There are some frequent arguments that customers use when negotiating limits of liability.
Customers purchase goods and services from vendors, which often have incorporated into or built the product using goods and services from their suppliers. But the customer has contractual privity only with the vendor, so the customer has to look to its contractual counterparty for any remedies.
On top of that, some customers that act as resellers are the last in the line before a product reaches the consumer. The law limits how much a vendor to consumers can insulate itself from liability so that the last purchaser before the consumer sits with a lot of risk.. In addition to the legal restrictions, customers also face sophisticated end-use customers that refuse any effort to shift risk to them.
This sandwich of risk - with their vendors shifting risk to customers and the customers not able to shift risks to its customers - leaves the customer exposed.
It is no wonder that customers try to shift risk to their vendors and preserve as many remedies as they can in their contracts. They know they may be left bearing all that risk.
Those reasons outlined are why customers need to manage their risk closely. Here are some common arguments customers make to their vendors during negotiations:
1. You are selling a product, so you should bear all the risks relating to what you sold us.
2. We should not have any liability for problems with what you provide to us.
3. We accept liability from our customers when we sell. We can't also take on your liability when we purchase from you.
4. We are paying you in part to stand behind your product and take the risks.
5. You as the seller are in a better position to mitigate and manage risks.
What other arguments do you see in your contracts? Which arguments resonate the most with you as a vendor or customer?
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