Abstract
Setting standards and specifications of a commercial contract is a significant process that contracting parties should take with a lot of seriousness. The standards and specifications set by the parties ensure that the products and services supplied are of the right quality and quantity. For an organization to ensure that it gets the precise products or services from the suppliers, it has to ensure that the standards and specifications agreed upon by the two parties are clear. The following report will be exploring the practical problems of ascertaining that the standards and specifications agreed upon in a contract are fit for the purpose, and they protect both parties from exploitation.
Introduction
According to the commercial law firm Moore Blatch, parties entering into commercial contracts are warned about ignoring the standards and specifications of the contract. All commercial contracts should provide a clear outline of the party that is responsible for all the specifications and standards of the project to avoid future conflicts between the parties (Cips.org 2016). The warning by the law firm arises amid the ruling of the case between MT Hojgaard and E. on Climate and Renewables where the contractor MT Hojgaard was ruled not liable for the design problems of a wind farm’s foundations committed by the defects in an international standard that was applied.
Body of the Report
Upon appeal by the plaintiff, the court of appeal reversed the initial ruling for the plaintiff, E. on Climate and Renewables; thus, making the contractor liable for the damages caused. The fact that the contractor's obligations were clearly outlined in the contract led to a conviction for the liability (Jacobs & Chase 2013). The terms of the contract required the contractor to comply with good industry practice and use reasonable skill and care while undertaking the project. In this contract, the standards and specifications were pressing on the contractor because it should have been a simple warranty that the designed would work.
Whenever the parties are setting the standards and specifications of the contracts, they should ascertain that they use specific language that makes the contractor's obligations binding. The contractor supplying the products or services is responsible for creating the technical specifications, which must be met do avoid defective performance that may result from the negligence of the contractor (Sallis 2014). Unless the terms of the contract are specific about the standards and specifications of the contract, the contractor may not be legally liable for any defect of the products or services supplied.
In the process of setting the standards and specifications of the contract, both parties should also ensure that they sign off the technical specifications to reduce the risk involved and make a very clear distinction between the obligations of each party (Harris & McCaffer 2013). The roles played by each party should be clearly stated in the terms of the contract to guarantee there is full compliance with the terms and ensure they all exercise reasonable skill and care while executing their obligations. If the terms of the contract are well expressed in the contract, the challenge of ensuring that an organization obtains the precise products or services they need will be adequately overcome.
In circumstances which the organization requires warranty for the products or services received, such information should be expressly stated in the contract. For the contractors offering the products or services to the organizations to be free from any remedial actions or costs for the damages caused by any deficiencies, they need to state expressly that they will not be liable for such occurrences. In case there are numerous documents involved in the contract, it is the obligation of the contracting parties to ensure that a clear distinction is set to avoid any contradiction in the future (Baily 2013). From the implication of this information, all parties entering into a contract should understand that the terms of the contract should be very clear to guarantee them perfect products and services as ordered.
The organization seeking delivery of products or services from a supplier should ascertain that the terms and conditions of the delivery contract are legally clear for the purpose of legal interpretation in case of any defects encountered. On the other hand, the contractor should be careful with the choice of words used to express the terms and conditions of the contract. Loose language may be quite binding; thus, forcing the contractor to be responsible for some defects that could be avoided by use of specific language (Harris & McCaffer 2013). Therefore, the manner in which the terms and conditions of the contract are expressed will directly influence the outcome of any defect resulting from the transaction.
Whenever the contractors want to withdraw from the obligation for any deficiencies in the specifications and standards of the contract, they have to state expressly in the contract and make the other party fully aware of entering into the contract. The measure will enlighten the organization on the extent to which it can hold the supplier responsible for any defects in the products or services supplied. In such circumstances, the clients will be fully aware of the level of responsibility they expect from the supplier since the contract acts as the guiding principle for the entire transaction (Cips.org 2016). With such provision, the level of complains raised by the clients later greatly reduces since they are granted prior opportunity to negotiate for the terms and conditions of the contract before entering into the agreement for the supply of products or services.
The representation and warranties of the contractor to the client provide a strong background upon which the client can derive some confidence about the quality of the products or services offered by the supplier. All the representations and warrants in the contract of supply should be presented in a true manner, which can guarantee the client confidence to rely on such representation and statements when entering into a contract (Baily 2013). It shows that the clients make the decision to select a specific supplier based on the standards and specifications provided in the contract for the supply of products.
Recommendations
Several recommendations can be derived from this case. The whole idea of ascertaining that organizations obtain the precise products or services they are seeking is always challenging, and the necessary measures should be taken to provide a suitable remedy. In the process of making an agreement and receiving the products or services, the clients, and the supplier should enter into conflict concerning the breach of the standards and specifications indicated in the contract document. To deal with this conflict, the parties should consider the remedies to ensure that the most prominent statements of the contract are considered first (Monczka et al. 2015). The first consideration should be made to the main agreement, followed by the special terms and conditions of the agreement, the general terms, and conditions, the government policies on the contract, then finally the nature and scope of work involved by the parties.
The supply management role is very critical for every organization because it determines the availability of the required resources for the firm. Therefore, the management of the organization's supply should take predominance of any delay in supply of critical products or services will alter the performance of the organization. The period of supply needs to be known and specific to avoid any unnecessary delays in the supply of products (Baily 2013). It can be achieved by setting a specific start date and completion date for the project to estimate the project period for budgeting (Monczka et al 2015). The time which the main terms and conditions of the contract declared should also be put into consideration to ensure that the client has some credible evidence for defending any form of breach of the set standards and specifications. Therefore, the effective date of the main agreements can be used to guide the client and supplier on the subsequent agreements entered into them within the course of business.
Conclusion
References
Baily, PJ (2013). Purchasing and supply management, Springer, Berlin
Cisp.org, (2016). MT Højgaard A/S v E.On Climate and Renewables - Supply Management. [Online] Cips.org. Available at: http://www.cips.org/en/Supply-Management/Analysis/2015/July/MT-Hojgaard-AS-v-EOn-Climate-and-Renewables/ [Accessed 21 Feb. 2016].
Harris, F and McCaffer, R, (2013). Modern construction management, John Wiley & Sons, New Jersey.
Jacobs, FR and Chase, RB, (2013). Operations and supply chain management, McGraw-Hill Education, New York.
Monczka, R, Handfield, R, Giunipero, L and Patterson, J, (2015). Purchasing and supply chain management, Cengage Learning, Stamford.
Sallis, E, (2014). Total quality management in education, Routledge, London
