Legal Definitions - pass-along

The term "pass-along" refers to the direct transfer of a cost, benefit, or legal obligation from one party to another, often through an intermediary. In such situations, the intermediary typically acts as a conduit, allowing the item to flow through to the ultimate recipient without incurring a new, significant obligation or substantially altering the nature of what is being transferred.

Here are some examples to illustrate this concept:

• Example 1: Passing Along Increased Costs

  Imagine a scenario where a major supplier of raw materials to a furniture manufacturer announces a 10% price increase due to rising global commodity prices. To maintain its profit margins, the furniture manufacturer decides to increase the wholesale price of its finished products to the retail stores by a similar percentage. The retail stores, in turn, adjust their shelf prices for customers. In this situation, the initial increase in raw material costs from the supplier is "passed along" by the manufacturer to the retailers, and then further "passed along" by the retailers to the end consumers.

  This example demonstrates how an increased cost originating at one point in a supply chain can be directly transferred through intermediaries until it reaches the final purchaser.

• Example 2: Passing Along Financial Benefits or Savings

  Consider a large commercial landlord who receives a significant tax credit from the city government for installing energy-efficient windows and insulation throughout their apartment complex. Instead of keeping the entire financial benefit, the landlord decides to slightly reduce the monthly rent for all tenants in the building, citing the energy savings and the tax credit. Here, a portion of the financial benefit from the government's tax credit is "passed along" from the landlord to the tenants in the form of lower rental costs.

  This illustrates how a financial advantage or saving obtained by one party can be directly transferred to another, often to maintain goodwill or comply with an agreement.

• Example 3: Passing Along Regulatory Requirements

  A new federal environmental regulation mandates that all manufacturers of certain electronic components must include a specific recycling instruction label on their product packaging. A company that assembles these components into larger devices and then sells them to distributors must ensure that these labels are present on the components they receive and that the final assembled product also carries appropriate recycling information. The distributors then ensure the products they ship to retailers comply. The regulatory requirement, initially placed on the component manufacturer, is "passed along" through the assembler and distributor to ensure the information reaches the end consumer.

  This example shows how a legal or regulatory obligation can be transferred through a chain of parties to ensure compliance at the final point of sale or use.