Pass through Indemnity Clause Drafting for Garment Wet Processing
Pass-through indemnity clauses require un-capped liability carve-outs and mandatory flow-down terms to bridge privity gaps across dyehouses and garment vendors.
Privity of Contract
Legal Principles
Rules restricting the rights and obligations of an agreement to the parties who signed it define the scope of enforceable claims. Privity of contract prevents a brand from suing a sub-tier mill if the brand only has a direct agreement with the garment factory.
Liability Barrier
Separation creates a barrier that shields raw material suppliers from direct claims by the final retailer. This indirect route is a direct consequence of the privity of contract. If a fabric defect occurs, the brand must claim against the garment factory, which then pursues the mill in a separate action.
Established Exception
Formal agency agreements or collateral warranties provide ways to bypass this restriction in certain jurisdictions. These legal tools allow parties to manage the restrictions imposed by the privity of contract. Such instruments create a direct legal link where one would not otherwise exist under common law.
Practical Application
Purchasing departments manage this risk by requiring nominated suppliers to sign separate quality agreements. Overcoming the limits of the privity of contract is a standard goal of procurement legal teams. These documents establish the necessary legal connection to hold the mill accountable for technical failures, ensuring that quality standards are maintained regardless of the number of intermediaries in the supply chain.