Why you should keep attention to the specification when contracting with suppliers
If you have joint any procurement training, probably you would hear that the specification is one of the most important documents in procurement and supply. This proclamation may sound straight forward to you, but some people may argue that other documents are even more crucial to procurement processes. In fact, in contractual law, the specification plays a fundamental role because the most essential obligations arise from it. This blog post will clarify the relation between the specification and an implied term in sale contract – fitness for purpose.
What is fitness for purpose?
According to USLegal Inc, fitness for purpose refers to the standard that must be met by a seller in the course of a business. Generally, when a buyer makes known to a seller the particular purpose for which the goods are bought, there is an implied condition that the goods are reasonably fit for that purpose (customer’s requirements, needs, or desires).
Fitness for purpose can be found in the legislations almost every countries. In countries with civil law system (such as France, Germany, Japan, Vietnam, etc), clauses on fitness for purpose may lie in Commercial Law (or Commercial Code) and Civil Code. In countries with common law system or mixed legal system (such as UK, US, Botswana, South Africa, etc), you can find the clauses in Sales of Goods Act. Article 35 of Vienna Convention also deals with fitness for purpose.
Fitness for purpose seems ubiquitous regardless which legal systems apply. Generally, fitness for purpose requires the seller to provide a product that conforms with the description within contract documents between the buyer and the seller; or if the contract does not show the description in details, the product must:
- meet the buyer’s needs that the goods with same description would ordinarily be used; or
- are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract; or
- possess the qualities of goods which the seller has held out to the buyer as a sample or mode.
Consequences of Unfitness
Providing the ‘fit for purpose’ goods is one of the fundamental obligations of seller in sale contract. Unfulfilling this obligation would lead to legal consequences. If the goods are unfit for purpose, seller may have to:
- replace the non-conforming goods
- pay the damages to the buyer
Relations between the specification and fitness for purpose
You may have realised the relations between the specification under a contract and fitness for purpose. Specification is the ground for deciding whether goods received are fit for purpose.
We already know that there are two types of specifications: conformance and performance specifications. With conformance specification, the buyer lists out technical requirements to which the goods must conform. Lacking of any requirement may be enough for the goods to be unfit. On the other hand, if performance specification is in use, the goods must be fit for specific outputs that buyer has listed in the specification.
So, at the next procurement project, you should read carefully the specification. When the goods are delivered to your place, make sure that they are carefully inspected and notice the supplier any detected defect immediately.