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Which companies or suppliers are you willing to mitigate terms for them in their PO or contract if you decided to award a scope of work.?
The principle of mitigation normally applies to two scenarios: (a) mitigating circumstances e.g. even though a crime has been committed there may be extenuating circumstances (hungry person stealing bread). (b) mitigation of damages - implies that the victim of the breach of contract makes reasonable effort to limit his damages.
.Mitigated conditions are applicable in case the supplier fails to perform the work within the stipulated time as noted in contract/PO. Normally, in order to mitigate the risk, the purchaser requests the supplier for an unconditional performance guarantee (or Bank Guarantee) issued by a bank, before issuance of contact/PO. The Performance Guarantee is normally equal to ten percent of the contract/PO value and remains valid for a specific period.
The performance guarantee states that if the supplier fails to perform the work within the stipulated time as mentioned in contract/PO, the purchaser has the right to cancel the contract /PO and encash (meaning asking the bank to pay) the performance guarantee without any reference to the supplier.
Type of Bonds, Guaranty, Insurance, Mode of Payment, PO Validity,Liquidated damages, After sale services, and etc.
