Our Ref:………………. Dated: ……………..
Re: Vetting of Supply, Installation and Commissioning Contract to be entered into by and between S and A.
We refer to your letter dated ………. regarding the captioned subject.
We have perused the above draft Contract and our observations are as follows:
|01.||1.1||It is stated in this Clause that Company1 shall supply the products and services specified in ‘Annexure 1’. However, we have not found any such Annexure to the Contract. Prior to execution of the Contract, S should carefully examine the contents of Annexure 1.|
|02.||1.2||The Clause provides that the Supplies shall be subject to the regulations applicable in the Federal Republic of Germany on the date of conclusion of the Contract and variations shall be permissible. Please ensure whether S is agreeable to the same.|
|03.||2.1||In line 4, please replace “defied by” with “defined by”.|
|04.||2.2||Under this Clause, the price shall be valid for Supplies until………., and if the date is exceeded Company1 shall be entitled to invoice any verifiable additional coCompany 2. As such, COMPANY 2 must ensure that the L/C is opened on time so that the Supplies are made within…………|
|05.||2.3||Although this is a commercial issue, please note that under this Clause all ancillary coCompany 2 outside Germany including taxes, customs duties or fees shall be borne by S. Please ensure whether COMPANY 2 is agreeable to the same.|
|06.||3.1.2||The Clause refers to Annexure 2. But we have not found any such Annexure to the Contract. Also, prior to execution of the Contract, S must ensure whether it would be able to meet the “eventual other conditions” as stipulated in the Clause.|
|07.||3.2.1||The Clause refers to Annexure 3. But we have not found any such Annexure to the Contract.|
|08.||3.2.2||Under this Clause, acceptance shall take the form of signature in the Protocol or failure to sign the Protocol. However, as per terms of Clause 3.2.1, any complaint must have to be recorded in the Protocol. If so, it will be deemed that the acceptance is made notwithstanding the complaints. Please ensure whether COMPANY 2 is agreeable to the same.|
|09.||3.3.1||Under this Clause, training of operating personnel has been shown as optional. As such, if COMPANY 2 wants Company1 to train their personnel, it is advised to incorporate the same in the scope of services in ‘Annexure 1’.Also, please note that in case of training of operating personnel by Company1, S has to establish the technical and staffing conditions as requested by Company1. These matters need to be discussed first to ensure that S can meet the technical and staffing conditions.|
|10.||3.3.2||The Clause states that S shall compensate A for any detriment sustained by Company1 due to failure to comply with the date of handover, whereas it is ‘A’ responsibility to meet the date of handover.We therefore suggest deletion of the second sentence starting with “The Purchaser…….” in the Clause.|
|11.||5.1||In order to keep consistency, it is advised to replace the term “customer” with “Purchaser” in line 3.|
|12.||5.1.1||Under this Clause, L/C may be opened 20 weeks before the contractual delivery time, whereas, under Clause 3.1 the delivery time is maximum 18 weeks, which is inconsistent. Please look into the matter.|
|13.||5.2||We suggest deletion of the Clause since it is unnecessary. L/C by itself will secure the payment to Company1, no other evidence is required.|
|14.||5.3||As the payment shall be made by way of a confirmed L/C, there is no scope of any amount falling into arrears. The beneficiary of a L/C enjoys maximum protection against commercial risk since it is assured that the Issuing Bank will pay even if the buyer defaults or is unable to meet its payment obligation. As such, we suggest deletion of this penalty Clause.|
|15.||5.4||As the payment shall be made by way of a confirmed L/C, the Issuing Bank shall effect payment to the Negotiating Bank. As such, we suggest deletion of this Clause.|
|16.||5.5||It is stated that A is entitled to set-off any claim of its associated companies in accordance with Company Law. We suggest deletion of the second sentence in the Clause being unreasonable.|
|17.||6.1||This Clause relating to the warranty period is vague and unspecific. For protection of S’s intereCompany 2, we advise that Clause be re-phrased as follows:“A warrants that it shall be liable for any defect, whether manufacturing or not, in the Supplies for the period of 12(twelve) months from the date of Acceptance under these presents and undertake to make replacement of the Supplies, if the defect is not at all curable. For any other defects, A shall repair the same and shall also supply spare parts in order to keep the Supplies in good order during the warranty period. However, for supply of spare parts subject to ordinary wear and tear, the warranty period shall be 6(six) months.”|
|18.||6.2||In Clause 6.1 above, we have suggested that the warranty period shall run from the date of Acceptance, as such, Clause 6.2, being inconsistent, should be deleted.|
|19.||6.3||We suggest that in line 4, the words “transfer of risk (see Subpara 4.1 above)” with “Acceptance (see Subpara 6.1 above)”.|
|20.||6.4||In line 2, please replace “transfer of risk” by “acceptance”.Please note that by this clause the responsibility of Company1 regarding warranty has been restricted. COMPANY 2 should check whether it is agreeable to the same.|
|21.||12.1||In line 2, please delete “and other Group companies associated with A under company law”.|
|22.||13.1||We suggest that the place of Arbitration be either UK or Singapore.|
|23.||14.1||We suggest that the Contract be governed by “the substantive law applicable in England, instead of “the substantive law applicable in Bern, Switzerland”..|
|24.||Additional clauses||It is advised to incorporate the following clauses numbering in order:
“Unless otherwise provided in the present Contract, either party reserves the right to terminate the Contract by giving 1(one) month’s prior notice in writing to the other party”.
“This agreement shall be binding upon the parties herein and their successors in title and permitted assignees or transferees.”
Apart from above observations, the contents of the draft Contract is in order.
If you have any query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurist”
M.L.Hotel Tower Ltd,208,Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.