Business Law Assignment: Purchase Department Memo on Robotic Line

This report details a memo from the Purchase Department regarding the acquisition of a robotic line. The process began with the solicitation of quotations, selection of a supplier, and negotiation of terms, including price, delivery schedule, and guarantees. A contract was drafted, and after initial progress, quality issues arose with the supplier's materials. The supplier threatened to terminate the contract and demanded compensation for various costs. The report highlights the importance of adherence to contract terms, quality standards, and the legal implications of contract disputes in the context of a business transaction, with a focus on the supplier's failure to meet the agreed-upon quality standards and the subsequent dispute over contract termination and compensation.

BUSINESS LAW
INTER- OFFICE MEMO
FROM: STUDENT I/c of Purchase Department TO: CEO
RE: PURCHASE OF ROBOTIC LINE Dated: 24th November 2017
On the above noted subject, my report on the developments, which took place recently,
is being appended below for your kind perusal.
 I had sent an offer on 18th of August 2017 to a few of our specialized suppliers for
quotations regarding the supply of a Robotic Line as per the specifications given by
Technical Department.
 By 28th August 2017 I received three bids and on 1st September I selected one
supplier whose offer was for three different types of machines. Although each
machine had different technical specifications and price, all were compatible with
our specifications.
 On 4th September I informed the selected supplier and confirmed that his terms
could be considered for final acceptance.
 I also informed the suppliers that we shall hold a meeting within two weeks to
discuss which of the three configurations our company’s technical team finds more
suitable to their needs.
 The supplier was also informed that during the meeting, agreement must be reached
on the following:
 The technical characteristics, including the capacity and quality of the line.
 The final price of €1,850,000.
 The delivery schedule.
 The supplier was also apprised that after principle approval of the prototype
selected, we shall pay an advance of €350,000, subject to his furnishing the final
project drawings and the final delivery schedule.

 The suppliers was also notified about the deduction of a guarantee amount, equal to
5% of the Final Price, until the suppliers warranty obligations remain unfulfilled.
 After a series of meetings, held from 16th to 19th September, between our Project
Team and the supplier, it was decided that the terms are mutually agreed upon and
the contract document can be drawn.
 It was also decided that the contract agreement shall be transfused into a supply
contract at the earliest despite the fact that the issue of the guarantee had to be
addressed at the earliest.
 However, in the minutes of the meeting, it was made clear that the guarantees shall
be those stated under the law of the land.
 On 20th September, I sent the supplier our General Terms of Purchase along with a
draft of our Standard Supply Contract, requesting the suppliers to return the
accepted CGAs and his comments on the draft contract.
 After five weeks, on 2nd November I received an email from the supplier that the
Technical Draft has been submitted to our Technical Team of Operations, hence as
per the agreement, the advance amount should be released. The supplier also
confirmed that many material supplies have already been executed.
 I made enquiries from the Operations Manager about the supplier’s status and was
informed on 5th November that the quality of the supplies was very poor. On these
basis, I replied to the supplier that he was not maintaining the quality standard as
specified in the CGAs.
 A meeting with the supplier was arranged in my office with the Technical Team on
10th November. The supplier, instead of resolving the issue, threatened to terminate
the contract and demanded – (i) Cost of Technology Development €75,000; (ii)
Cost of Industrial Activities €80,000; (iii) Cost of Supplies €65,000; (iv) Contract
Termination Charges of €250,000.
 The supplier did not adhere to the agreed terms of the Supplier Contract nor did he
acknowledge his short comings as compared with the requirements stated in the
CGAs.