Component Liability Sample Clauses

Component Liability. A. In certain cases, the manufacturer will wait for an order before it expends any money to support the order. In many cases, however, the manufacturer will have to take action (e.g., order components) and incur liability prior to the date on which it receives an order. Many customers choose to provide forecasts to the manufacturer, and expect the manufacturer to be able to fully support its orders which have been included in the forecast (as well as some additional “drop in” orders as set forth in the flexibility parameters). Often the customer disclaims any liability for its forecast, and expects the manufacturer to take the risk that the forecast may not materialize. Where the manufacturer has many customers for its product (and the manufacturer’s margins and/or industry standard/competition support taking the risk), the manufacturer may be willing to do so. However, where the customer is the manufacturer’s sole customer for the product or where the customer has specifically requested that the manufacturer customize its standard product to meet the customer’s specification (which requires the manufacturer to purchase components which are not usable for any other customer), it is fair for the manufacturer to require the customer to remain liable for purchases made in support of the customer’s forecast. B. The “material liability” risk is best illustrated by example: Assume that on March 1, 2011, Manufacturer and Customer ABC sign an Agreement which forecasts delivery of 100 units on January 1, 2012 and an additional 100 per week for the remainder of the quarter, for a total of 1,300 units. ABC has several configurations for the product, and will only issue a purchase order 30 days prior to the delivery date of the product (but expects Manufacturer to be able to support is forecast by ordering the necessary components in accordance with the component vendor’s required leadtime (the “Vendor Lead Time”). Under industry practice, Manufacturer will place Component orders such that all Components are received by Manufacturer on or before December 10, 2011 so that the Manufacturer can manufacture, test and ship the product in time for the January 1, 2012 deadline (the period between December 12, 2011 and January 1, 2012 is referred to as the “Manufacturing Lead Time”). Manufacturer must order the component within the Vendor Lead Time; if Manufacturer does not order the component within the Vendor Lead Time, it should expect to pay a premium for the component (i...