Inspections and Defects
TITLE: INSPECTIONS AND DEFECTS
POLICY NO: P-120
SUBMITTED BY: R. BRADLEY &
APPROVED BY: D. SABEL
Effective Date: 1/08 Supersedes No: 11/86 Page No 1 of 1
This policy is to provide guidance needed to properly inspect and process any defects discovered during or after inspection.
This policy applies to all University employees.
Although inspection of goods received is not a function of Purchasing Services, the Procurement Professional should be informed of any negative results of inspection so that the appropriate action can be taken with the vendor.
IV. Specifications and Quality
Accurate specifications help to assure receipt of proper quality and service. Quality buying involves buying supplies, materials, goods or services of a grade sufficient to fulfill the requirements for which the goods are intended. Purchasing Services attempts to secure the best quality for the intended purpose, and is expected to work with other departments to obtain adequate specifications that are:
A. Simple, clear and exact so that a supplier cannot evade any provisions.
B. Capable of being checked, including a description of the inspection methods to be used, where applicable.
C. Reasonable in tolerances.
D. Capable of being met by several bidders.
E. Flexible, to encourage vendors to suggest cost-saving alternatives or substitutes.
The buyer is responsible for insuring that specifications are sufficient to allow the user to inspect goods upon receipt.
VI. Defective Equipment
Rights to recover losses and damages suffered as a result of defective equipment, materials and workmanship exist at the outset, either by operation of law, or by reason of express contract provisions. Our rights may arise by operation of law in the following ways.
A. Warranties created by law rather than by expression of the parties.
B. Negligence on the part of the supplier or manufacturer of a component part.
C. Violation of an express statutory duty.
Duty to Inspect
Under the Uniform Commercial Code (UCC), a merchant-buyer has no statutory duty to inspect goods on arrival. Failure to inspect goods at time of arrival may preclude the right to reject shipment in its entirety, even though it does not constitute a waiver of the right to claim breach of warranty upon a subsequent discovery that the goods are faulty. Most vendors have sought to impose a duty to inspect upon arrival by inserting clauses in the contract stating that all claims must be made within ten (10) days after arrival of the shipment. Such clauses normally are interpreted by the courts to apply only to claims for defects readily apparent upon arrival.
With respect to non-apparent defects, so-called guaranty clauses may be found that expressly warrant defects for one year and, thereby, limit the sellers liability to a one-year period, rather than the usual four year period imposed by law, in the absence of an express agreement.
Receiving and Inspection Procedures
Sound receiving and inspection procedures mark the starting point for preserving the rights of the University against suppliers, and are essential to successful prosecution of claims for shortages or damages to shipment. Early detection of defects or obvious failures to comply with specifications often permits us to secure a replacement at the suppliers expense and puts us in a more favorable position if a claim develops.
Shortage and/or damage should be called to the attention of the supplier or the carrier at the earliest opportunity. Tardy claims are usually suspect, and there is the risk of losing our rights because of a short non-claim clause in the bill of lading or vendors form.
VII. Defects Not Reasonably Discoverable Upon Receipt of Shipment
In certain types of goods a defect or fault is not reasonably discoverable upon receipt of shipment. For example:
A. Goods received in packages that are not opened until needed;
B. Goods shipped in sealed packages or containers;
C. Defects which do not appear until the goods are put into service
When the defect appears, prompt action may be essential to remedy the non performance or other deficiencies.
Purchase contract documents often contain obscure limitations against charging the supplier for cost of repairs attempted without advance approval. While it is clear that we should not hold up all efforts to begin work merely to preserve our rights against the supplier of a defective minor part, it is equally clear that upon discovery of the defective minor part we should give the supplier prompt written notice and advise him that we will take independent action if he fails to respond by a stated time with instructions or assistance. Where remedial work must begin before the suppliers response could reasonably be expected, prompt notice to the supplier usually will protect us against accidental loss of rights against the supplier.
VIII. Notification Procedures
The printed language on our purchase order is intended to minimize the risk of loss of rights. However, we will not always be able to obtain contracts on exactly the terms that we desire, so it is important to develop notification procedures to cover situations where the discovery of a defect creates an emergency with respect to the scheduled start-up of work, and will permit us to maintain maximum rights against the supplier while minimizing delay and cost.
Please reference the current inspection business process located on the Business at Purdue website: https://www2.itap.purdue.edu/bs/BPP/index.cfm .