Knowledge To Negotiate

In a linkedIN group someone asked this is of what “every once in a while” means. The most typical use of the word is with a necessity that an ongoing party, their service, or product complies with relevant laws. When you say “Supplier shall adhere to all applicable laws as may be amended every once in awhile”, what you are really doing is to require the supplier to make changes each and every time an applicable law changes.

Complying with appropriate laws as they are changed presents an enormous potential risk. You can have labor laws, minimal wages, or healthcare laws enacted. You can have environmental laws enacted. Imagine being truly a supplier to an ongoing company that markets products in well over 100 countries, each of which may have multiple political subdivisions that can each move laws.

A change or new environmental legislation can also force changes to materials and processes used to manufacture a product. Should a provider be required to comply with all changes that might occur in these various locations? Could it be financially feasible even? If a little country enacted an environmental law or other laws the price to implement the changes may not be worthwhile for the quantity of sales for the reason that market.

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It may also not be worth it to manufacture a unique item for only that market, nor would a supplier want to load their cost framework for marketplaces that simply don’t require it. Even though you require a supplier to make all changes that are necessary to comply with a fresh or changed law, there are several situations where they won’t be asked to make changes. The first is if the noticeable change in regulations would make the performance of the agreement illegal.

In that case the agreement would be voidable. The other situation would be where they might be excused from performance because the change in the law causes the impossibility of performance, impracticability of performance or in a few locations results within an economic hardship. One of the feedback made in that discussion was “if the Supplier considers that deal is wanted by him, it is part of the risk they need to take, which should be tackled in their quoted price”.

If the contract is silent about settlement or other adjustments that may be required to comply with the law, the entire cost and responsibility for compliance would need to be borne by the Supplier. Many times a change in the law may simply not be a cost issue, it can impact enough time for performance as well.