Who pays for a bad batch: the quality agreement

The argument you are going to have, agreed in advance

When a batch fails in the field, the conversation with your manufacturer is decided by a document that either exists or does not. Without one you are negotiating on goodwill, which is abundant while the order book is growing and scarce in the week you ask someone to absorb a loss. A quality agreement is not the purchase order and it is not the audit report. It is the short document that says what good means, who decides when something is not good, and who pays.

It is worth having even with a partner you trust, because the people who built the relationship are frequently not the people arguing about a batch two years later.

The specification, and the sample it points to

Every clause downstream depends on there being one controlling definition of the product. Name it explicitly: the specification document, its version number and date, and the physical reference sample both parties signed and hold. State where each side’s copy is kept and how long it is retained.

Then say how it changes. Many disputes that present as defects are really undocumented changes, such as a substituted resin, a different cap supplier or a new print vendor. The agreement should require written approval before any change to material, component source, process or manufacturing site, and should state that an unapproved change is a breach whether or not the resulting units pass inspection.

Agree the defect classification before you need it

Both sides need the same categories, and the categories need examples rather than adjectives. What counts as critical, what counts as major, what counts as minor, and crucially which cosmetic variations are accepted rather than relitigated every shipment. Attach photographs of the boundary cases, because the disagreement is never about the obvious failures.

Record the inspection standard you both accept and, separately, record that field performance is also admissible evidence. An agreement that only recognises what an inspector saw at dispatch quietly excludes the failures that cost the most money.

Rework, freight and the buckets nobody assigns

A failure has more cost lines than the value of the goods, and each one needs an owner named in advance.

• The units themselves, by replacement, credit note or a price reduction on the affected lot.
• Rework: who performs it, at whose site, at whose cost, and who inspects the reworked output.
• Freight, including the return leg, plus any expedited shipping needed to cover the supply gap.
• Sorting and screening a suspect lot unit by unit, which is real labour that somebody has to fund.
• Destruction or disposal of unsalvageable stock, with documentation you can produce later.

Silence on any of these is not neutral. In practice it means the brand pays, because the brand is holding the stock and facing the customer.

The platform penalty is the clause brands forget

This is the gap that costs the most and appears in the fewest agreements. When a defect reaches customers, the marketplace or quick commerce platform acts against the entity it has a contract with, and that entity is you. Deductions, penalty charges, listing suppression, enforced returns and the cost of a customer recovery all land on the seller account. The factory is not party to that relationship and carries no exposure to it.

Unless the quality agreement passes it through, the penalty stops with you. State plainly that platform deductions, penalties and enforced customer remedies attributable to a defect are recoverable, define what evidence establishes attribution, and set a cap if the supplier needs one so the clause is signable rather than aspirational. A capped pass-through you can enforce beats an unlimited one that never gets agreed.

How long liability runs

Liability that ends at delivery is barely liability at all, because the defects that matter are usually the ones that appear later. Set a defined period running from delivery, or from the product’s expiry where that is the more sensible anchor, and choose it against how the product actually fails. A consumable that fails on stability needs a longer tail than a moulded part that fails on day one or never.

Decide what pauses the clock as well. Stock sitting in a warehouse has not been used yet, and a period that runs from dispatch can expire before a single unit reaches a customer.

What you have to prove, and what changes the conversation

Name the evidence burden, or you will be asked for the impossible version of it at the worst possible time. Batch code and manufacture date, quantity affected, a defect description mapped to the agreed classification, photographs, the retained sample, and a notification window measured from when you discovered the fault rather than from when it occurred.

Then give the document teeth. A claim against a supplier who has already been paid in full is a request. A quality retention, meaning a hold-back on a fixed share of invoice value released after the liability period, or a right of set-off against open invoices, turns that request into a decision you can take yourself. Suppliers price for this, so expect it in the unit cost, and treat that as the cost of the protection rather than as a concession you lost.

Contract enforceability and remedies are legal matters, and this is not legal advice. Have a lawyer draft and review the agreement, particularly the caps, indemnities and governing law, before either side signs it.