Meaning
Legal provisions in resin purchasing agreements that allocate financial liability for defects, delays, and non-conformance. Procurement and sourcing departments negotiate these clauses to protect the company from costs associated with supply chain disruptions. This clause is a risk-management tool in polymer supply.
Risk Allocation
These clauses define who is responsible for costs arising from issues like delivered resin being out of specification or late deliveries. If the resin contains high contamination that damages the moulder’s hot-runner system, the indemnity clause can shift the repair costs to the supplier. Negotiating supply contract indemnities carefully ensures both parties understand their liabilities.
Financial Recovery
When a supply failure occurs, these clauses allow the moulder to recover losses associated with production downtime, scrapped parts, and customer penalties. This protection is necessary when running high-volume, just-in-time production lines where even a short delay has major financial consequences. Sourcing teams use these terms to minimize the financial impact of material defects.
Delivery Enforcement
Clear indemnity terms encourage the resin supplier to maintain high quality control and delivery performance to avoid financial penalties. If the supplier fails to deliver, the moulder can use these provisions to cover the cost of sourcing material from an alternative supplier at a higher price. This helps ensure a stable and reliable supply of raw materials.