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  4.3 Contract Review

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Author Topic:   4.3 Contract Review
Lurker (<10 Posts)

Posts: 4
From:Portland, OR
Registered: Jan 99

posted 27 January 1999 02:38 PM     Click Here to See the Profile for LaurieB   Click Here to Email LaurieB     Edit/Delete Message   Reply w/Quote
I need some help in interpreting the intent of Contract Review. Is is considered the same for ongoing PO's as it is for an initial contract, where you review feasibility & whether you can perform to the customers satisfaction? If I accept an order for a COD that is for a stock item, new customer, am I bound by the laws of 4.3?

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Marc Smith
Cheech Wizard

Posts: 4119
From:West Chester, OH, USA

posted 28 January 1999 06:18 AM     Click Here to See the Profile for Marc Smith   Click Here to Email Marc Smith     Edit/Delete Message   Reply w/Quote
Yes, you are bound by contract review for a new customer. BUT - the review can be as simple as the person taking the order ensuring thaqt the catalogue number is correct. The extent of any review is proportional to the risks.

In so far as on-going POs, once the original PO is 'reviewed' any further review will be limited to something simple such as how many are ordered and such. Keep a log. Document some basic guidelines for 'types' of reviews. Don't over complicate the issue.

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Marc Smith
Cheech Wizard

Posts: 4119
From:West Chester, OH, USA

posted 18 July 1999 09:10 AM     Click Here to See the Profile for Marc Smith   Click Here to Email Marc Smith     Edit/Delete Message   Reply w/Quote
From: (Doug Pfrang)
Subject: Re: Q: Contract Review in a Catch 22 Situation /Scalies/Pfrang

>From: Charley Scalies
>Subject: Q: Contract Review in a Catch 22 Situation /Scalies
>Here is a new thread for discusssion. It is based on an actual case.
>As a matter of standard practice, an ISO9001 registered firm takes
>orders by telephone. The seller's sales representative recommends - and
>the buyer consents to - purchase of an extended on-site repair warranty.
>When the product arrives, it's defective. The replacement product is also
>defective. In attempting to return the defective product for a full refund, the
>customer is then informed of the terms of the seller's warranty which
>excludes seller's liability for return shipping costs. The customer is
>now in the position of having to pay freight costs for the "pleasure" of
>having an unusable product. There was no mention of such warranty
>provisions at the time the phone order was placed.
>1. Under the scope and intent of the standard, particularly 4.3, is the
>seller under a positive obligation to reveal the material terms of that
>warranty at the time of the sale?
>2. Is the customer entitled to issue a Corrective Action based on
>nonconformance with 4.3?


Interesting questions, however, I don't see a Catch 22.

First, an editorial comment. I don't entirely agree with the statement that the customer "is now in the position of having to pay freight costs for the 'pleasure' of having an unusable product." Although your observation is technically correct, there are other, arguably more likely, situations in which it makes sense for the buyer to pay return freight. For example, from the seller's perspective, the fault for the so-called "defective" product might lie with the freight carrier or even with the buyer himself. In the former case, it is reasonable for the buyer to pay the return freight, because the buyer should have filed a damage claim with the carrier. In the latter case, it is also reasonable for the buyer to pay the return freight, because the buyer broke the product. Another situation is when the buyer buys the product, uses it for a while, and then sends it back for a refund even though it has not malfunctioned. In this case, it is again reasonable for the buyer to pay the return freight because the seller has already paid outbound freight costs, plus gets back a used product in place of the new product that was sent out. If we assume that most situations of returned goods are one of these that I've described, and not the repeated manufacturing defects that you described, then it will be reasonable, in most situations, for the buyer to pay the return freight.

Now, as regards your first question, the buyer and seller are both responsible for agreeing on warranty terms; the burden is not solely on the seller. Your question seems to assume that the seller withheld that information, but it is equally the burden on the buyer to inquire. If the buyer does not read or ask about the terms of the seller's "on-site repair warranty," then the buyer, not the seller, is at fault.

As regards your second question, I don't know of any company that allows customers to "issue a corrective action [request]" for any reason; the responsibility for issuing corrective action requests lies with the seller. The customer might complain about not being aware of the return goods policy, which might cause the seller to issue a corrective action to make this information more explicit in the purchase documents or phone order-taking process, but the seller might decide the customer is at fault for not asking about the warranty terms when the customer placed the order.

ISO-9000 is a quality system standard for sellers, not a license for customers to be stupid.

-- Doug Pfrang

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Andy Bassett
Forum Contributor

Posts: 274
From:Donegal Ireland
Registered: Jun 1999

posted 19 July 1999 02:36 AM     Click Here to See the Profile for Andy Bassett   Click Here to Email Andy Bassett     Edit/Delete Message   Reply w/Quote
Can i just throw something in here. On the train to Hannover this morning i was sweating over the some study notes for a unit of a Purchasing Diploma 'Legal Aspects'.

Now i would think that European and American Contract Law is not so far apart, if this is the case maybe this can help.

The fact that freight will not be paid by the seller when defect goods are returned is an 'exclusion clause' and as such has to be agreed at the time the contract was made. So if the contract was made over the telephone ie 'How much?... OK i will take them', and no exclusion clauses were mentioned they are not valid.

Example Olley v Marlborough. A client booked into a hotel and subsequently had something stolen, the hotel owners said they were protected by a disclaimer hung in the hotel bedroom. 'Invalid' said the courts because this was introduced after the contract was made (ie agreeing room price and availability at the reception).

A second possibility is that the seller sends an Order Confirmation with the goods with this nasty exclusion clause in. If the buyer takes delivery of these goods then he has effectively accepted the contract terms, this is known as the 'Battle of the Forms', the last party to issue contract terms generally wins the arguement.

I hope i havent put the quality boys too sleep.


Andy B

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