Is Petra right to accept this arrangement?

Petra Ltd is a manufacturer of upmarket baked goods and they have a range which is gluten free and therefore suitable for customers who have an intolerance of wheat. For this reason Petra Ltd is very strict about the ingredients that it sources. It’s main supplier has provided written agreement that they will test all ingredients in their processing factory to ensure that they are suitable for the gluten free diet before delivery is made, and once delivery is made the materials will be deemed accepted by the buyer.

Is Petra right to accept this arrangement?
A . yes- this reduces the risk of unsuitable materials entering Petra’s factory
B. yes- this arrangement places the risk on the supplier rather than Petra
C. no- Petra should arrange for additional tests to be conducted on the deliveries and only accept them once these tests have been completed
D. no – this arrangement is unacceptable and Petra should void the contract

Answer: C

Explanation:

Petra should arrange for additional tests to be conducted. This question is based on a real example in the exam. In this scenario there is still significant risk for Petra even if the supplier is testing the materials. The supplier could miss something, or forge the results with disastrous consequences for Petra’s customers. Moreover it would severely damage Petra’s reputation. Therefore the wise thing would be for Petra to conduct additional tests in-house to ensure they are happy with the products and only then accept them. This could be an audit of 10% of deliveries to ensure compliance. Acceptance Testing is discussed in the textbook on p.70

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