Skip to main content

Ahead of the Curve Auto Supplier Blog

July 30, 2012

Limiting Warranty and Recall Liability

Suppliers may be concerned about potential liability under express or implied warranty provisions in supply agreements.  Such warranties are often contained in purchase orders, terms and conditions and statements of work, and can, under the appropriate circumstances, shift liability for part defects from an OEM to a supplier (regardless of tier), and from one supplier to the next.  

A supplier may be able to better manage exposure to warranty liability by understanding how such liability may be allocated among the parties to a supply relationship. Here are some points a supplier may want to keep in mind when evaluating the parties’ individual roles under a supply relationship:

What are the supplier’s responsibilities under the project? Understanding the scope of each project allows a supplier to be aware of how much risk it might be assuming. It helps if the parties work to clearly define each parties’ responsibilities and come to an agreement on those responsibilities.  How will the customer’s expectations affect the supply chain? OEMs (and suppliers) typically try to hold suppliers to the same standard required by its own customers and expect that parts received from a supplier will meet its customers’ demands and expectations. Suppliers may find it beneficial to see that its own suppliers are aware of and aim to meet any such demands and expectations also in order to limit its own potential warranty liability. Is a lawyer necessary? Any time a supplier feels like warranty may become an issue, it may be time to contact counsel to work though any questions or concerns a supplier may have with respect to warranty. In the end, it helps to keep warranty liability in mind and to learn to manage it in a proactive manner, so as to avoid liability later down the road.

NOTICE. Although we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Also, we cannot treat unsolicited information as confidential. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you.

By clicking the ‘ACCEPT’ button, you agree that we may review any information you transmit to us. You recognize that our review of your information, even if you submitted it in a good faith effort to retain us, and even if you consider it confidential, does not preclude us from representing another client directly adverse to you, even in a matter where that information could and will be used against you.

Please click the ‘ACCEPT’ button if you understand and accept the foregoing statement and wish to proceed.

ACCEPTCANCEL

Text

+ -

Reset