Legal and Ethical Aspects of Material Management

Legal and Ethical Aspects of Material Management

Introduction

·       Material management is a crucial function in hospitals and healthcare institutions, as it ensures the timely availability of medical equipment, drugs, consumables, and other supplies necessary for patient care and smooth operations.

·       Since materials involve significant financial investment, their procurement, utilization, and disposal must adhere to legal frameworks and ethical standards.

·       Legal aspects provide the statutory and regulatory guidelines that govern contracts, purchasing, and sale of goods, ensuring fairness and compliance with law.

·       Ethical aspects emphasize integrity, transparency, accountability, and fairness in procurement and use of resources, thereby preventing malpractice, corruption, and wastage.

·       Thus, material managers must balance law (compliance and legality) with ethics (fairness and responsibility) to optimize resource utilization and uphold trust in healthcare services.

Law of Contract in Material Management

·       Contracts form the backbone of procurement and supply chain agreements in hospitals.

·       A contract is a legally enforceable agreement between two or more parties. In the context of material management, contracts are used for purchase, supply, installation, and maintenance of goods/equipment.

Essentials of a Valid Contract (as per Indian Contract Act, 1872)

1. Offer and Acceptance – A clear proposal by one party and acceptance by the other.
2. Lawful Consideration – Payment or benefit exchanged must be legal.
3. Capacity of Parties – Both parties must be competent (not minors, unsound mind, or disqualified by law).
4. Free Consent – Agreement must not be obtained by coercion, fraud, misrepresentation, or undue influence.
5. Lawful Object – Purpose of contract must be legal and not against public policy.
6. Intention to Create Legal Relationship – Both parties must intend that their agreement be legally enforceable.
7. Possibility of Performance – The contract must be capable of being performed.

Types of Contracts Relevant to Material Management

• Fixed Price Contracts – Supplier provides goods/services at a fixed price.
• Cost-plus Contracts – Buyer reimburses cost plus a margin.
• Rate Contracts – Pre-fixed rates for a period (common for consumables).
• Service Contracts – For equipment maintenance and technical services.

Breach of Contract

• Consequences: Delay in supply, financial losses, operational disruption.
• Legal Remedies: Damages, specific performance, injunction, or cancellation of contract.

Sale of Goods Act (1930) and Its Relevance in Material Management

·       The Sale of Goods Act governs contracts relating to the sale and purchase of goods. In hospitals, this law ensures that materials purchased meet quality, safety, and legal requirements.

Key Provisions Relevant to Material Managers

1. Contract of Sale – Transfer of ownership of goods from seller to buyer for a price.
2. Conditions and Warranties:
• Condition – Essential stipulations (e.g., expiry date of medicines, safety compliance of equipment).
• Warranty – Collateral stipulations (e.g., free service period).
3. Transfer of Property (Ownership) – Ownership transfers when goods are delivered and accepted.
4. Right of Buyer –
• To get goods of merchantable quality and fit for intended purpose.
• To reject defective or substandard goods.
• To claim damages for breach of contract.
5. Right of Seller –
• To receive payment.
• To withhold delivery until payment is made.
6. Unpaid Seller’s Rights – Right of lien, resale, or stoppage in transit.

Importance in Hospitals

• Ensures quality purchase of medicines, disposables, surgical items.
• Protects against fraudulent or defective supplies.
• Provides legal remedies in case of disputes.

Principles and Standards of Purchasing Practice for Material Managers

·       Material managers in hospitals must not only follow legal norms but also adhere to professional ethical standards to maintain transparency, accountability, and fairness.

Ethical Principles in Purchasing

1. Transparency – All procurement processes should be open, clear, and auditable.
2. Fair Competition – Equal opportunity must be given to vendors; avoid favoritism.
3. Value for Money – Aim for the best combination of quality, cost, and service.
4. Integrity and Honesty – Avoid conflicts of interest, corruption, or kickbacks.
5. Accountability – Material managers must justify decisions and be answerable.
6. Confidentiality – Vendor quotations, tender details, and pricing must be kept confidential.

Standards of Good Purchasing Practice

• Need-Based Procurement – Avoid overstocking or unnecessary purchases.
• Standardization – Adopt hospital-wide standards for drugs, consumables, and equipment.
• Vendor Evaluation – Assess suppliers based on reliability, quality, service, and past performance.
• Tendering System – Open tendering, limited tendering, or rate contracts for fair purchasing.
• Documentation – Maintain proper records of quotations, approvals, purchase orders, invoices.
• Compliance with Laws – Adhere to Drugs & Cosmetics Act, Biomedical Waste Rules, and other statutory requirements.
• Quality Assurance – Ensure purchased materials conform to safety and quality norms (ISO, NABH, BIS standards).

Ethical Issues and Challenges in Material Management

• Kickbacks and Corruption – Suppliers may offer bribes to influence purchases.
• Conflict of Interest – Material manager’s personal interest vs. hospital’s interest.
• Supplier Pressure – Lobbying for unnecessary purchases.
• Overpricing – Artificial inflation of costs during emergencies.
• Favoritism in Tenders – Ignoring competitive bids.

Video Description

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