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(hereinafter referred to as the Supplier)
KOSTAL CR, spol. s. r. o.
264 51 Zdice
and all other companies in the KOSTAL Group
the following agreement is concluded relating to the reimbursement of warranty costs:
Subject matter of the agreement
This present warranty agreement is applicable to all products delivered by the Supplierdesignated for KOSTAL or only for the products which are listed in the appendix. If the warrantyagreement is limited to the products listed in the appendix, the parties undertake to up-date theproduct list on an ongoing basis.
It is the objective of this warranty agreement to resolve complaints regarding quality in amanner which is speedy, unbureaucratic and cost-efficient for both parties.
Furthermore, this warranty agreement governs only the reimbursement by the supplier toKOSTAL of costs incurred in the remedy of defects. It does not govern general liability fordamages for which the Supplier is responsible, in particular for late deliveries (arrears),personal injuries, pecuniary damages, legal deficiencies (e. g., infringements of industrialproperty rights), claims for compensation of expenses and material damages in the legalsense of product liability in respect of those injured, who are not contractual partners to thiswarranty agreement.
Extent of liability
The Supplier is responsible in full for maintaining the agreed quality of the products. TheSupplier is responsible for the unrestricted quality assurance of the products, including thecomprehensive testing of the products. The Supplier guarantees that the products are freefrom faults and that they comply with the agreed specifications and recognized technicalstandards.
Depending on agreement, the method of calculating warranty charges will be either a simplifiedprocess with specified lump sums for every product complained of and accepted as defectiveby the Supplier, or by the individual calculation of all costs incurred by KOSTAL and theircustomers associated with the defective product.
The two methods of calculation differ in that, with agreed lump-sum figures, the Supplier bearsonly the costs in the lump-sums. With individual calculations, the Supplier must reimburse allcosts which are supported by receipts. This includes the internal and external costs incurred incertifying the defect and the expenses involved in detecting and eliminating the defect. If theindividual billing method is applied, the Supplier is always liable without limitation in accordancewith legal stipulations.
If the lump sum method is agreed in the application of the warranty agreement, Section XVParas. 4 to 7 of KOSTAL’s General Terms and Conditions of Purchase (dated November 2006)are replaced in full by the terms set out below. If the individual billing method is agreed, theSection and paragraphs continue to apply in full.
Reimbursement by lump sums
Depending on the time at which the fault is recognized, KOSTAL distinguishes between threetypes of returns. In general, the following lump sums cover all the necessary costs incurred ineliminating the defect. This does not include out-sorting and rework serial defects (in particularreplacement operations in the factory or in the field, or unreported or public recall actions) andspecial freight costs. These will be charged in full on the basis of receipted costs, instead ofthe lump-sum or agreed separately in individual cases.
Internal returns (failures on the line at KOSTAL)
Internal returns are defective products, in which the deficiencies are discovered at KOSTAL
during assembly or by final testing before shipment to the customer.
a) For a full production price of the Supplier's product of up to € 2.00 per unit, a lump sum of
€ 10.00 per unit shall be charged.
b) If the full production price for the Supplier's product is more than € 2.00 per unit, the level of
the lump sum shall be 5 (five) times the gross full production price of the Supplier's product.
Factory returns (failures on the line at KOSTAL's customer's plant)
Factory returns are a justified advice of defects from KOSTAL’s customer, where the Supplier
is responsible for the failure and the products have not yet left the manufacturing plant ofKOSTAL's customer.
c) For a full production price of the Supplier's product of up to € 2.00 per unit, a lump sum of
€ 10.00 per unit shall be charged.
b) For each individual factory return where the full production price for the Supplier's product is
more than € 2.00 per unit, the level of the of the lump sum shall be 15 (fifteen) times the
gross full production price of the Supplier's product.
Field returns are a justified advice of defects from KOSTAL’s customer for products which
have already left KOSTAL's customer's production plants; that is, where the end-product or
spare part has been delivered to the distributor, dealer or ultimate buyer (the customer) and theSupplier is responsible for the defect.
In case of field returns, the Supplier shall reimburse KOSTAL 10 (ten) times the cost of the
KOSTAL product based on the factory transfer price which KOSTAL charges their customer. Ifthe sum which KOSTAL must pay their customer is lower, the difference between the lump-sum and the lower figure will be repaid to the Supplier at the end of the settlement period.
Costs deviating from and additional to the lump sums
As a general principle, where quality deficiencies are detected in products, materials and/or inservices supplied, the following lump-sums will be charged within the framework ofreimbursement of the costs of the work involved :
a) A charge of € 50 will be made for each inspection report which is needed.
b) Where defects are reported and KOSTAL‘s analysis personnel determine the cause of the
breakdown in further processing, the Supplier will be charged a minimum lump sum of€ 100. If additional costs arise for KOSTAL in producing evidence for the defect becausethe Supplier denies without justification the existence of the defect or his responsibility,these costs shall also be charged to the Supplier.
c) The Supplier must bear in full the invoiced cost of transport where special transport is
required to prevent breaks in operations at KOSTAL or at KOSTAL's customer's premises.
Costs for replacement deliveries, sorting and rework
Instead of the lump-sums covered by Paras. 3.1.1 to 3.1.3, the following regulations applyunder (a) to (c) :
a) If goods received are rejected during incoming inspection or before they are used on
assembly, the Supplier shall, at his own cost and at KOSTAL’s choice, out-sort out thedefective products and either replace them with new fault-free products, or repair them.
b) Where immediate action is required to avoid a break in production and the Supplier himself
cannot sort and/or repair the defective goods or declines to do so or is clearly not in aposition to do so, then KOSTAL will remedy the defects themselves or have the defectsremedied by a third party. The costs arising shall be charged to the Supplier, covering theemployment of personnel, the work involved, the hourly rates and including the company‘soverheads and a surcharge for profit. KOSTAL are further entitled to charge the Supplier infull, in addition to the costs mentioned above, for the working, storage and placementareas, in the sum of the costs actually incurred.
c) In urgent cases in order to meet their own delivery obligations, KOSTAL can obtain fault-
free products from a third party in the necessary quantities. The additional costs arisingfrom the covering purchase will be charged to the Supplier.
d) In addition, the Supplier shall reimburse KOSTAL any additional costs incurred as a result
of repairs or providing replacement products or claims for compensation by third parties,provided these costs are not covered by the lump sums. These additional costs include,inter alia, sorting, test and inspection costs, mileage, labour and material costs, transportcosts (including freight and packaging), as well as dismantling and fitting costs and third-party damages. The lump-sums shown in Paras. 3.2.1 (a) and (b) remain unaffected andare therefore invoiced in addition.
Serial damages are repeatedly occurring warranty damages with the same cause of failure. Acase of serial damages occurs where, in a single batch or for the whole of the goods in ashipment, the agreed maximum ppm figure is exceeded by a factor of 15 (fifteen).
In the case of serial damages, all costs required to eliminate the defect will be invoiced to theSupplier.
Recall actions are carried out to avert a danger to the health to persons and damage toproperty. Recall actions are intended to protect the companies responsible for the product andtheir employees from much more costly claims for damages or criminal proceedings. Recallactions can take place as the result of a legal obligation on the part of any company involved inthe manufacturing process of the end-product, or as the result of an official directive. TheSupplier will generally accept recall actions by KOSTAL‘s customers, provided the recall actionis not carried out unreasonably. The recall action may be carried out as a public or unreportedrecall action. In the latter case, only KOSTAL's customers' contracted repair shops andauthorized dealers are informed of the recall action by internal memoranda.
a) In the evaluation phase of a possible recall action and where an unreported recall action is
carried out, the Supplier undertakes to maintain strict confidentiality. If damages arise froma breach of confidentiality by the employees, the Supplier will reimburse in full the damagesincurred by the injured party.
b) In the event of a recall action, KOSTAL are entitled to claim from the Supplier all the costs
which they have necessarily incurred, including charges issued by KOSTAL’s customers.
Where the recall action is carried out because of a serial damage (see 3.2.3 above) theSupplier agrees in principle that products which may in the event be free from defects canalso be replaced at his cost. The Supplier is obliged to accept the costs for replacingdefect-free products only if the replacement of the defect-free products is justified. This willbe the case where to determine at the exchange location whether or not the product isdefect-free would be either technically impossible without unreasonable efforts or wouldnot be economically justifiable.
Cost agreement for serial damages and recall actions
If the Supplier has accepted the lump-sum method of settlement method for the product inquestion, then on conclusion of the actions to eliminate the defects, KOSTAL will at theirdiscretion reduce level of charges in favour of the Supplier, provided that no other restriction onliability has been agreed with the Supplier, which would otherwise apply. In determining thelevel of damages to be paid by the Supplier, consideration shall be given to the Supplier'seconomic circumstances, the nature, scope and duration of the business relationship, anypossible contribution to the cause and/or blame of the customer according to legal terms andany particularly disadvantageous installation point for the part supplied, as well as thereasonableness of the relationship between the Supplier's price for the product and the costs tobe charged.
On conclusion of all actions to eliminate the defects, every effort will be made to reach a mutualagreement on costs between KOSTAL and the Supplier. As a general rule, the lump- sums inSections 3.2.1 (a) and (b) will be charged.
Individual billing will be carried out on the basis of KOSTAL’s General Purchasing Conditionsand statutory rights. KOSTAL are entitled to charge the Supplier for all the costs required in
providing proofs, the calculation of charges or other necessary spending in the management ofdamages. These also include the lump-sums in Sections 3.2.1 (a) and (b) which are calculatedin favour of the Supplier of any higher costs. The Suppler is permitted to demonstrate proof oflower costs. The Supplier accepts the invoices from the customer where a customer ofKOSTAL levies charges. In the case of serial damages, field returns or other damages havingthe same cause and costs, the Supplier accepts a typical proof of costs as an example whichwill then be used as a basis for other defective products without further receipts.
The incoming inspection at KOSTAL is limited to checking the identity of the products(category of goods) and checking for transport damage. If faults are ascertained within thescope of this incoming inspection or during a later check, these are notified to the Supplierimmediately in writing. To this extent the Supplier waives the right to plead that the claim hasbeen made too late.
If and as soon as any defective deliveries are ascertained and provided the goods are inKOSTAL's possession, KOSTAL will return the rejected parts or batch/shipment to the Supplierat the Supplier's costs.
In principle, the Supplier must process all complaints and rejects from KOSTAL free of chargeand must provide proof that the complaint is unjustified, if he refuses to accept costs in full or inpart. The Supplier shall examine the returned components or products and submit his findingsto KOSTAL. The scope and detail of such investigations must be agreed with KOSTAL. Theinvestigations must be conducted within four (4) weeks and the results conveyed to KOSTAL inwriting, unless KOSTAL's customer demands a more speedy analysis. An extension to theperiod is possible in justified, individual cases and must be agreed in writing. Otherwise thecomplaint shall be regarded as accepted after the period has lapsed.
If the Supplier is not in a position to carry out the investigations himself, KOSTAL will carry outthe investigations and charge the costs incurred to the Supplier.
In the case of field returns, the parties to the contract will for economic reasons reduce thenumber of defective products to be returned to the Supplier to a quantity required for statisticalevidence. Even so, KOSTAL will endeavour to obtain all the defective parts which the Supplierrequires. The Supplier shall repay KOSTAL in full the additional costs involved.
Warranty claims do not arise, if the defect is the result of any non-compliance with operating,maintenance or installation instructions, improper or undesignated use or storage, negligent orincorrect processing or the result of interference with the Supplier’s product by KOSTAL or bya third party.
The Supplier undertakes to maintain a liability insurance, in particular to cover the cost fordismantling and fitment costs, recall actions and serial damages in accordance with SectionsXVIII (1) and (2) of KOSTAL’s General Purchasing Conditions, during the entire life of thecontract.
Unless otherwise agreed, the warranty periods set out in Section XV (8) of KOSTAL’s GeneralPurchasing Conditions shall apply.
By arrangement, normally annually, the parties to the contract shall hold discussionsconcerning the amount and extent of the warranty costs. It is the declared intention of both
parties to this contract to keep warranty costs as low as possible by manufacturing productswhich are free from defects.
Validity and duration of the warranty agreement
The agreement shall become effective upon its signature by both parties to the contract. Itshall be extended by one year unless it is terminated at 6 (six) months' notice before the end ofa year. Any such notice must be served by registered post.
Additional verbal agreements have not been made.
Amendments and additions to the agreement must be in writing.
Where any single provision of the contract is or becomes ineffective, this shall not affect theeffectiveness of the remainder of the agreement. The parties to the contract shall endeavour toreplace any such ineffective provision with another provision which fulfils the intention of theformer or missing provision and of this agreement.
The law and place of jurisdiction agreed for the contractual supply relationship also applies tothis warranty agreement. If no such agreement has been made, the regulations in Sections XXI(1) and (2) of KOSTAL’s General Purchasing Conditions shall apply exclusively.
KOSTAL CR, spol. s r. o.
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