Tuesday, November 1, 2011

Experts and Reliance

I had a reader ask me how to deal with language that was being struck from the boilerplate preamble of their standard template by the supplier. The language that was being struck was:

"WHEREAS, Supplier has experience and expertise in the business of providing professional services;

WHEREAS, the buyer is relying upon such experience and expertise of Supplier, and Supplier acknowledges that the services to be performed hereunder are critical to the business operations of buyer"

To understand what to do, you need to understand what the language means and what the original drafter intended by including it.Some drafters put language in recitals sections or section headings in an attempt to slide things through. The language in those recitals was intended to do several things. First by including a representation that the Supplier is an “expert” that places a higher standard on the supplier. They are not just an average supplier. they are an expert.

Including language that says that "you are relying on their expertise" is a way of creating an implied warranty of fitness for a particular purpose. An implied warranty of fitness for a particular purpose requires two things. First the purpose must be disclosed.Second,the supplier must know that you are relying upon them and their expertise. Rather than include a specific warranty in the warranty section that the product or service would be fit for a particular purpose, the drafter chose to try to include it via the recitals language.

Whether the higher standard and implied warranty of fitness for a particular purpose are needed is something that should be discussed with the legal people that support you.

If you knew exactly what you wanted and the specification or statement of work clearly defined it, you probably don't need those types of representations in the preamble.When you have those you are not demonstrating that you are relying upon them. If you have given them a very general specification or statement of work and are truly looking for them to provide you with a solution that works for that stated purpose,that would clearly be a situation where you are relying upon them and their expertise and should have that form of commitment

Since the supplier raised the issue with their strikethrough,if I needed that type of warranty I would take a different approach. Rather than try to slide a warranty of fitness for particular purpose through under the recitals section, I would probably delete the language in the preamble and add an express warranty that the product or service will meet the specific purpose. Then there is no question about the fact that you are relying on them to deliver a product or service that meets those stated purposes.

With that express warranty,if they failed to deliver such a product or service you could reject it as not conforming,not pay for the product and if desired sue for any damages sustained.

Where you could be potentially impacted by eliminating the concept of "expert" is with the damages you could collect.If you don’t have the concept of expert, you would be limited to what would be performed by a company with reasonable skill and expertise. When you include the higher standard of the supplier being an "expert", they would be measured against what would be reasonable for an expert in the field.

If you learned from this post, think about how much more you could learn from the book.
The book is only US$24.95 plus shipping. The hot-link to amazon.com is above the date.

No comments:

Post a Comment