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Case study for Refusal of Goods and Pay

2019-12-30

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Buyers in international trade refused to accept goods for quality problems, how can we solve it?

In international trade, foreign buyers often refuse to accept goods or refuse to pay for goods for quality problems.


In the case of such a situation, the domestic seller should not immediately compromise the concession, but should first find out the facts and clarify the responsibilities. The foreign buyer’s return is indeed justified and should be actively negotiated, settled and reconciled; when the buyer returns or refuses to pay, if it is unreasonable, you should stand firm and decisively protest, and take measures to reduce losses when the buyer refuses to accept the goods.


Specifically, the seller should do the following work after receiving the buyer’s refusal to receive the goods:



STEP 1

Ask the buyer to provide a third-party inspection certificate of inconsistent quality.


Everything should be based on evidence. If the buyer suggests that the quality is inconsistent, he should provide convincing evidence. This is also the basic requirement for ascertaining the truth of the matter. Because clarifying the facts is the basis for solving the problem, if the facts are unclear, it’s only a rush to find a countermeasure.



STEP 2

Confirm whether you are responsible for the quality of the goods

Under the usual CIF/FOB trade terms, the seller's liability for the quality of the goods in the FOB clause ends with the shipment, and subsequent damage to the goods, if it is damaged in transit, is the buyer's risk. Thus, this raises the question: Does the quality defect of the goods occur before shipment or during transportation?


If the defect in the quality of the goods occurs during transportation, the seller is not responsible for the FOB trade terms, the buyer will not be able to reject the goods. The buyer should look for an insurance company that undertakes the transportation of the goods for damages caused by transportation. (For example, goods are moldy, insect-damaged, and wet)


Except for the above, in the case of the DDU, DDP, etc., the seller is responsible for the arrival of the goods to the port.



STEP 3

Analyze whether the buyer has the right to refuse to accept the goods with quality problems.


In the event that the quality of the goods does not comply with the contract, the buyer does not have the right to refuse the goods.


Under English law, unless it's stipulated in the contract, the buyer can refuse to accept the goods only if:


1)

The goods do not conform to the description of the nature of the goods in the contract. For example, the goods in the contract is wheat but not oats; for example, it should be wrapped in small boxes but delivered in large boxes. This is not strictly a matter of quality, but a question of the type of goods.


2)

The goods do not meet the satisfactory quality. If the defect is not serious and can be accepted by the general buyer of the same kind of goods, it still meets the satisfactory quality.


3)

The goods do not satisfy the buyer's special use, provided that the buyer has informed the seller of the special use before the contract is concluded.


The United Nations Convention on the International Sale of Goods does not even stipulate that the buyer has the right to refuse to accept the goods due to quality problems. The buyer can only ask the seller to repair, replace, or reduce the price, etc., and can only claim the contract is invalid if the goods are seriously inconsistent, thus returning the goods.


It can be seen that even if the quality of the goods does not conform to the seller's reasons, in most cases, unless stipulated in the contract, the buyer can only claim damages or take other remedies but cannot refuse to accept or refuse to pay all the money.



STEP 4

Analyze whether the buyer has waived or lost the right to refuse to accept the goods.


 Even if the buyer does have the right to refuse to accept the goods, in the following circumstances, the buyer will be deemed to have waived or lost the right, that is, the buyer can no longer refuse to accept the goods:


1)  

The quality of the goods stipulated in the contract is subject to the inspection certificate at the time of loading. If the goods are qualified after inspection, the buyer can no longer object to the quality of the goods;


2) 

If the buyer has inspected the goods in person or through an agent and confirmed that the goods are qualified, the buyer cannot subsequently claim that the quality of the goods does not match.


3) 

The buyer did not raise the quality objection within a reasonable time.


After the above analysis, if the buyer does not actually have the right to refuse to accept the goods but still insists on returning or refusing to pay, it will constitute a breach of contract, and the buyer must bear the ship demur-rage fee and cargo storage fee due to the refusal to accept the goods, and If there are unpaid purchases, they should continue to pay.


The seller should strive to argue and explain the consequences of the buyer’s breach of contract in order to serve as a deterrent. If the foreign buyer still does not pay attention to the goodwill, the seller may issue a “without prejudice” statement stating that in view of the buyer’s refusal to accept the goods, the seller will have the right to take back the goods for further processing in order to reduce the losses, but this does not prevent the seller from accepting the goods in the future. The right recovers the buyer from costs and losses. After the proper return, the seller can decide whether to bring a lawsuit or arbitration to the buyer to recover the loss according to the actual implementation effect of the buyer's financial and legal channels.


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