or the option to choose from a list of remedies at the time of failure.

In PurchTips edition #245 (, we discussed two of the five remedies commonly used in such situations: replacement and supplier repair. Today, we'll cover two more: self-repair and refund.

To avoid disputes, you should contractually specify certain things for each remedy. Here are two checklists that correspond to the applicable contractual remedies.

If self-repair is your chosen option:

  • What technical guidelines must your organization following when repairing the product?
  • Will the supplier reimburse your organization for the labor spent on repairing the product?
  • If the supplier will reimburse your organization for its labor costs, what labor rate will be used to determine the amount of reimbursement?
  • If the supplier will reimburse your organization for labor costs, when will the reimbursement be due?
  • Will the supplier's warranty remain in effect?

If refund is your chosen option:

  • Do you need to return the defective product or can you simply dispose of it?
  • If you need to return the defective product, does the supplier need to receive the defective product prior to issuing your refund?
  • If you need to return the defective product, who pays for the shipping of the defective product?
  • How soon must the supplier provide your refund?
  • If you need to return the defective product and the refund timing depends on the supplier's receipt of the returned product, what shipping options (e.g., next day air, ground shipping, etc.) are acceptable for shipping the product back to the supplier?

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