A supplier delivers a machine that is defective. After several repair attempts, the machine still does not work and you suffer damages. What are your rights and obligations? Topics such as non-conformity of the delivered item, buyer's duty to complain and exoneration of supplier's liability play an important role in this type of situation. In this blog, Jan Willem van Aken explains these topics using a real-life example. He concludes with 3 tips to avoid legal conflicts with a supplier.
Case study: dairy farmer buys reconditioned milking robots from supplier
What was going on?
A dairy farm purchased fully reconditioned second-hand milking robots for milking cows from a supplier. The contract between the dairy farmer and the supplier was declared subject to the Metaalunie conditions (general conditions issued by entrepreneurial organization Koninklijke Metaalunie), about which more later.
Recovery
From the first moment, the milking robots are not working properly. The cows are not fully milked because the milking robots cannot be properly coupled to the cows' teats. The dairy farmer complained to the supplier about this several times, after which the supplier replaced the components of the milking robots and adjusted the settings. However, the repairs did not have the desired effect.
The dispute
The dairy farmer's patience is running out and he no longer pays the invoices for the milking robots. The supplier argues that the problems are not due to the machines or the repair attempts made. On the contrary, the problems are caused by the dairy farmer's inexperience and failure to follow the directions, instructions and advice provided by the supplier. Together, the dairy farmer and the supplier do not reach an amicable solution and so the dairy farmer takes the matter to court.
How does the judge rule?
Complaint duty
A buyer who receives a defective good or service must complain to the seller within a reasonable time. If he fails to do so, his legal rights and remedies against the seller, such as the right to a replacement product, expire. The purpose of the duty to complain is to protect the seller from late complaints, which are difficult to verify due to the passage of time. The complaint period is different for each commercial transaction, considering circumstances such as the contractual arrangements between the parties and what is customary between them.
Did the dairy farmer complain in time?
In this case, the supplier argued that the dairy farmer had not fulfilled his obligation to complain because no complaint was made within 14 days, which is mandatory under the Metaalunie conditions. The court does not agree, because the dairy farmer complained about the defects of the milking robots immediately after delivery.
Non-conformity
Among other things, a delivered item is non-conforming if it does not meet the buyer's expectations that he was entitled to expect on the basis of the agreement, the nature of the item and the statements made by the seller about the item. The buyer is then entitled to delivery of the missing item, repair of the item or replacement of the item. In a business-to-business transaction, the right to replacement of the item is regulatory. This means that companies can make different arrangements among themselves.
Are milking robots flawed?
In determining whether the milking robots were non-conforming, the court considered it important that they were fully reconditioned. Used devices that have been fully reconditioned need not be expected to require repair shortly after delivery. This is different when it comes to second-hand products that have not been reconditioned. Given that the supplier had to make repairs and adjust settings of the milking robots shortly after commissioning, the court comes to the conclusion that the milking robots are non-conforming.
Exoneration of liability
As a result of the defective milking robots, the dairy farmer believes he has suffered damages in excess of €150,000 in lost production, extra maintenance and cow disposal costs. The supplier believes that these items of damage qualify as indirect damage. The supplier's liability for these damages is excluded via an exoneration clause in the Metaalunie conditions.
The dairy farmer argues that the exclusion clause should be annulled because the exclusion clause is unreasonably onerous. The argument of the dairy farmer, is that at the time of entering into the agreement he did not realize that the exclusion of indirect damage could have such major consequences for the supplier's liability. In addition, the dairy farmer indicates that he did not have sufficient legal training and, in addition, was not assisted by legal counsel at the time of the negotiations and conclusion of the agreement.
Should the supplier exclude liability?
The judge did not go along with this and upheld the exemption clause. That the dairy farmer is not legally literate and has not sought the assistance of a legal advisor is at his own risk. Liability for indirect damage is thus completely excluded by the exoneration clause, leaving the dairy farmer to bear the damage in excess of €150,000 himself.
3 tips for business buyers
Tip 1: Avoid exceeding the complaint deadline
Immediately after delivery, check whether the product was delivered in accordance with the agreement. Contact the supplier immediately if the product is not delivered in accordance with the agreement and specify exactly what defects the product has.
Tip 2: Check the exoneration clause
Generally, exoneration clauses can be found in the general terms and conditions declared applicable to a contract. The present case shows that the exclusion of indirect damages can have major consequences for the amount of compensation. Be keen on this and include it in negotiations that the exclusion of certain indirect damages is unacceptable.
Tip 3: Engage legal counsel
It can be difficult to properly assess the consequences of an exclusion clause in your case. If you do not properly assess the consequences, it will be at your risk. A lesson that cost the dairy farmer in this case dearly.
Lock
Have you been supplied with a non-conforming product and are wondering what your options are for taking action against the supplier, or are you wondering to what extent your supplier's liability is limited? The real-life example from this blog just goes to show that it is important that you seek the assistance of legal counsel when negotiating and drafting contracts. We are happy to look into this with you.
