4. Contract terms — clauses that protect the buyer

Pump-supply contracts are usually drafted by the vendor’s legal team. Buyers who accept those drafts unmodified end up with weak warranty rights, no penalty exposure on the vendor side, and limited recourse when something goes wrong.

This section is the buyer’s redline: clauses to insist on, language to push back on, and the legal standards that bound what vendors can refuse.

4.1 Minimum buyer-protective clauses

Clause Default vendor wording What buyer must demand
Performance guarantee “Vendor will use commercially reasonable efforts…” “Vendor warrants performance per HI 14.6 Grade 1U at FAT and field-acceptance”
Warranty period 12 months from delivery 12 months from commissioning OR 18 months from delivery, whichever is later
Spare-parts availability “subject to availability” Vendor will hold rotable spares at agreed lead time for 10 years from delivery
Liquidated damages “no consequential losses” Defined penalty for late delivery (typical 0.5%/week up to 10% of contract)
Intellectual property Vendor retains all drawings Buyer receives “as-built” drawings + dimensional GA with right to repair
Source code / firmware (often silent) Controller firmware updates available for 10 years; escrow on critical software
Inspection rights Vendor schedules FAT Buyer right to witness FAT with 10 business days notice
Rejection rights “best efforts to remedy” Buyer right to reject at FAT for any non-conformance and re-test at vendor cost
Insurance during shipping Vendor’s standard All-risk coverage, FOB or CIF clearly defined per Incoterms 2020
Force majeure Broad vendor protection Mutual; pandemic and supply-chain disruption explicitly included
Governing law and jurisdiction Vendor’s state Buyer’s jurisdiction OR neutral arbitration (CCBC, ICC)

4.2 Performance guarantee — get the language right

The performance guarantee is the most-litigated clause in pump-supply disputes. Make it specific:

Vendor warrants that the pump shall meet the following performance at the FAT and at field acceptance, measured per HI 14.6 Grade 1U as applicable:

Vague performance guarantees (“good industrial practice”, “as per agreed-upon specifications”) give vendors latitude to argue interpretation. Numerical guarantees do not.

4.3 Warranty trigger — commissioning, not delivery

A pump delivered FCA factory may sit in a warehouse for 6 months before commissioning. If the warranty starts at delivery, the buyer loses half of it before the pump runs.

The fix is one of:

Vendors push back on this. The right counter-argument: the pump’s operating clock starts at commissioning, and the warranty should track operating exposure, not shelf life.

4.4 Liquidated damages for late delivery

A typical formulation:

If delivery is delayed beyond the agreed delivery date for reasons attributable to the Vendor, Vendor shall pay liquidated damages of:

This is not a penalty in the punitive sense (Brazilian law restricts those) — it is a pre-agreed estimate of the buyer’s loss, which courts generally enforce.

Avoid these vendor counters:

4.5 Spare-parts continuity

A standard but often-omitted clause:

Vendor commits to maintain availability of spare parts for the equipment covered by this contract for ten (10) years from delivery date. Spare-parts pricing for the first 5 years shall not exceed 110% of the prices listed in Annex X. Vendor shall give Buyer 24 months’ written notice before discontinuing any spare-parts line.

Without this clause, vendors are free to discontinue parts at will. With a 15-year asset life, this is not a theoretical risk — it is the most common cause of premature pump replacement.

4.6 Inspection and rejection rights at FAT

The contract must give the buyer real teeth at FAT, not just a courtesy visit:

Buyer or Buyer’s nominated representative has the right to witness the FAT with not less than 10 business days advance notice. Buyer’s witnessing is not waived by absence; vendor shall provide complete test records on demand.

If FAT identifies non-conformance with the performance guarantee (clause 4.2), Buyer may at its option:

  1. Accept conditionally with documented reservations;
  2. Require re-testing at Vendor’s cost after Vendor remedies the cause; or
  3. Reject the equipment with full refund of CAPEX paid and reimbursement of Buyer’s documented FAT costs.

4.7 Intellectual property — buyer’s right to repair

Vendors traditionally retain all drawings, treating “buyer’s right to repair” as a discretionary add-on. For a 15-year asset life, this is unsustainable.

Demand:

Vendor shall deliver to Buyer, at FAT, the following documentation with non-exclusive perpetual licence to use solely for purposes of operating, maintaining, repairing, and refurbishing the equipment covered by this contract:

Buyer shall not disclose to third parties for the purpose of competing with Vendor’s manufacture of like equipment.

This clause is the difference between being able to spec a refurbishment kit from a third party in 5 years versus being captive to original-vendor parts forever.

For Brazilian buyers and vendors:

4.9 Templates

See templates/contract-clauses.md for a ready-to-paste clause library.

Next section: Factory acceptance — FAT witness rights.