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					NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                     Risky Business in
                COMMERCIAL PROCUREMENT
                     CONTRACTING
                                      Breakout Session # 408
                                         April 12th, 2006
                                        10:45am-11:45am

                                                                                              Jeffrey L. Roth
                                                                                             Allen L. Anderson
                                                                                         FEES & BURGESS, P.C.
                                                                                             213 Green Street
                                                                                        Huntsville, Alabama 35801
                                                                                         Telephone (256) 536-0095
                                                                                          jroth@feesburgess.com
                                                                                        anderson@feesburgess.com
                                                                                           www.feesburgess.com


NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
Dispute Resolution

Warranty

Warranty Limitations and Disclaimers

Limitation of Liability




  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
             These issues arise in:
        Negotiated Agreements:
        –(Electronic Data Interchange, ―white paper‖
        contracts).


        Forms:
        –purchase orders, purchase order acknowledgments,
        sales orders (―battle of the forms‖ environment).


        ―No Contract‖ Environment:
        –(no such thing).
NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
               I. Dispute Resolution




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
             KEYS

A. Be proactive in agreement forms
   regarding procedure to resolve,

B. Attempt to resolve them without
   ―legal
   interference,‖ OR

C. At least give your lawyer a chance!


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
   ―Discourage litigation, persuade your
neighbors to compromise whenever you can.
Point out to them how the nominal winner is
 often the real loser– in fees, expenses, and
waste of time. As a peacemaker, the lawyer
 has a superior opportunity of being a good
                    man.‖



                                                                      Abraham Lincoln
 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
        Litigation is the least
  acceptable and least cost-effective
method for resolving business disputes




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
I.                 The Common Types of Alternate
                       Dispute Resolution
•       Mediation
•       Early Neutral Evaluation
•       Arbitration
•       Med-Arb
•       Mini-Trial
•       Summary Jury Trial


    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                       Mediation Procedure
•selection of mediator
•opening statement by mediator
•initial joint session
•opening presentation— ―caucuses‖ between mediator
and each party
•draft of a settlement agreement or memorandum or
understanding


   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                      Arbitration Procedure
• alternative to court proceeding
• grounded in contract
• cannot be forced to do so
• arbitrator is not obliged to comply strictly with
     court rules of evidence
• each party presents its own case
• arbitrator’s decision is final
• parties are bound to comply with the award

 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                      ―Mediation Explosion‖

Over 1500 law firms have signed the CPR
Institute of Dispute Resolution Law Firm
Pledge, which requires them to ensure that
lawyers responsible for litigation are
knowledgeable about ADR and, where
appropriate, will discuss its availability with
their clients.


NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                             Arbitration
• Alternative to Court                                                  • Arbitrator is not
  Proceedings                                                             obligated to Comply
• Grounded in Contract                                                    strictly with Rules of
                                                                          Evidence
• Cannot be Forced to
  do so                                                                 • Arbitrator’s decision is
                                                                          Final
• Arbitrator is a neutral
  Person                                                                • Parties are bound to
                                                                          comply with the
• Each Party Presents its
                                                                          Arbitral Award
  Case

  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                      Mediation Compared to
                           Arbitration
              Mediation                   Arbitration
• Assisted negotiation                                                      • Adjudication
• Parties decide if any                                                     • Arbitrator issues binding
  settlement will be binding                                                  decision
                                                                            • Parties relinquish control
• Parties control
                                                                            • Parties may not withdraw
• Parties may withdraw
                                                                            • Parties may present case,
• Parties able to vent                                                        testify under oath
  feelings, tell story                                                      • ―Split the baby‖, tends to
• Encourages and facilitates                                                  result in a ―win-lose‖
  ―win-win‖ solutions                                                         award
• Low cost                                                                  • Can be but is not always
    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
What should a Supply Chain or
 Other Agreement contain?




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                               Choice of Law
Headquarters vs. Contracting location
Applicable law does make a difference in
certain situations




 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                           Venue and Forum
Geographic Location (Barbour County vs.
Madison)
    Court?
    Mediation?
    Arbitration?
    Rules?
  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                         Escalation of dispute
                                            Helps avoid:

• Obstinate executive;

• Executive focused on narrow portion of the
  business;

• Shines the ―Sarbanes-Oxley‖ light;

• Usually underlying issues relation to egos,
  reserves, or timing.
 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                  Time Schedule
rigid schedule to prevent ―foot dragging‖
and delay in remedy




 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
     Prevailing Party Pays Attorney
                 Fees?




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
    • Sometimes impediment to settlement;

    • can create ―all or nothing‖ scenario;

    • the object is to settle not litigate.



NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                           CHOICE OF LAW

The laws ____________________ shall govern this
agreement, with the exception of its conflict of law
principles, and the exclusive jurisdiction for the
resolution of any dispute under this agreement shall
be in the ____________ courts of _____________.

(You can still propose mediation but know you will
                 end up ―at home‖!)

  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
     ALTERNATIVE DISPUTE RESOLUTION
A.   In the event there is any claim, dispute or other matter arising out of or related to this
     Agreement, the Parties shall initially cooperate in good faith to resolve the same
     between executives of the Parties who do not have direct responsibility for
     administration of this Agreement, and shall explore whether techniques such as
     mediation, minitrials, mock trials, or other techniques of alternative dispute
     resolution might be useful in resolving the matter in question. If the Parties cannot
     agree with ten(10) business days on a different method of resolving the matter, the
     matter may be submitted by one of the Parties to non-binding mediation. In such
     event, the Parties shall agree upon a mediator and the mediation shall be held at
     Customer’s headquarters unless otherwise agreed.
        If neither Party submits the matter to mediation or if the mediation is not
     successful, then the matter shall be decided by binding arbitration in accordance with
     the American Arbitration Association Commercial Rules. The demand for arbitration
     shall be made within a reasonable time after the time period stated above for the
     Parties to agree on an alternate means of resolving the matter has expired. The award
     rendered by the arbitrators shall be final and judgment may be entered upon it in
     accordance with applicable law in any court having jurisdiction thereof.
B.      Unless otherwise agreed in writing by both Parties, Supplier shall carry on the
     Services during any arbitration proceedings and Company shall continue to make
     payments in accordance with this Agreement.

     NCMA World Congress 2006                                                                    April 10–12, 2006
     :
                                                                                                 Hyatt Regency Atlanta
     Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
       Arbitration clauses are
 DEFINITELY enforceable in the
U.S. under Federal Arbitration Act,
    if properly written, in ALL
        commercial contexts



NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                          Beware the obligation to
            proceed with performance or
              payment in the face of the
           dispute. Sometimes the threat
        of a work stoppage or withholding of
              payment is best leverage.

NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                             Key to Disputes
•Completely investigate all facts prior to
      ―pulling the trigger,‖
•make a realistic objective assessment (take
your beating now),
•negotiate fairly with conviction,
•search for ―intangibles.‖



  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                      II. WARRANTIES




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
•Sale of Goods/Merchants vs.
Individual Consumers or
Sellers, Uniform Commercial
Code


•Buyers fight to keep or
enhance them; Sellers fight to
limit and disclaim them


NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
               Expressed Warranties Under
                          UCC
• Affirmation of factor promise
• Description of goods
• Sample or model

IF: ―basis of the bargain‖


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                     Most Common
1. Seller/Manufacturer- free from defects in material,
   design, and workmanship for certain time

2. Service Provider/Assembler- workmanship only if
   design provided by Buyer; ―flow through‖ of
   components warranty.

3. Distributor- pure ―flow through‖ of manufacturers
   warranty.

   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
          PRODUCT WARRANTY
Seller/Manufacturer warrants that
Products manufactured hereunder will
conform to, and be manufactured in
accordance with, the Specifications, and
will be free from defects in material and
workmanship for a period of _____(__)
days from the date of delivery of the
Products to Buyer.


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
What Specifications?

•BEWARE performance warranty
  if seller. Do ―Specifications‖
  include performance specifications
  or just published documentation?

•May be highly desirable to Buyer!

NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
    Implied Warranties under UCC
    •Merchantability (also under CISG);
    •Fitness for Particular Purpose (also under CISG);
    •Title;
    •Non-infringement.


generally apply to leases also, except finance leases



NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                    Merchantability—goods are of
                      ―merchantable‖ quality

                                  Most important are:
•   Capable of passing without objection in the
    trade under the contract description (cars have
    engines);
•   Fit for ordinary purpose (the goods work);
•   Goods are adequately contained, packaged and
    labeled;
•   Conforms to any promises or affirmations on
    container or label (dealer is responsible).
    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
     Fitness for a Particular Purpose
• Reliance on Seller’s judgment;
• If seller has reason to know use of goods
  and buyer is relying on seller’s judgment.




    (technical advice in selecting product)
NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                                  Title
           Free of any claim or lien.




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                 Non-Infringement
             Free from ―rightful claim of
             any third person by way of
              infringement or the like‖
                unless Buyer supplies
                specifications/design


NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
Infringement Issues

• Make, use, or sell?
• As Seller, do not offer unless you KNOW;
  if required, give a warranty with a
  knowledge qualifier.
• As Buyer, make sure that the warranty is
  express, complete as to geography and
  intellectual property coverage.
   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                     Knowledge Representation
―To the best of Supplier’s knowledge the exercise
of rights pursuant to this agreement and or use of
the Product pursuant to this agreement will not
infringe any valid intellectual property rights
owned by persons other than Customer.‖




   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                    PRODUCT WARRANTY
      Manufacturer warrants that Products manufactured
      hereunder will conform to, and be manufactured in
      accordance with, the Specifications, and will be free
      from defects in material and workmanship for a
      period of _____(__) days from the date of delivery
      of the Products to Buyer.
PLUS           •Title
               •Non-infringement
               •Express warranties
               •Fitness for particular purpose
               •Adequately contained, packaged and labeled
  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
     III. Warranty Limitations And
              Disclaimers




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                Express Warranties
--the express warranty and any disclaimers tending to negate
       or limit the warranty are construed wherever
       reasonable as consistent BUT limitation is inoperative
       to the extent that such construction is unreasonable.


--disclaimers narrowly                                   construed                   to         preserve              express
        warranties.


--court attacks usually based upon unconscionibility to fraud
       or lack of agreement to integration clause.

  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                       IMPLIED WARRANTIES
                             limited by:
1. Specific language, i.e. ―Magic Words‖:
--       merchantability—must mention ―merchantability‖ and be
         conspicuous if in writing;
--       fitness for a particular purpose—must be in writing and be
         conspicuous; ―fitness‖ need not be mentioned (―There are
         no warranties which extend beyond the description on the
         face hereof‖ is sufficient); and
--       title and non infringement—must be specific and
         conspicuous.

 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
2.   ―As is‖ or similar language (―with all
     faults‖); must be conspicuous.

3.   Buyer’s examination of the goods—if
     Buyer examines goods or Seller demands
     the Buyer examine goods and he does
     not, there are no implied warranties as to
     anything the Buyer should have found
     (does not apply to express warranties).


     NCMA World Congress 2006                                                                    April 10–12, 2006
     :
                                                                                                 Hyatt Regency Atlanta
     Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
4.      Custom or Usage—the parties understand there
        is no implied warranty, there is no implied
        warranty.
5.      Limitation of Remedy—listed remedies are
        ―exclusive‖ – ―repair or replacement at the
        Sellers option shall be the sole remedy of the
        Buyer for breach of warranty;‖ otherwise
        remedies are cumulative.



NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                   Cumulative Remedies
                       For Buyer:

•       Repossession;
•       Cost of cover;
•       Contract/market differential;
•       Consequential damages, if Seller had reason
        to know and incidental damages.

    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
            Cumulative Remedies
                  For Seller:

•Action for full purchase price (specific
   performance);
• contract/resale differential;
• contract/ market differential;
• lost profits.


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                 BEWARE

    Exclusive remedy will be enforced
    unless such remedy ―fails of its
    essential purpose‖




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
         Practical Limitations on Scope
•       --Time/length (from…?)
•       --repair/replacement/credit
•       --whose option?
•       --exclude abuse/unauthorized repair/handling
•       --no defect found reimbursement

             (Buyer and Seller perspectives)
    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                    PRODUCT WARRANTY AND
                         DISCLAIMER
A) Product Warranty:

           Manufacturer warrants that Products manufactured hereunder will conform to the
   Specifications for a period of ____(__)days from the date of delivery of the Products to Buyer.
          If any returned Product fails to conform with the Specifications, then Buyer’s exclusive
   remedy and Manufacturer’s sole liability under this warranty will be for Manufacturer, at its sole
   option and expense, to correct, replace or issue a credit for the nonconforming or defective
   Product.
           This warranty does not apply to :
   (i) any first articles, prototypes, pre-production units, test units of a Product;
   (ii) any Products which have been altered or modified in any way by Buyer or third party; or
   (iii) any Products which have been subject to misuse, abnormal use or neglect.




     NCMA World Congress 2006                                                                    April 10–12, 2006
     :
                                                                                                 Hyatt Regency Atlanta
     Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
    B) Disclaimer:

           The Warranty stated above is in lieu of all other
    warranties, conditions or other terms, express or implied,
    statutory or otherwise, including without limitation any
    implied warranties of terms as to quality, fitness for
    particular purpose, merchantability or otherwise, whether
    implied by custom or law.

        Without limiting the foregoing disclaimer, Buyer understands,
acknowledges and agrees that Manufacturer does not warrant any parts,
components or other materials used in the manufacture of the Products.




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                   IV.                Limitation of Liability

                                       (beyond warranty disclaimers)




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
      Consequential and Incidental
              Damages

May be limited or excluded unless unconscionable
(personal injury in sale of consumer goods but not
in commercial context)




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                  Liquidated Damages
Damages may be ―fixed‖ or ―liquidated‖, if
reasonable in light of the anticipated or
actual harm caused by a breach

      Daily dollar amount related to non delivery,
failure to meet quality or other performance
parameter(s)


   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
 Consequential Damages may include
economic loss including loss of profits,
damage to goodwill or business reputation
and personal injury or property damage.

 Incidental Damages include cost of
―cover‖ or buying substitute goods, storage
or inspection charges and freight.


  NCMA World Congress 2006                                                                    April 10–12, 2006
  :
                                                                                              Hyatt Regency Atlanta
  Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                     Unconscionability
Is a question for the court and is a principle
to prevent oppression and unfair surprise
and not to disturb the allocation of risks
because of superior bargaining power.
Measured at the time of contracting.



 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                            Noncontract Damages
• torts including negligence, strict liability,
  fraud, trespass
• punitive damages(?), only in tort, not a
  contract issue

     Lawsuits often filed for torts to do an ―end
     around‖ legitimate UCC contract limitations.

 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                 LIMITATION OF LIABILITY
     IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF
ANY KIND OR NATURE ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR CONNECTED WITH OR
RESULTING    FROM    THE   MANUFACTURE,     SALE,
DELIVERY, RESALE, REPAIR, REPLACEMENT, OR USE OF
ANY PRODUCTS OR THE FURNISHING OF ANY SERVICE
OR PART THEREOF, WHETHER SUCH LIABILITY IS BASED
IN CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY
OR OTHERWISE, EVEN IF SUCH PARTY HAD BEEN
WARNED OF THE POSSIBILITY OF ANY SUCH DAMAGES.
   NCMA World Congress 2006                                                                    April 10–12, 2006
   :
                                                                                               Hyatt Regency Atlanta
   Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
Other Seller strategies or compromises by
        Buyer besides exclusion?
• Liquidated Damages
             • Limit to overtime and freight
             • Limit to profit


• For All Damages
             • Limit to price paid for goods
             • Limit to certain dollar amount
             • Percentage of revenue

 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
     Conversely, Buyer will want all these damages
       plus epidemic failure and recall coverage

• Epidemic Failure                                               • Recall
• Same failure mode                                              • NEVER agree without
• Limit to warranty                                                insurance
  coverage                                                       • Put cost into product
• ―Super warranty‖                                                 cost
• Limited time frame                                             • Buy product to
                                                                   product


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
 Always argue facts surrounding the
procurement to support your position
              Buyer                                                            Seller
•       Sole source                                                    • Increases costs of
•       Penalties from                                                   doing business
        customer                                                       • Diverts resources from
•       Other quick source not                                           intended application
        available if failure
                                                                       • Other do not accept
•       Motivate seller to
        perform
•       Others accept
    NCMA World Congress 2006                                                                    April 10–12, 2006
    :
                                                                                                Hyatt Regency Atlanta
    Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
Bottom Line…

1. Contract away/allocate/minimize risk
2. Pass on
3. Insure

NEVER ACCEPT UNLIMITED RISKS OR RISKS
       BEYOND YOUR CONTROL


 NCMA World Congress 2006                                                                    April 10–12, 2006
 :
                                                                                             Hyatt Regency Atlanta
 Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                    Questions?




NCMA World Congress 2006                                                                    April 10–12, 2006
:
                                                                                            Hyatt Regency Atlanta
Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management   Atlanta, GA
                                                                Michael L. Fees
                                                            mfees@feesburgess.com
                                                                                                                              Speakers
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FEES & BURGESS, P.C.                                                                                         business groups; and clients. For
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         NCMA World Congress 2006                                                                               April 10–12, 2006
         :
                                                                                                                Hyatt Regency Atlanta
         Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management              Atlanta, GA

				
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