Article 8

Inspection of Production Facilities and Production Samples

[If acting for the Buyer and the Purchased Goods are being manufactured specially for the Buyer, you may want to insert the following clause:

8.1. Inspection of Production Facilities and Samples - The Buyer, or an independent inspection organization of the Buyer’s choosing, shall have the right to inspect at any time during normal business hours the production facilities where the Purchased Goods are being produced and to inspect the Purchased Goods during production. The Seller shall cooperate with such inspections. In addition, the Seller shall send to the Buyer at the Seller’s expense, prior to, and at reasonable intervals during production of the Purchased Goods, production samples of the Purchased Goods for the Buyer to test and approve.

In the event that the Buyer is not satisfied with either the Purchased Goods being produced at the time of such inspection or with the said production samples, the Buyer shall notify the Seller in writing of its dissatisfaction. The Seller shall immediately seek to cure any such dissatisfaction. In the event that corrections are not immediately made to the satisfaction of the Buyer, Buyer may, at its option, require that production and delivery be suspended pending timely corrections, and such action by the Buyer shall not excuse the Seller from any delays or failure to ship the Purchased Goods on time.]

Article 9 Warranties

The warranty section, if included, is an extremely sensitive negotiated provision. Obviously the Seller will want a “bare bones” minimal approach while the Buyer will want an extensive (both in coverage and time) warranty. The following is only an example of one possible outcome of the negotiations of this provision.

9.1 Warranties - The Seller warrants that all of the Purchased Goods delivered hereunder will conform [strictly] to the descriptions and specifications set forth in Schedule 2 of this Agreement [and to production samples furnished by Seller], and will be merchantable, of good material and workmanship and free from defect. This warranty shall survive any inspection, delivery or acceptance of any Purchased Goods, and payment thereof by the Buyer and any inspection or certificate by an independent inspection organization. The Seller’s obligation shall apply only to failure to meet the foregoing warranties (except as to title) occurring within * (*) months from date of delivery pursuant to Article *, of which the Seller is given written notice within * (*) days of such occurrence and provided the Purchased Goods or part thereof are made available to the Seller as specified by the Seller. If any of the Purchased Goods or part thereof fails to meet the foregoing warranties (except as to title), the Seller shall repair same or, at its option, replace same in either case [INCOTERM] on the same basis as described in Section 3. Any such failure shall not be cause for extention of the duration of the warranty specified in this Article 9. If such failure or defect cannot be corrected by the Seller’s reasonable efforts, the Parties shall negotiate an equal adjustment. The Seller’s obligations under paragraph * above shall not apply to any Purchased Goods, or part thereof, which:

(a) is normally consumed in operation; or

(b) has a normal life inherently shorter than the warranty period specified in paragraph *; or

(c) is not properly stored, installed, used, maintained or repaired, or is modified other than pursuant to the Seller’s instructions or approval; or

(d) has been subjected to any other kind of misuse or detrimental exposure, or has been involved in an accident.

With respect to any of the Purchased Goods not manufactured by the Seller (except for integral parts of the Seller’s Purchased Goods, to which the warranties set forth above shall apply), the Seller gives no warranty, and only the warranty, if any, given by the manufacturer shall apply. Subject to Article *, this Article sets forth the exclusive remedies for claims based upon defects in or non-conformity of the Purchased Goods, whether the claim is in contract, warranty, tort (including negligence), or otherwise. Except as set forth in Article *, the foregoing warranties are in lieu of all other warranties, whether oral, written, express, implied or statutory. NO IMPLIED OR STATUTORY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE SHALL APPLY.