Please enable JavaScript.
Coggle requires JavaScript to display documents.
Negotiating inspection and defects liability - Coggle Diagram
Negotiating inspection and defects liability
What is the benefit of a well-designed set of specifications?
It protects both the buyer and the seller:
the buyer is protected against inferior products as it can reject any products that fail to meet specification
the seller can protect its reputation and avoid costs.
Which kind of goods needs pre- delivery inspection? Give example.
sophisticated items
capital equipment
What does customs inspection reveal?
Customs inspection reveals discrepancies in
size
discription
weight
Name quality checks on goods exported for resale
Inspection by Inspection service (e.g: SGS).
Inspection by Carrier on dispatch.
Inspection by Buyer or Buyer’s agent before delivery.
Open package Inspection on arrival at destination.
Seller’s liability for defects after sale.
What are 5 steps in negotiating the Defects Liability Period?
Terms: Warranty or guarantee?
Definition: What is, and what is not, a defect?
Inspection: When are the goods inspected? And when can the buyer to reject them?
Timing: How long is the defects liability period? When does it begin? What about other timings?
Corrective action: What must the seller do to cure defects?
What counts as a patent defect? Give examples.
Defects that are apparent, e.g., wrong items, broken or missing parts, scratches, etc
What counts as a latent defect? Give examples.
Defects that only come to light after buyer’s acceptance, or hidden defects, e.g.,
failure to operate at high or low temp,
high fuel consumption
structural weaknesss
What are Implied Warranties?
Assumptions that buyers can make about goods, even if the exporter gives no express warranty.
What are 3 types of Implied Warranties
Implied warranty of merchantable quality: The Buyer can reject the goods that are not of merchantable quality.
Implied warranty of fitness for intended purpose: If the Exporter knew the intented purpose, and if the Buyer relied on the Exporter’s judgment, the Buyer can reject the goods that are not suitable for their intented purposes.
Implied warranty of conformity with contract: In principle, the Buyer can reject the goods if they do not conform with the Contract.
What are the similarities and differences between a guarantee and a warranty?
Similarities: Both are promise about performance, payment is only made when there is non-performance of products or of parties involved.
differences
Content Contract to perform the promise or discharge liability (hợp đồng thực hiện trách nhiệm)
Parties Tripartite (3 bên)/ three part
Essence (bản chất) Promise about somebody else 's performance
Purpose • To obtain loan (vay tiền)
• Credit purchase/sales (mua bán tín dụng)
• For good conduct or honest of person (thể hiện tính trung thực bên bảo lãnh)
• Show of quality (thể hiện chất lượng)
• Assurance of product performance (đảm bảo tính năng của sp)
State of the subject of contract
Bilateral (song phương)/two parties
Commitment of Seller to make good defects in products or service in a fixed period.
• To enhance their value (tăng giá trị sản phẩm)
What are the 3 types of defects?
Defective materials: defective materials are materials or parts of a product that are inferior or somehow incorrect.
Defective design: defective design means that a product does not meet specifications.
Defective workmanship: a product with defective workmanship is incorrectly built.
What are the common exclusions of defects?
Fair wear and tear: the results of normal use.
Ex: the plastic handle on an electric drill is scratched and scuffed after 6 months use.
Misuse: seriously incorrect handling by the buyer.
Ex: the use of acetone to clean plastic components, failure to check the oil level in a motor.
Faults not present on delivery.
What is the Defect Liability Period?
The period during which the Exporter is liable for and must make good defects that are apparent on delivery or that come to light later.
What are the four timing decisions in Defect Liability Period?
The starting point of the period (defect liability period).
The time allowed to the buyer to nofify the exporter of a defect.(notification period).
The time the exporter has to correct the defect (rectification period).
The period during which the buyer can begin a legal action (legal action period).
. What is “Eternal warranty”? How to avoid problems of an Eternal warranty
The exporter cannot break the chain of warranty and is involved in endless responsibility for the goods
The problems can be avoided with a cut-off clause such as: the total warranty period shall in no case exceed 3 years.
Eternal warranty is an endlessly renewed liability for defects
What are the 5 options for curing defects?
Reduce the price
Return the goods and refund the price
Replace (part or whole item)
Allow the buyer to repair at exporter’s cost
Repair
Which corrective method is least favourable for the seller? Why?
That means the deal is a total loss for the exporter.
Returning the goods and refunding the price seems to be the least favorable for the exporter because this can be considered a cancellation of the contract.
Often defective goods are not worth the cost of return shipment to the exporter’s country.