In a recent In-House Connect webinar, “Supply Chain Disruptions for In-House Counsel” Vanessa Miller, Litigation Partner and Chair of the Manufacturing Sector at Folely, shared valuable insights into supply chain management and crafting effective contract clauses. The session provided practical guidance for in-house counsel and supply chain professionals on how to mitigate risks and navigate disruptions.
Here are the top five key takeaways from the webinar:
1. The Importance of Force Majeure Clauses
The session emphasized the importance of including force majeure clauses in contracts to address unexpected events such as natural disasters, geopolitical tensions, or factory disruptions. Without these clauses, companies may need to rely on the principle of commercial impracticability under the Uniform Commercial Code (UCC), which can be limiting. It was recommended that these clauses include clear notice periods, performance resumption guidelines, and exit strategies to minimize the impact of supply chain disruptions.
2. Precision in Requirements Contracts
The webinar highlighted cases where imprecise language in requirements contracts led to varying interpretations by courts. To avoid disputes, it is critical for in-house counsel to ensure that obligations and expectations are clearly outlined in contracts. Precise wording in requirements contracts can help prevent misunderstandings and reduce the risk of litigation.
3. Balancing Indemnity Provisions Between Buyers and Sellers
Indemnity provisions are often a point of contention in supply chain agreements, with buyers seeking broad indemnification and sellers aiming to limit their responsibilities. The session underscored the importance of balancing these interests and ensuring that indemnity clauses, particularly terms such as “defend,” are fair and clearly defined. Well-drafted provisions can protect both parties and facilitate smoother dispute resolution.
4. Proactive Risk Management and Supply Chain Mapping
A proactive approach to managing risks was advised, including thorough supply chain mapping to identify vulnerabilities and reviewing past disruptions. Regular updates to contracts, particularly the force majeure provisions, can help allocate risks more effectively. In-house counsel were also encouraged to include provisions for air freight and price indexing to handle unforeseen supply chain fluctuations more flexibly.
5. Long-Term Agreements (LTAs) and Legal Trends
Long-term agreements (LTAs) with key suppliers and customers were recommended as a way to provide stability in uncertain supply chains. Staying updated on legal trends, such as litigation over price increases or supply chain disruptions, is critical for managing contract breaches and enforcing specific performance or injunctions effectively.
Missed The Session? You can watch it now via IHC On-Demand!
