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Is a contract closed if the warranty is period still in effect?


frog2

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I believe that the warranty is condition of the contract and until it expires the contract is not completed? My situation is this:

M&O Contractor (Company) hires a contractor to furnish and install a piece of equipment. Equipment is installed, tested and accepted by Company. Equipment has a one year warranty that starts after acceptance. Stated contract period of performance does not include the one year warranty period.

Before the warranty period expires, a problem arises with the equipment that may or may not be the fault the contractor (manufacturing defect). The problem may have been caused by factors attributable to the Company facility. It is essential that replacement parts be ordered and the repairs begin, probably before the cause has been determined. We want the contractor to repair the units irregardless.

If the repairs are covered under warranty, the repairs would be done under the existing contract. I believe that if we have to pay for the repair, that the existing contract should be modified to add the repair. My compliance guy says no. His opinion is the contract is closed , and if we have to pay for the repairs and we should issue a new contract for the repair. I believe it would be redundant and unnecessary issue a separate contract.

Would appreciate a ruling on this.

Thank you in advance

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Guest Vern Edwards

Under government contracting rules, if the items have been delivered and accepted, and if the repairs are not covered by warranty, then the repairs are outside the scope of the original (furnish and install) contract and require a new procurement. A new procurement would be governed by current regulations (and contract clauses), not regulations in effect when the original contract was awarded. It would not much sense to me to process the new procurement as a modification to an old contract, although I suppose you could do so as long as you comply with regulations.

I don't know to what extent the government contracting regulations apply to you as a management and operating (M&O) contractor.

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Guest Vern Edwards

Your terminology, "open" and "closed," is not appropriate. A contract continues in effect until it has been "discharged" in one way or another, e.g., by fulfillment, accord and satisfaction, or breach. See Cibinic, Nash, and Nagle, Administration of Government Contracts 4th, p. 1202, which describes discharge as "extinguishment of all or part of the continuing rights and obligations of the parties under the contract." See also Restatement of the Law, Second, Contracts 2d, Ch. 12. Warranties are usually described in contract warranty clauses, and warranty rights are contractual rights. A contract continues in effect until all obligations and rights under a warranty clause have been extinguished.

In government contracting, when a contract is "physically complete," see FAR 4.804-4(a), its files must be "closed out" in accordance with FAR 4.804, which is a bureaucratic procedure, not a contractual one.

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