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                            Subpart 12.4 - Unique Requirements Regarding Terms and Conditions for Commercial Products and Commercial Services
        
                  FAR
FAR
FAC Number: 2024-03 Effective Date: 02/23/2024
PartPart 1Part 2Part 3Part 4Part 5Part 6Part 7Part 8Part 9Part 10Part 11Part 12Part 13Part 14Part 15Part 16Part 17Part 18Part 19Part 20Part 21Part 22Part 23Part 24Part 25Part 26Part 27Part 28Part 29Part 30Part 31Part 32Part 33Part 34Part 35Part 36Part 37Part 38Part 39Part 40Part 41Part 42Part 43Part 44Part 45Part 46Part 47Part 48Part 49Part 50Part 51Part 52Part 53
Subpart12.012.112.212.312.412.512.6
Section12.40112.40212.40312.404
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Subpart 12.4 - Unique Requirements Regarding Terms and Conditions for Commercial Products and Commercial ServicesSubpart 12.4 - Unique Requirements Regarding Terms and Conditions for Commercial Products and Commercial Services    **Parent topic:**  Part 12 - Acquisition of Commercial Products and Commercial Services12.401 General.       This subpart provides-                                       (a) Guidance regarding tailoring of the paragraphs in the clause at  52.212-4, Contract Terms and Conditions-Commercial Products and Commercial Services, when the paragraphs do not reflect the customary practice for a particular market; and                                          (b) Guidance on the administration of contracts for commercial products or commercial services in those areas where the terms and conditions in  52.212-4 differ substantially from those contained elsewhere in the FAR.12.402 Acceptance.       (a) The acceptance paragraph in  52.212-4 is based upon the assumption that the Government will rely on the contractor’s assurances that the commercial product or commercial service tendered for acceptance conforms to the contract requirements. The Government inspection of commercial products or commercial services will not prejudice its other rights under the acceptance paragraph. Additionally, although the paragraph does not address the issue of rejection, the Government always has the right to refuse acceptance of nonconforming items. This paragraph is generally appropriate when the Government is acquiring noncomplex commercial products and commercial services.                                          (b) Other acceptance procedures may be more appropriate for the acquisition of complex commercial products or commercial services, or commercial products or commercial services used in critical applications. In such cases, the contracting officer shall include alternative inspection procedure(s) in an addendum and ensure these procedures and the postaward remedies adequately protect the interests of the Government. The contracting officer must carefully examine the terms and conditions of any express warranty with regard to the effect it may have on the Government’s available postaward remedies (see  12.404).                                          (c) The acquisition of commercial products or commercial services under other circumstances such as on an "as is" basis may also require acceptance procedures different from those contained in  52.212-4. The contracting officer should consider the effect the specific circumstances will have on the acceptance paragraph as well as other paragraphs of the clause.12.403 Termination.       (a)                   *General*. The clause at  52.212-4 permits the Government to terminate a contract for commercial products or commercial services either for the convenience of the Government or for cause. However, the paragraphs in  52.212-4 entitled "Termination for the Government’s Convenience" and "Termination for Cause" contain concepts which differ from those contained in the termination clauses prescribed in  part  49. Consequently, the requirements of  part  49 do not apply when terminating contracts for commercial products or commercial services and contracting officers shall follow the procedures in this section. Contracting officers may continue to use  part  49 as guidance to the extent that  part  49 does not conflict with this section and the language of the termination paragraphs in  52.212-4.                                          (b)                   *Policy*. The contracting officer should exercise the Government’s right to terminate a contract for commercial products or commercial services either for convenience or for cause only when such a termination would be in the best interests of the Government. The contracting officer should consult with counsel prior to terminating for cause.                                          (c) Termination for cause.                                                         (1) The paragraph in  52.212-4 entitled "Excusable Delay" requires contractors notify the contracting officer as soon as possible after commencement of any excusable delay. In most situations, this requirement should eliminate the need for a show cause notice prior to terminating a contract. The contracting officer shall send a cure notice prior to terminating a contract for a reason other than late delivery.                                                            (2) The Government’s rights after a termination for cause shall include all the remedies available to any buyer in the marketplace. The Government’s preferred remedy will be to acquire similar items from another contractor and to charge the defaulted contractor with any excess reprocurement costs together with any incidental or consequential damages incurred because of the termination.                                                            (3) When a termination for cause is appropriate, the contracting officer shall send the contractor a written notification regarding the termination. At a minimum, this notification shall-                                                                           (i) Indicate the contract is terminated for cause;                                                                              (ii) Specify the reasons for the termination;                                                                              (iii) Indicate which remedies the Government intends to seek or provide a date by which the Government will inform the contractor of the remedy; and                                                                              (iv) State that the notice constitutes a final decision of the contracting officer and that the contractor has the right to appeal under the Disputes clause (see  33.211).                                                                                                           (4) The contracting officer, in accordance with agency procedures, shall ensure that information related to termination for cause notices and any amendments are reported. In the event the termination for cause is subsequently converted to a termination for convenience, or is otherwise withdrawn, the contracting officer shall ensure that a notice of the conversion or withdrawal is reported. All reporting shall be in accordance with  42.1503(h).                                                                             (d) Termination for the Government’s convenience.                                                         (1) When the contracting officer terminates a contract for commercial products or commercial services for the Government’s convenience, the contractor shall be paid-                                                                           (i)                                                                                             (A) The percentage of the contract price reflecting the percentage of the work performed prior to the notice of the termination for fixed-price or fixed-price with economic price adjustment contracts; or                                                                                                (B) An amount for direct labor hours (as defined in the Schedule of the contract) determined by multiplying the number of direct labor hours expended before the effective date of termination by the hourly rate(s) in the Schedule; and                                                                                                                                         (ii) Any charges the contractor can demonstrate directly resulted from the termination. The contractor may demonstrate such charges using its standard record keeping system and is not required to comply with the cost accounting standards or the contract cost principles in  part  31. The Government does not have any right to audit the contractor’s records solely because of the termination for convenience.                                                                                                           (2) Generally, the parties should mutually agree upon the requirements of the termination proposal. The parties must balance the Government’s need to obtain sufficient documentation to support payment to the contractor against the goal of having a simple and expeditious settlement.12.404 Warranties.       (a)                   *Implied warranties*. The Government’s post award rights contained in  52.212-4 are the implied warranty of merchantability, the implied warranty of fitness for particular purpose and the remedies contained in the acceptance paragraph.                                                         (1) The implied warranty of merchantability provides that an item is reasonably fit for the ordinary purposes for which such items are used. The items must be of at least average, fair or medium-grade quality and must be comparable in quality to those that will pass without objection in the trade or market for items of the same description.                                                            (2) The implied warranty of fitness for a particular purpose provides that an item is fit for use for the particular purpose for which the Government will use the items. The Government can rely upon an implied warranty of fitness for particular purpose when-                                                                           (i) The seller knows the particular purpose for which the Government intends to use the item; and                                                                              (ii) The Government relied upon the contractor’s skill and judgment that the item would be appropriate for that particular purpose.                                                                                                           (3) Contracting officers should consult with legal counsel prior to asserting any claim for a breach of an implied warranty.                                                                             (b)                   *Express warranties*.   41 U.S.C.3307(e)(5)(B) requires contracting officers to take advantage of commercial warranties. To the maximum extent practicable, solicitations for commercial products shall require offerors to offer the Government at least the same warranty terms, including offers of extended warranties, offered to the general public in customary commercial practice. Solicitations may specify minimum warranty terms, such as minimum duration, appropriate for the Government’s intended use of the item.                                                         (1) Any express warranty the Government intends to rely upon must meet the needs of the Government. The contracting officer should analyze any commercial warranty to determine if-                                                                           (i) The warranty is adequate to protect the needs of the Government, *e.g.,* items covered by the warranty and length of warranty;                                                                              (ii) The terms allow the Government effective postaward administration of the warranty to include the identification of warranted items, procedures for the return of warranted items to the contractor for repair or replacement, and collection of product performance information; and                                                                              (iii) The warranty is cost-effective.                                                                                                           (2) In some markets, it may be customary commercial practice for contractors to exclude or limit the implied warranties contained in  52.212-4 in the provisions of an express warranty. In such cases, the contracting officer shall ensure that the express warranty provides for the repair or replacement of defective items discovered within a reasonable period of time after acceptance.                                                            (3) Express warranties shall be included in the contract by addendum (see  12.302).
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