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Terms and Conditions for Purchase Production Material

KTM AG Version 01/17, 12.07.2017

TERMS AND CONDITIONS FOR THE PURCHASE OF PRODUCTION MATERIAL AND SPARE PARTS

1. GENERAL TERMS, ORDERS, ACCEPTANCE, SUPPLY CONCTRACT, DELIVERY

1.1 These terms and conditions of purchase (‘TCP’) apply to all purchase contracts concluded by KTM AG (‘KTM’) (regardless of how they be named, e.g. ‘Supply Contract’) for the purchase of production material and spare parts as well as tools and appliances for the manufacturing of those, and regardless of whether or not this was explicitly pointed out in the purchase order.

1.2 Inasmuch the term ‘Supplier’ is being used below, it is to be understood that this term refers to the respective contracting party of KTM.

1.3 The contractual relationships between KTM and the Supplier conform exclusively to these TCP. General terms and conditions of the Supplier do not apply, even if KTM has not explicitly objected in particular cases.

1.4 Special contractual agreements departing from these TCP that are met with the Supplier have priority, provided they are in writing.

1.5 Departures from and amendments of contractual agreements and these TCP as well as other statements are valid only if in writing.

1.6 KTM places an order with the Supplier for the Delivery Items. These may also result from a Delivery Schedule provided by KTM. All orders as well as amendments thereof are legally binding for KTM only if they have been issued by the KTM purchasing department and production department/DISPOSITION in writing.

1.7 The Supplier will accept orders from KTM without delay and in writing. However, the order shall be regarded as accepted if the Supplier does not object in writing within 5 KTM-working days (Monday through Friday, except KTM company holidays) after order date. Each accepted order constitutes a separate supply contract.

1.8 Provided it is economically reasonable for the Supplier, KTM is entitled to amend every aspect of an order, a delivery or a Delivery Schedule at any time (specifically with regard to specifications, plans, designs, time and place of delivery, packaging, quality/quantity of the mode of shipment).

1.9 All correspondence regarding the delivery must show the order number issued by KTM as well as place and address of delivery.

1.10 The Supplier agrees in principle to supply KTM with custom-made products for motorsports inasmuch this will be possible and reasonable for him.

In the case of possible price changes due to an order amendment or a default in delivery the Supplier is obligated to inform KTM without delay. The specific cost responsibilities of amendments are to be settled amicably between the contract parties.

 

2. PRICES

Prices agreed upon include all costs of the Supplier for quality management, function and quality checks, packaging, documentation as well as possibly required permits and insurance.

 

3. DELIVERY

3.1 The dates and periods of delivery as well as delivery quantities predetermined by KTM shall be deemed agreed upon unless the Supplier expressly objects within 5 KTM-working days. The receipt of the Delivery Items at the delivery address specified by KTM governs the compliance with the dates agreed upon.

3.2 KTM reserves the right to reject a delivery or parts thereof and/or to return it to the Supplier on his own expense in the case that they were not carried out in accordance with the order and/or the Delivery Schedule agreed upon. 

3.3 The complete fulfillment of contract together with the implementation of a possible assembly, supply of documentation, instruction/orientation, commissioning, compliance of other subjects agreed upon govern the timeliness of a delivery.

  

4. DELAY IN DELIVERY, DEVIATION IN QUANTITY, PENALTY CLAUSE, NON-INFLUENCEABLE DELAY

4.1 The Supplier undertakes to inform KTM without delay in writing and in detail upon the perception of the imminent risk of a scheduling delay and/or the risk of a deviation in quantity as well as the remedial actions taken by him.

4.2 Upon default by the Supplier due to his own fault KTM is entitled to either demand fulfillment of the contract and compensation for damages occurred to delays or resign from the contract upon setting of an adequate grace and demand compensation for damages occurred to nonperformance.

4.3 Upon default by the Supplier due to his own fault KTM reserves the right to assertion of any claim of damages.

4.4 Each of the contract parties is entitled to defer the compliance with a delivery or service contract upon the incidence of an inevitable delay on which he has no bearing. Any kind of delay that is not due to the default of the related party and thus is beyond his influence is being considered as inevitable (e.g., but not exclusively, cases of force majeure, restrictions and proscriptions on the part of public authorities, embargoes or natural disasters). In such cases KTM will be entitled to cancel orders and to purchase from alternative Suppliers to avoid possible economic damages. Supplier will be obliged to bear proportional cost, which will be probably grow up for the purchasing of original foreseen quantity of Delivery Items from Supplier. KTM will be obliged to show such costs before issuing a debit note.

4.5 In case the Supplier attains knowledge of a circumstance that leads or could lead to an inevitable delay he forthwith informs KTM thereof without delay and will make any effort to alleviate the adherent adverse consequences for KTM.

  

5. PACKAGING

5.1 The Supplier packages the Delivery Items either according to his own packaging method, which is accepted and released by KTM or according to the ‘KTM Packaging Specification for Supplier’ submitted to him separately. Packaging has to be appropriate, functional, faultless and of a quality that ensures the protection of the Delivery Items on their way to the destination point agreed upon.

5.2 The Supplier is liable for an increase in freight charges and/or damages to the goods due to faulty packaging or invalid shipment.

 

6. SHIPMENT, SUPPLY DOCUMENTATION, PASSING OF RISK

6.1 The INCOTERMS 2010 apply to all shipments of the Delivery Items for transnational shipments as well as for national shipments correspondingly. The specific provision is to be agreed upon individually in writing. If no provisions have been agreed upon all costs and risks are on the account of the Supplier, including possible duties and taxes, up to the acceptance by KTM.

6.2 The Supplier informs the carrier timely on the readiness for dispatch of the Delivery Items so that the scheduled delivery date can be met.

6.3 The Supplier encloses a written delivery note stating the delivery data forwarded by KTM such as order number, order item number, parts number, place and address of delivery as well as the detailed description of the contents. In order to avoid confusion with production material it is absolutely essential that the Supplier encloses also the exact indication of the maturity level (e.g. P3-parts, initial samples, samples etc). Upon absence of these data KTM is entitled to reject the delivery on the Supplier's expense and risk. Joint delivery of several items from different orders and/or delivery calls and a joint delivery note / joint shipping documents shall only be permitted if the different orders and/or delivery calls and Delivery Items are clearly indicated. Regarding the shipping documents for the Delivery Items the Supplier adheres to the guidelines agreed upon.

6.4 Should the Supplier arrange for the shipment he provides KTM timely and in writing with a forwarding advice stating the time of delivery, the delivery note data, means of conveyance, and the names of the carrier/forwarding agent.

6.5 The delivery of goods to KTM facilities takes place exclusively to the incoming shipment office at the times agreed upon in writing.

6.6 In case of non-compliance with the provisions according to Article 6.1 through 6.5 due to his fault any damages, risks and costs shall be carried by the Supplier.

6.7 The time of the passage of risks is determined by the respective INCOTERMS 2010 agreed upon, both in the case of international and national transportation. Should no concrete INCOTERM 2010 have been agreed upon the Supplier shall bear the risks up to the acceptance of shipment by KTM.

6.8 Should KTM or a third party provide components the Supplier bears the risk for these components with respect to such components from the time of delivery or receipt by him. This applies accordingly for the return shipment to KTM or the forwarding of the components. The Supplier provides KTM timely and at his own expense with the official documents and certifications required for the intended import or export disposition of the Delivery Items. The consignment note of deliveries originating outside the EU is particularly accompanied by a customs invoice (in triplicate) as well as a certificate of origin valid for a preferential import customs clearance free of charge.

 

7. PAYMENT, INVOICING, OFFSET

7.1 After successful delivery / service provision the invoice is sent by the supplier electronically to accounting@ktm.com.

All invoices have to be in conformity with the Austrian fiscal requirements according to § 11 Austrian VAT Act and have to include the following information in order to enable a comparison with the order and to perform the invoice verification in a precise manner:

- Order Number, KTM Article Number, KTM Part Description and Supplier Number

- Number of the Delivery Note of the Supplier

- Shipping Date, Delivery Address, Incoterms

- Additional Delivery Costs (customs duty, packaging, transport, insurance) 7.2 In case there are no separately agreed terms of payment in written form, the terms of payment are 90 days from the date of receipt of the invoice (workday, until 11:00 CET) and successful receipt of the delivery/service. Until the complete performance of the contract KTM is allowed to retain the payment or conduct a reversal of the payment in case payment took already place.

7.3 If there is no separately written agreement the payment is made by bank transfer. Charges for the bank transfer are shared between KTM and the supplier (bank service charges as option „SHA“ – „shared“). The bank transfer takes place once a week on a workday defined by KTM and includes all faultless, released and due invoices. The bank transfer is made to the bank account of the supplier, which is registered in the KTM database. A change of the supplier’s bank account has to follow a specific process, which is predefined by KTM and will be communicated separately. Invoices, which do not include the information mentioned above, include faults or mistakes or delay the process of invoice verification can be rejected by KTM and invoices will not become valid. The occurring costs, especially missed input tax deductions, have to be paid by the supplier. In this case the term of payment is based on a new properly issued invoice which is correct in content.  

7.4 KTM is entitled to offset accounts towards the Supplier against liabilities if when the latter are not yet due or are to be paid in foreign currency.

7.5 The acceptance of the delivered goods and/or the payment by KTM is no indication for the waiver of assertion of claims for defects, damages or other claims against the supplier.

7.6 The supplier shall not assign claims against KTM to third parties without written agreement of KTM.

 

8. MEANS OF PRODUCTION

8.1 Means of production (production facilities and machinery materials including drawings, samples, models, drafts, tools, appliances, testing equipment, etc.) as well as all attachments to inquiries or orders that the Supplier is provided with by KTM for the performance of his contractual obligations remain physical and intellectual property of KTM. It may only be utilized for the execution of orders from KTM and may not be made available nor disclosed to third parties without prior written consent of KTM.

8.2 Upon payment KTM fully assumes ownership of means of production ordered by KTM and manufactured by the Supplier or third parties and dedicated to the Supplier for the production of parts.

8.3 Should a proportion of tooling costs have been agreed upon, then KTM acquires the proportional property to this extent. The Supplier commits to grant KTM the pre-emptive right to his share upon demand. In the case of indebted delay in delivery he is obliged to refund KTM the proportional tooling cost borne by KTM. KTM is entitled to demand refund payments already made for the cost/share of the means of production should the Supplier fail to provide his delivery as agreed.

8.4 The Supplier commits to deliver a minimum output per tool for mass production to the extent if stipulated separately and in the consistent quality required. Failing which he assumes the corresponding maintenance work or the reconstruction of the means of production, whereat the replacement times of the Delivery Items to KTM may not be jeopardized.

8.5 The deployment condition of the means of production has to correspond to the latest state of the graphs of KTM or to the state of Supplier’s graphs released by KTM. If production and delivery of KTM serial parts and/or spare parts will not be possible according to the former state of graphs, Supplier is obliged to inform KTM without delay. Changes in the means of production require consultation with KTM.

8.6 The Supplier stores, maintains and services the means of production owned by KTM, replaces worn parts as well as insures it against all damages at his own expense. The Supplier guarantees preventive service and maintenance operations to assure a trouble-free minimum production output as agreed upon and to provide for the uninterrupted supply of the Delivery Items for a period of ten years after the completion of the deliveries for the KTM spare part production.

8.7 The Supplier is obliged to inform KTM timely before the expiry of the technical service life and/or before the achievement of the agreed minimum output.

8.8 The passage of risks of the means of production is transferred to the Supplier upon payment or allocation of the manufacturing equipment.

8.9 The means of production will be labeled with an undetachable tool number and the addition ‘Property of KTM’.

8.10 KTM reserves the right to perform an inspection or check of the means of production in the production facilities and/or the warehouses of the Supplier after arrangement upon an appointment.

8.11 The means of production will be provided to KTM ready for collection after the completion of the order or in the case that no valid placing of order should be accomplished respectively upon KTM's request. Furthermore, the Supplier is interdicted from copying, disposing, bonding, or otherwise encumbering means of production in the sole ownership of KTM. 

 

9. WARRANTY

9.1 The Supplier and his subcontractors, upstream Suppliers, and other representatives provide unlimited warranty for the contractual, complete and faultless execution of the delivery in a statutory extent. Supplier particularly warrants that the delivery is featuring the contractually assured characteristics and is corresponding to the underlying designs, in compliance with the accepted rules, the statutory provisions regarding safety and quality, as well as the technical data agreed upon.

9.2 The warranty period begins with the acceptance of the Delivery Item by KTM. The warranty period shall end however subject to the regulation in Article 9.5 within 36 months after the acceptance by KTM, at the latest.

9.3 The Supplier waives the objection of delayed notice of defects. KTM may file such notices of faulty or deviant deliveries within 14 (fourteen) KTM-working days. With obvious defects (such as damaged transport packaging, deviation of quantity) this period begins after receipt of the delivery, otherwise within 14 (fourteen) KTM-working days after obtaining knowledge of the defect. Examination and notice obligations or conditions do not exist prior to complete delivery.

9.4 Regarding warranty remedies the Supplier is able to accomplish the improvement or replacement, if necessary in multi-shift operations or with commitment to overtime and holiday works, provided this is essential due to reasons of KTM business operations and is reasonable towards the Supplier. KTM is not obliged to tolerate more than 1 (one) replacement or rectification attempt. If the Supplier does not forthwith comply with his rectification or replacement obligation KTM is entitled to rectify defects or services not rendered herself or by third parties at risk and expense of the Supplier, to claim a price reduction or to return the Delivery Items to the Supplier on his expense and to declare annulment of the respective Delivery Contract.

9.5 In the case of repair of the Delivery Item – even by replacement of faulty parts – the warranty period is renewed.

 

10. INDEMNITY

10.1 KTM categorically reserves the right to assertion of any claim of damages. Insofar as KTM is entitled to compensation, her claim also extends to the compensation for all damages claimed by KTM's end customers, regardless of the degree of fault of the Supplier or his subcontractors.

10.2 Insofar the Supplier is entitled to compensation KTM is liable to the Supplier for intentional or wantonly negligent performance, except personal injuries for which KTM is liable in cases of slight negligence as well.

  

11. PRODUCT LIABILITY

11.1 In cases of deficiency in title as well as in case of a claim due to product liability (product liability law is regardless of culpability and cannot be limited or excluded by any agreements), the Supplier furthermore indemnifies and holds harmless KTM. In this case the Supplier also has to bear all accruing costs, particularly the costs of an inevitable litigation, and he commits himself to provide all expedient records.

11.2 Should KTM be held liable by reason of the product liability act by any third person, the Supplier is under the obligation of furnishing proof that the Delivery Item was faultless.

11.3 The contracting parties will strive towards the conclusion of a legal defense agreement. 

 

12. RECALL

12.1 In the case of clues for a requirement of a product recall of KTM-goods resulting from a defect of the Delivery Items the contracting parties will comment without delay. Subsequently KTM decides whether a product recall campaign is to be carried out.

12.2 The Supplier will indemnify and hold harmless KTM regarding all expenditures resulting from or due to a product recall campaign of goods or products integrated in the Delivery Items, insofar as the product recall campaign was due to quality defects of Supplier’s delivered products and had been inevitable. This arrangement is also valid in case of a campaign, which must be organized by KTM with a “Technical Information/KTM TI” and realized by means of inspection at KTM’s workshops or Dealer’s workshops.

  

13. INSURANCE, DOCUMENTATION

13.1 The Supplier shall procure adequate product and business liability insurance covering the contract volume and the assumed responsibilities with renowned and solvent insurance companies. In particular, KTM recommends that the insurance coverage for his liability is going beyond statutory liability provisions (product liability with a coverage of at least EUR 5,000,000.00). The Supplier thus ensures that the North American market (Canada and USA) is explicitly considered with adequate coverage amounts for the risk coverage of his product liability in the insurance contract or insurance policy.

13.2 The Supplier provides KTM with the documentation requested in separate agreements in German and/or English Language and guarantees their integrity and accuracy.

  

14. SECRECY, TRADE NAMES, ADVERTISING, CONTROL OF DATE AND QUALITY

14.1 The Supplier commits to treat all overt, commercial and technical circumstances that come to his knowledge through the business relationship with KTM, as trade secrets. This obligation extends beyond the termination of the business relationship. In this regard, the Supplier signs a separate Confidentiality Agreement.

14.2 The Supplier labels the Delivery Items according to the KTM specifications. The mounting and the detailed design of the Supplier's trademark or logo on the Delivery Items will be arranged in cooperation with KTM separately in writing. The Supplier is not allowed to supply unauthorized third parties with Delivery Items bearing KTM's marks. This goes as well for packaging labeled in such way.

14.3 Should the Delivery Items and/or packaging labeled in such way be rejected for being faulty the Supplier shall render them useless at his own expense.

14.4 Exploitation of the business relationship between KTM and the Supplier is permitted only with explicit written consent by and for both partners. The same goes for names, logos, trademarks, decors, product labeling, or company logotypes, respectively.

14.5 The Supplier establishes and substantiates an adequate quality management system with due regard to cost-effectiveness. KTM is entitled to monitor the efficiency of this system on-site. For the safeguard of the desired quality control requirements the Supplier signs a separate Quality Assurance Agreement.

  

15. PLACE OF PERFORMANCE, PASSAGE OF TITLE

15.1 Place of performance for deliveries of the Supplier to KTM is the delivery address stated in the order.

15.2 The passage of title regarding the Delivery Items takes place after full payment by KTM. Extended title retentions shall be accepted by KTM.

 

16. EXTRAORDINARY NOTICE OF TERMINATION

16.1 Both parties are entitled to terminate Framework Delivery Contracts, Delivery Contracts, pending orders, delivery schedules, etc. while maintaining a reasonable period, which ascertains the relocation of KTM-orders for the current or subsequent model year, taking into account the dispositions of the Supplier for primary materials, blanks, finished parts and system components. In case of a termination by the supplier the proportionality of the relocation costs and the units that still have to be produced (all-time requirement) has to be considered, whereas the allocation of the relocation costs on the KTM parts price should not exceed 10% of the parts price.

16.2 In the event of an important reason KTM is entitled to terminate Delivery Contracts without notice. Important reasons can be above all the acquisition of Supplier’s company by a competitor of KTM, repeated failure to comply with Delivery Schedules / calls as well as faults that may affect the nonperformance of guaranteed characteristics. In that case KTM is entitled to rectify or adduce the faults at the place of performance herself or by a third party at the Supplier's expense and risk.

16.3 Furthermore, both contracting parties are entitled to the termination of contracts without notice in the following cases: dismissal of a petition for insolvency proceedings due to lack of liquidity; existence of the requisites for the opening of insolvency proceedings or the dismissal of such an action; repeated or severe infringement against these TCP, against special contractual agreements in written form or the respective Delivery Contracts.

 

17. THIRD-PARTY PROPERTY RIGHTS, OTHER RIGHTS

17.1 The Supplier has to ensure that the contractual usage of his Delivery Items (made by his drawings and/or his know how) does not infringe any immaterial property rights of third parties – even when their issuance, as the case may be, has only recently been applied for. He releases KTM and her subcontractors from all claims resulting from an infringement on such property rights and commits himself to provide KTM with the required permits (licenses) on his own expense.

17.2 Both partners are entitled to forward technical records of the other partner to public authorities to the extent required.

17.3 The Supplier grants KTM or her representatives access to all documents, instruments, accounts and records in relation to the respective Delivery Contract after an appropriate announcement given in advance. The Supplier commits to retain records for the period of a minimum 11 (eleven) years after the last Delivery of the Delivery Items to KTM.

17.4 Should the direct cooperation in the business relationship with KTM generate new inventions or designs all property rights are due to KTM. Should the Supplier have contributed materially to the development he is entitled to the property right pro rata providing the non-existence of an agreement stating otherwise.

17.5 Development services, which are content of an agreement are always part of a superior project. The project management of projects and the development as well as technical and organizational control function of several subprojects and development stages always are in the responsibility of KTM. The awarding of such development services takes place under explicit standards defined by KTM. This is an indication for internal operating research achievements according to § 108c Abs. 2 Z.1 Austrian Income Tax Law and are therefore benefited research efforts for KTM. The contracting parties mutually inform each other about possible property right infringements or the risk thereof. Upon demand of KTM the Supplier informs about and discloses all property rights that are or will be in his ownership and that will be utilized in the research and development or manufacture of the Delivery Items or that pertain to them in another way.  

 

18. SPARE PARTS

18.1 Independent from the term of contract the Supplier commits himself to supply KTM upon request with an ample amount of spare parts namely at least for the life span of the respective Delivery Item, but at least for a period of 10 (ten) years after the completion of the Delivery for KTM’s serial production. The Supplier ensures that all his subcontractors are likewise contractually obliged to the compliance with this provision.

18.2 During the period of a Delivery Contract for KTM’s serial production the prices of spare parts are governed by the agreements met in the Delivery Contract plus possibly necessary costs for special packaging. All the time of Phase-Out of the Delivery Item the supplier has to inform KTM regarding last shot for mass production in order to define the quantity which has to be produced and taken over by KTM PG&A within a period of 2 (two) years. Additional quantities for spare parts are governed by the scaled pricing quotation. Latest at the time of order placement/before production start for spare parts the supplier has to send an offer to KTM PG&A based on production lots of 100pcs./250 pcs./500 pcs./1000 pcs./etc.

  

19. GOVERNING LAW, PLACE OF JURISDICTION

19.1 This agreement shall be governed by the Convention on Contracts for the International Sale of Goods (CISG) excluding the conflict rules of the private international law.

19.2 Any and all disputes arising from or in connection with this TCP shall be settled by the court having jurisdiction over A-5230 Mattighofen.

  

20. WRITTEN FORM, SEVERABLITY, CONDUCT ON COMPANY PREMISES

20.1 All agreements, subsequent amendments and collateral agreements require written form, whereat statements made by FAX, EDI or email suffice this written form requirement.

20.2 Wholly or partially ineffective or unenforceable provisions in this TCP do not affect the effectuality and enforceability of all other provisions in any way.

20.3 The directives of the KTM plant security must be obeyed unconditionally. For the conduct on KTM premises and specifically the exceptional usage of KTM working fund prior consultation with the responsible division manager is required. The rules of conduct declared by KTM must be obeyed.