Hi Semih - great question, especially as I think that we're yet to see the full impact on many supply chains of this incident.
There will be many suppliers and their customers having discussions about the potential application of this clause. One of the most simple definitions from the internet is set out below :
Unforeseeable circumstances that prevent someone from fulfilling a contract.
It's instances like this where I go back to what was a watershed moment for myself and many others in the audience when Bruce Everett and Tim Cummins challenged the audience in New Zealand last year, asking why we spend so much time trying to get the best supplier on board to give us the best possible outcome - and then run straight to solicitors when something goes wrong. Perhaps now is that opportunity, if you haven't already adopted the IACCM contracting principles into documents, and think about how you might engage directly with suppliers and customers and hope that they remember back to when everyone was happy that both felt excited to be part of a new relationship - and how to maintain that through what might be a challenging time around the globe.
If you've got a strong relationship with some of your affected suppliers, no doubt you've had a chat already about this.
If not, then perhaps you could kick that off by extending out to them the olive branch to start these discussions.
Thanks for your post. I forwarded it to Tim Cummins, our Founder and President and he wrote this blog for you and others who are interested in the impact of the virus
I note your profile refers to "Moreland City Council", I assume Melbourne (Australia).
Note - this response references 'UK' practice and legislation, different rules may well apply in your jurisdiction.
In the UK consideration would need to be given as to whether the contract was let under a government framework (or similar 'public procurement rules'), if so there may well be restrictions in place as to whether you could extend further.
If it is under a Framework, in the UK you would need to offer a 'Direct Award' extension (if permitted). If it is 'non-framework' then you would almost certainly be able to extend subject to agreement with the supplier.
Assuming you can extend, doing so after the previous contract has expired is generally permissible as long as both parties agree; for 'neatness' I would suggest that the extension applies with 'retroactive effect' from the day the previous contract expired, so there aren't any 'uncovered periods'.
Hope this helps
NOTE: you need to be wary of anti-bribery and corruption laws - extending 'expired' contracts rather than running a competitive procurement process often leads to concerns being raised - you may well need to demonstrate that this is very much an 'interim and last resort' measure as a precursor to a full competitive procurement process.
• Victorian Council - Australia
Thank you, Steve
Thank you for the prompt reply!
I agree with your comments
Victoria's IBAC (anti-Corruption body) highlighted that as one of the red flags for corruption
Generally speaking, we do not extend contracts beyond their expiry dates, especially if all extensions have been exhausted.
I am coming to these special and few cases that we have to manage. I am trying to balance commercial needs and legal exposure if any.
Product replacement or discontinuation is obviously quite usual - but that doesn't alter warranty obligations. The manufacturer should have stocked sufficient to meet likely needs. Without knowing the value. It is hard to know whether it is worth pursuing them; right now it sounds like they are ignoring you in the hope you just give up.
Thanks for your viewpoint and I couldn't agree more with you on this.
However, they have actually discontinued the product and their revised e-catalogue confirms this. I am sure they understand that a Purchase Order from us would just add on to their revenue in multiples at best, to risk such ignorance. Of the 28 product categories they have supplied, the issue affects only 1 of the 28.
The query deals around with
(a) non availability of spare parts of the product and
(b) non availability of the product itself.
• Isle of Man Government
Experience suggests this will boil down to the terminology used within your warranty document. It may be unreasonable to expect a supplier to maintain full stocks for all warranty potential on discontinued products (Tim already mentioned value...). More commonly, suppliers offer repair or replacement with the direct alternative product. If the 'standard' warranty were considered unacceptable at the outset it would be appropriate to develop the warranty model to include a recommended spares holding based upon MTBF, or more onerously full replacement of the product range used including mobilisation costs. Either way both parties are fully aware of expectations and obligations from the outset.
Contractually speaking if the warranty document is deficient you are really only left with negotiation. An option being to approach the supplier for access to the original product production drawings and look to have bespoke replacements made.
As a compromise and considering the actual failure rate seems quite low (5# out of 1500#) - though in no way trying to belittle the frustration you must feel - are there visual aspects where use of the replacement product may be viable and use the original products from those locations for the more visible locations ?
Dear Carrie, I have experience from pricing changes both during the negotiation process and during the contract lifecycle. Our clients have especially found this as an effective tool during negotiations to demonstrate risk/work-impact if the other party is requesting terms transferring an extensive part of the risk/work to them. By showing the cost-impact, the incentive for price increase becomes rather obvious which strengthens your negotiation position. Kind regards, Madeleine Willyams - Advokatfirmaet Negota AS, Norway.