Vetting of Supply & Installation

Mr. M



Our Ref: …………..

Dated: ………………

Mr. X


Dear Sir,

We refer to your letter dated 29.09.2004 regarding the captioned subject.

We have perused the above draft Agreement and our observations are as follows:

Sl. Clauses Observations
01 1.1 It is stated in this clause that the scope of services and description of the Supplies is specified in ‘Annexure 1’.The said Annexure was not referred to us. It is thereby advised to X Holding (X) to review the said Annexure before execution of this Agreement.
02 2.2 Under the terms of this clause,  Y shall be entitled to charge additional coX if the supply is not made by them within 30.10.2004 for any reason attributable to X.  As  such, if  the L/C is not opened on time X may have to pay additional charge. Please look in to the matter.
03 3.2.2 Under  the terms of this clause, Acceptance shall take the form of signature in the Protocol. Whereas as per the 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. It is upon X whether to accept the same.
04 3.3.1 Under this clause,  training of operating personnel has been shown as optional. As such, if X wants Y to train their personnel, it is advised to incorporate the same in the scope of services in ‘Annexure 1’.
05 3.3.2 This clause is unreasonable, in that, it is stated that  if the installation work is not initiated in accordance with the terms of the contract then X shall compensate Y. The question is who is responsible for installation, it is Y.Further, it is stated that X shall be liable to compensate Y for any detriment sustained by Y due to failure to comply with the date of handover. The question is who will handover the Supplies, it is Y.

It is thereby  advised to delete the entire clause.

06 5.1 In order to keep consistency it is advised to replace the term “customer” with the “Purchaser” in last line.
07 5.1.1 Under the terms of this clause L/C may be opened 20 weeks before the contractual delivery time, whereas, under clause 3 the delivery time is maximum 18 weeks, which is inconsistent. Please look into the matter.
08 5.2 This clause is advised to be deleted as unnecessary. L/C by itself secure the payment to Y, no other evidence is required.
09 5.3 As the payment shall be made by way of a confirmed L/C, there is no scope to fall any amount as arrears. The beneficiary of a L/C enjoys maximum protection against commercial risk since it is assured that the issuing bank will pay it even if the buyer defaults or is unable to meet its payment obligation. As such, this penalty clause being irrelevant is advised to be deleted.
10 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 this clause being irrelevant is advised to be deleted.
11 5.5 It is stated that Y is entitled  to set-off any claim of its associated companies in accordance with German Company Law. As we understand, X would have no liability with any of Y’s associated companies.
12 6.1 Under this clause, the warranty period has been mentioned 12 months from the date the risk is transferred, which is vague.It is thereby advised to re-phrase the entire clause as follows:

“Y 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 cureable. For any other defects Y shall repair the same and shall also  supply of spare parts in order to keep the Supplies in good order during warranty period. However, for supply of spare parts subject to ordinary wear and tear, the warranty period shall be for 6(six) months”

13 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,  is advised to be deleted.
14 6.3 It is advised to replace the phrase “transfer of risk” with “Acceptance” in  fourth line.
15 6.4 By this clause the responsibility of Y as to warranty was restricted. It is upon X whether to accept it or not.
16 12.1 It is advised to delete “under German company  law”    from third line.
17 13.1 The place of Arbitration is advised to substitute with either UK or Singapore.
18 14.1 We are not conversant with Swiss Law. It is therefore advised to substitute the substantive law with the ‘English Law’.
19 Additional clauses It is advised to incorporate the following clauses numbering in order:“Unless otherwise provided in the present Agreement, both the parties shall have the right to terminate the Agreement by giving 1 (one) month prior notice in writing to the other party”.

“All notices shall be sent by tele-fax to the respective above mentioned addresses and all notices shall be deemed to be received if sent  through the above mentioned methods”.

“This agreement shall be binding upon the parties herein and their successors in title and permitted assignees or transferees.”

Apart from above observations, the draft Agreement was found in order.

Thanking you.

Yours faithfully,

Drafted by:

For: “The Lawyers & JuriX”
M.L.Hotel Tower Ltd,208,Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.