HLST Partners Present Supply Chain Risk Mitigation Strategies to an International Audience

On November 16, HLST Partners Thomas Zalewski and Erin Magennis Healy spoke on the Lex Mundi* panel "Negotiating Commercial Contracts: Insights from Around the Globe" as part of a learning series hosted by a global pharmaceutical company for its in-house counsel worldwide. The presentation offered practical tips from a global perspective for protecting against supply chain vulnerabilities.

Zalewski and Healy offered risk mitigation strategies to help companies plan for and respond to supply chain interruptions as well as tips for negotiating contractual provisions that ensure purchasers have adequate remedies in the event of delivery failures and long-term interruptions.

The discussion included contractual tools for aligning purchaser needs and supplier production capacity such as forecasting, the use of safety stock, and, in scenarios where supply is mission critical and/or sourced from an exclusive supplier, the use of joint committees and incorporating internal policies, procedures, and business continuity plans into contractual obligations.

Zalewski and Healy described their experience negotiating contractual consequences for breaches and various levels of supply interruption. They advised on the implications of exercising a termination right versus a right to require specific performance or seek other damages, such as penalties relating to late shipments or nonconforming product, and discussed the use of liquidated versus unliquidated damages depending on the jurisdiction. They offered tips for qualifying a secondary supply source, including contractually requiring a supplier to assist in the process and use of technology escrows where appropriate.

The presentation concluded with a discussion of the importance of carefully drafted force majeure language that is tailored, is time limited, includes notice requirements, clearly describes consequences, and fits with the contract's choice of law provision.

Supply chain vulnerabilities have been magnified by the COVID-19 pandemic, the war in Ukraine, and the volatility that has ensued globally. Day Pitney provides business-oriented counsel to help companies navigate these complex supply chain issues.

*Lex Mundi is the world's leading network of independent law firms, helping clients create bespoke multinational teams tailored exactly to their requirements.

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COVID-19 DISCLAIMER: As you are aware, as a result of the COVID-19 pandemic, things are changing quickly and the effect, enforceability and interpretation of laws may be affected by future events. The material set forth in this document is not an unequivocal statement of law, but instead represents our best interpretation of where things stand as of the date of first publication. We have not attempted to address the potential impacts of all local, state and federal orders that may have been issued in response to the COVID-19 pandemic.

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