Just-In-Time Purchasing and the Problem of Consequential Damages

Robert B. Bennett, Butler University


Because of the success demonstrated by Japanese companies, many US and European businesses are embracing certain aspects of just-in-time management. The just-in-time philosophy embodies a complete reorientation of production and inventory control. US companies have failed to adequately consider the legal implications of the implementation of just-in-time management, particularly those involved in just-in-time purchasing. Paramount among these implications is the risk of consequential damages that the supplier is being asked to undertake under current Anglo-American jurisprudence. The risk of loss should be allocated to the buyer/manufacturer if the manufacturer has failed to mitigate the losses of the supplier by maintaining a reasonable level of buffer inventory. This result can be achieved by an appropriate interpretation of the UCC and its application to the commercial context, in the absence of agreement of the parties.