OUTLOOK

REDUCING RISKS AS A MOLD BUILDER: RENEGOTIATING CONTRACT TERMS AND CONDITIONS

by H. Alan Rothenbuecher, partner, Benesch Friedlander Coplan & Aronoff LLP and Katie Berens, summer associate

As a mold builder, it is important to minimize risk to remain successful and profitable. This is no easy task – this requires knowledge of what risk areas to target, and how to best reduce each form of risk. The ability to avoid common costly pitfalls in contracting can help mold builders stay competitive in the industry and stable in their business financials. Below are five key risk areas to which every mold builder should pay attention when drafting a new agreement or renegotiating the terms and conditions of an existing contract.

LEVERAGE PRICE ADJUSTMENT CLAUSES Price adjustment clauses are contract terms that provide for the higher or lower pricing of goods, dependent upon certain conditions. These clauses mitigate uncertainty in pricing of commodities, as they can protect against financial exposure from price fluctuations. When executed properly, these clauses can insulate parties from costs resulting from inevitable market volatility. Price adjustment clauses can help foster long-term contractual relationships, as they minimize the need for future ongoing negotiations on the same pricing issues. Use of these clauses also can reduce the likelihood of contractual breach, as they embed a plan into the agreement to address how the terms of the exchange will shift to accommodate sudden changes in the market.

In legal disputes, courts commonly hold price adjustment clauses enforceable in agreements between sophisticated parties. Generally, a sophisticated party is aware of and understands the bargain to which it is agreeing. Notably, parties may specify their status as sophisticated parties within the terms of their contract, which can further the likelihood of enforcement of a price adjustment provision in a case of dispute.

Mold builders should utilize these terms in their agreements to minimize potential financial loss when facing a market downturn. Incorporating a price adjustment clause into the agreement likely will require some negotiation. Any such clause should include a defined price index designed to respond to material changes in the market. This clause should specify a maximum and minimum price range for the price adjustment.

BE AWARE OF THE MOLD BUILDER’S LIEN A lien is a legal right against another party’s assets that can be exercised to ensure fulfillment of an underlying debt or obligation. Mold builders may need to exercise their lien rights in cases of non-payment for materials or services rendered. Mold builders must ensure that their lien rights remain protected under any agreement into which they enter. Mold builders should familiarize themselves with the laws in their state governing mold builder lien rights to understand what measures can be pursued to secure payment for materials or services provided if needed. Often, a UCC financing statement must be filed for a mold builder to protect its lien rights.

Mold builders also should be aware of and look out for the lien release agreement. A lien release is signing away the ability to exercise the mold builders’ lien rights, such that they may not pursue certain claims against the other party in the case of a future dispute. Any such release should be negotiated and, if agreed to in exchange for payment, should be written as narrowly as possible. Further, a lien release can incorporate certain conditional language to better protect the mold builder’s interest – i.e., conditioning release upon actual receipt of payment. Exceptions also can be written into release terms, which can help prevent the mold builders from learning that their rights have been waived at the moment when they need to exercise them.

DISCLAIM IMPLIED WARRANTIES A warranty is a promise that a seller makes to a buyer about the quality and useability of the goods being sold. Under the Uniform Commercial Code (UCC), a set of laws that apply to all commercial transactions in the United States,

certain warranties may be read into a contract – even though they are not expressly written in the agreement. Mold builders can prevent future liability in a potential dispute by visibly disclaiming such warranties within any supply contract.

Common implied warranties include merchantability, fitness for a particular purpose and non-infringement. Merchantability is a guarantee that the molds sold will serve their ordinary purpose and satisfy the buyer’s reasonable expectations. Fitness for a particular purpose means that the mold will serve an intended purpose that is clear to both parties of the sale. Non-infringement is the assurance that the molds sold are not infringing upon existing intellectual property rights.

Mold builders should ensure that they disclaim as many implied warranties as they can. To be upheld under the law, any disclaimer of implied warranties within a contract must be visible and obvious. If the wording is unclear or the term is hidden within the contract, it is more likely that a court will hold the disclaimer unenforceable in a dispute. Mold builders need to ensure that there will be no responsibility for any defects that occur beyond the actions in their control. Mold builders should put this safeguard into their contracts to protect against the risk of financial liability from a promise that was never expressly made.

INCLUDE THE PROPER INCOTERMS When goods are transported between seller and buyer, certain logistics must be clarified to ensure a smooth transfer. Misunderstandings can present roadblocks in a transfer of goods that lead to surprise financial costs, as well as frustration and delay of business. Incoterms address this issue by establishing universal rules to clarify the responsibilities of each party to a transaction that involves the transport of goods.

The International Chamber of Commerce (ICC) promulgated Incoterms in 1936 to promote clarity in commercial transactions and provides periodic updates to them to incorporate changes in trade practices. Incoterms clarify who is responsible for costs and management of each logistical step of a transaction, such as shipping, insurance, documentation and customs clearance, among others.

There are 11 Incoterms that may be used in trade contracts to allocate risk and responsibility. For example, EXW (Ex Works) provides protection to a seller by requiring the buyer to assume all risk and transportation costs. Under

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FCA (Free Carrier), the risk passes from the seller to the buyer at the agreed-upon point of delivery. FOB (Free on Board) means that the seller is obligated to deliver the goods on board a ship for the buyer.

Incoterms are optional – parties must opt into them by including the proper terms in their agreements, and those agreements must specify the version of Incoterms to which the parties are referring. Mold builders must be sure to use the right Incoterms within their contracts to minimize their risk in the shipment of molds to a buyer.

Under the terms of an agreement, buyers should remain responsible for all that is in their control in a transaction. It is critical for sellers to select terms that only place risk upon the actions that they control.

INCORPORATE LIMITATION OF LIABILITY CLAUSES Lastly, mold builders should include limitation of liability clauses in their agreements to eliminate the risk of financial exposure for actions of the buyer. A limitation of liability clause limits a mold builder’s potential for exposure on a claim related to the molds. Include contract terms that say the mold builder will not be held responsible for any misuse, mishandling or improper storage by the customer.

Misuse is when a molder uses the mold improperly, or for an incorrect purpose. Mishandling occurs when a molder uses the mold incorrectly or ineffectively. Similarly, improper storage is the exposure of the mold to conditions that damage its effectiveness because of the molder’s incorrect handling of the mold. Limitation of liability clauses also can be used to exclude forms of damages that can be sought in a potential lawsuit, such as consequential, incidental and punitive damages.

The ability to avoid common costly pitfalls in contracting can help mold builders stay competitive in the industry and stable in their business financials.”

Mold builders should incorporate clauses into their agreements that eliminate their liability for actions that are entirely within the buyer’s control, and that exclude these forms of damages from potential recovery in a lawsuit against them. Under the UCC, limitation of liability clauses must be clearly displayed in consumer contracts and easy to understand to be enforceable.

Mold builders should review their agreements and consider the extent of all clauses to protect against being held responsible for unforeseen consequences beyond their control as sellers.

Alan Rothenbuecher general counsel for the AMBA organization and a partner with the law firm of Benesch, Friedlander, Coplan & Aronoff LLP. Rothenbuecher concentrates his practice in the plastics industry and proactively addressing challenges faced by industry companies. For more information, contact Rothenbuecher at 216.363.4436, www.beneschlaw.com or ARothenbuecher@beneschlaw.com.

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AMBA SALES PROCESS FORUM RETURNS IN SEPTEMBER

September 22, 2022 | Schaumburg, Illinois The AMBA Sales Process Forum, Schaumburg, Illinois, will return to an in-person format on Sept. 22, 2022, at the Fairfield Inn & Suites by Marriott and will feature key industry insights from Ken Seawell, Sandler Training and Shelly Otenbaker, WayPoint Marketing Communications. During this interactive workshop experience, Seawell and Otenbaker will facilitate conversation on the “psychology of selling,” clarify its role in new business acquisition and marketing strategy and help attendees design and refine their personal sales strategies. For details, hotel and registration, visit www.AMBA.org/Events.

[1] AMBA LAUNCHES NEW WORK CAPACITY TOOL The American Mold Builders Association is excited to announce the launch of the AMBA Work Capacity Tool – an innovative resource now available to help mold manufacturers share and fill capacity when needed. Designed specifically for AMBA member shops, this online, members-only tool allows a mold builder to locate open capacity in over-capacity situations and conversely, fill open capacity when work is needed, thereby helping to fuel sustainability and growth. For more information, visit page 43 or www.AMBA.org.

[2] INDUSTRY-WIDE BENCHMARKING HEATS UP IN THIRD QUARTER Three summertime benchmarking efforts have been completed by the AMBA Benchmarking team and are now available to the AMBA membership. The first is AMBA’s newest publication in its workforce development playbook series, Best Practices in Educator and Community Connections, which features a series of templates, resources and best practices that mold manufacturers can use to recruit next-generation employees. AMBA also has published, for the second year in a row, the Shop Rate Report, which illustrates the average shop rates across over 20 moldmaking and engineering services. Additionally, AMBA published the 2022 Health and Benefits Report, with data on health, dental, vision, ancillary and retirement benefits, the report reviewed the utilization of new strategies to control healthcare dollars and contain costs. Reports are available only to AMBA members at www.amba.org/publications/browse/.

In addition to its recent publications, AMBA has already launched its 2022 Wage and Salary Survey, which will be open to all US mold manufacturers. This year’s report will collect and analyze wage and salary information for over 50 job functions commonly found in mold building operations, as well as provide insight into vacation policies and other workforce-related benefits. Learn more at www.AMBA.org.

NEW ROUNDTABLE FOR OPERATIONS AND FACILITY MANAGERS August 31, 2022 | Virtual AMBA has opened registration for its newest roundtable discussion, which will focus on challenges faced in operations and facility management. Like its other virtual roundtable discussions, peers in these functional areas will meet on camera to discuss topics such as efficiency, workflow and throughput, capital investment, time off/ vacation policies, training procedures and more. AMBA also has scheduled its next Sales and Marketing roundtable discussion for Sept. 13 at noon EST. Learn more and register for these roundtable discussions at www.AMBA. org/Events.

SAVE THE DATE - PLANT TOUR WORKSHOP On November 10, 2022, AMBA will host its next inperson plant tour workshop at iMFLUX Inc., Hamilton, Ohio, “Automation and Fearless Innovation.” During the tour, iMFLUX will feature new technologies and recent investments related to mold estimating and scope development simulation, customer management, programming, tooling and much more. For details, visit www.AMBA.org/Events.

VIRTUAL SERIES PROVIDES LEADERSHIP GUIDANCE AND EXECUTIVE ACCESS TO EMERGING LEADERS On August 25, 2022, up-and-coming leaders in manufacturing will come together to hear from the Wise Plastics team as their top managers review past pitfalls in the workplace, provide an introduction to RACI principles (including responsibility and accountability) and review the role that team and individual accountability plays in leadership development and company-wide impact. This event is an interactive presentation and will include smallgroup interaction and all-group discussion.

This will be the second session of “Perspectives from the Top,” a virtual series of leadership lessons and stories shared by manufacturing industry executives. The series features one session per month through the end of 2022. To join peers in mold building, plastics processing and rubber product manufacturing emerging in leadership, learn more and register for the series at www.AMBA.org/Events.

[3] HILLARY THOMAS JOINS AMBA BOARD OF DIRECTORS Hillary Thomas, vice president of Westminster Tool, Plainfield, Connecticut, rejoined the family business in 2017 after four years of working as a global sales consultant. Thomas’ experience in leading and promoting corporate change through training programs has aided Westminster Tool’s philosophy of hiring for character and training for skill. The company’s commitment to developing its own talent – and the resulting young workforce – in a highly skilled industry has created a unique set of challenges, which Thomas has been working to overcome with new programs and infrastructure to retain the team the company has built. She also led the partnership and integration of new additive technology within the organization. Thomas was instrumental in developing the AMBA Emerging Leaders network and served on the advisory board since its inception in 2019. Additionally, she has served on PLASTICS FLiP (future leaders in plastics) engagement committee and was a 2021 MoldMaking Technology 30 under 30 honoree and Plastics News Rising Star.

NEW MEMBERS

Nicolet Plastics

16685 State Rd. 32 Mountain, Wisconsin 54149 Lisa Pichotta, director of Human Resources Phone: 715.276.4212 Email: lisa.pichotta@nicoletplastics.com Nicolet Plastics is a full-service tooling manufacturer with additive manufacturing and injection molding capabilities of high-, medium- and low-volume custom plastics. The company is fast to solve problems and provide solutions, fluid to adapt to changing requirements and flexible to support its customers’ needs. Nicolet offers in-house tooling along with build management of domestic and international suppliers.

Sullivan Tool and Repair Inc.

370 Brook St. Elgin, Illinois 60120 John Sullivan, president Phone: 224.856.5867 Email: jps@sullivantool.net

Sullivan Tool and Repair Inc. is a family-owned and -operated business established in 2002, specializing in custom injection molds. Sullivan provides class 101 tooling, performs repairs and has extensive experience with high-tolerance medical and automotive safety parts. The company offers nearly all services in-house, including full-mold design and construction, welding and polishing.

Xpress 7 Inc.

71070 US Highway 12 Dassel, Minnesota 55325 Blake Hendrickson, CEO/shop manager Phone: 320.275.2750 Email: blake@xpress-7.com

Xpress 7 Inc. specializes in prototype to medium production molds of parts that are small but not micro. Through standardization, accurate equipment and a good work environment, Xpress 7 strives to make mold building fun and stress free.

Rocheleau Tool and Die

117 Industrial Rd. Fitchburg, Massachusetts 01420 Zach Rocheleau, purchasing Phone: 978.345.1723 Email: zach@rocheleautool.com

Rocheleau Tool and Die, a fourth-generation familyowned business, specializes in the production of extrusion blow molding machinery. Rocheleau offers complete tooling services that include custom moldmaking and manufacturing of die heads with wide-range configurations designed to fit in its blow molding machinery. The team’s experienced toolmakers create molds that meet a range of production needs, reliably and economically.

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NEW PARTNERS

GROB Systems, Inc.

1070 Navajo Dr. Bluffton, Ohio 45817 Jamie Rivait, regional sales manager Phone: 419.358.9015 Email: jrivait@grobsystems.com

GROB Systems, Inc., is a family-owned company and is known worldwide for the development and manufacturing of machines and production lines for automotive OEMs for more than 90 years. GROB has since expanded its portfolio to include universal 5-axis machining centers with a unique retractable spindle that provides unmatched access to the workpiece, and even upside-down machining, in a collision-free environment during tool change.

Osco Inc.

2955 Waterview Dr. Rochester Hills, Michigan 48309 Bruce Gilgallon, sales manager Phone: 248.852.7310 Email: bgilgallon@oscosystems.com Innovative and responsive to the changing needs of the molding industry for 40 years, OSCO is recognized worldwide for the development and engineering of accurate, durable and time-saving products. OSCO’s nozzles, valves, filters and control systems save OSCO customers downtime, waste and money.

PrymeTech

155 Prairie Lake Rd. Suite A & J East Dundee, Illinois 60118 Rich Domaleczny, president Phone: 847.558.9213 Email: rich@prymetech.com

PrymeTech is a metrology company and a loyal distributor of Zeiss Industrial Metrology and Handson Metrology, as well as, a Universal Robotics Integrator. PrymeTech is the manufacturer of PrymeFix Fixturing which provides modular and custom fixtures for CMM and Vision Systems. PrymeTech services include contract inspection, programming, reverse engineering and training.