Product conformity, fitness for purpose

The Vienna Convention provides rules for a seller’s obligations regarding product conformity (quality of the goods) or fitness for purpose. In general, the seller must deliver goods that are of the quantity, quality and description required by the contract and that are contained or packaged in the manner required by the contract, as follows:

Article 35 [Conformity of the goods]
1.   The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.
2.   Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:
(a)      are fit for the purposes for which goods of the same description would ordinarily be used;
(b)      are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement;
(c)      possess the qualities of goods which the seller has held out to the buyer as a sample or model;
(d)      are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
3.   The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

Conformity, general. Thus, CISG Article 35 sets the standard as to whether a seller has discharged its obligation to deliver goods that conform to the contract. The first sentence emphasizes that the goods must conform to the agreed quantity, quality and description and must be contained or packaged in the agreed manner. It recognizes the prevailing nature of the contract between the parties. The remainder of Article 35 specifies the seller’s obligations (as to conformity) that apply “except as otherwise agreed”.

Fit for ordinary purposes. Goods are often ordered by general description without any indication to the seller as to the purpose for which those goods will be used. In such a situation, the seller must furnish goods that are fit for all the purposes for which goods of the same description are ordinarily used. The standard of quality implied in the contract must be ascertained in view of the normal expectations of people buying goods of that description. If the goods available to the seller are fit for only some of the purposes for which such goods are ordinarily used, it must ask the buyer to state the particular purposes for which these goods are intended so that it can refuse the order, if necessary.

‘Re-saleability’: merchantability. The scope of the seller’s obligation under CISG Article 35(2)(a) is not determined by whether the seller could expect the buyer himself to use the goods in one of the ways in which such goods are ordinarily used. Rather, the obligation pursuant to Article 35(2)(a) also covers a buyer who has purchased the goods for resale rather than for its own use. For goods to be fit for ordinary purposes, they must be properly re-saleable in the ordinary course of business. This matches the merchantability-criterion used in the U.S.: see the UCC (Uniform Commercial Code), adopted by virtually all (U.S.) states.

Fitness for a particular purpose. Generally, a seller is not bound to deliver goods that are fit for some special purpose that is not a purpose “for which goods of the same description would ordinarily be used” unless the buyer has “expressly or impliedly made known to the seller at the time of the conclusion of the contract” such intended use (CISG Article 35(2)(b)). This issue may arise if the buyer intends to use the goods for a purpose for which goods of this kind are sometimes, but not ordinarily used. If the buyer does not provide any indication that it intends to use the goods for such a particular purpose, the seller has no reason to attempt to supply goods appropriate for such a purpose.

Buyers often know that they need goods of a general description to meet some particular purpose, but they may not know enough about the goods to give exact specifications. In such a case, the buyer may specify the desired goods by describing the particular use to which the goods are to be put. If the buyer expressly or impliedly makes known to the seller such (particular) purpose, the seller must deliver goods fit for that purpose.

Parties’ duties to inform. To allow a claim for non-conformity of delivered goods, a buyer’s particular purpose for the goods must be known to the seller at the time of entering into the sales contract. The idea is that the seller can refuse to enter the contract if he is unable to furnish goods adequate for that purpose. Except to the extent that the parties agreed otherwise:

…the goods do not conform with the contract unless they … (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement.

Seller’s skill and judgement. In the clause given above, the strong impact of the duty to inform is somewhat qualified or limited. The seller is not liable for failing to deliver goods fit for a particular purpose (even if the particular purpose for which the goods have been purchased has been expressly or impliedly made known to him) if “the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement”.

For example, the circumstances may show that the buyer wanted the goods for the brand name or described the desired goods in terms of highly technical specifications. This may support a claim that, in making the purchase, the buyer had not relied on the seller’s skill and judgement. Nevertheless, if the seller knew that the goods ordered by the buyer would not be satisfactory for the particular purpose, it is likely that a seller must disclose this fact to the buyer.

Obviously, if the buyer would instead purchase the goods, the buyer can hardly be deemed to have relied on the seller’s skill and judgement. Conversely, it would also be unreasonable for the buyer to rely on the seller’s skill and judgement if the seller did not purport to have any special knowledge regarding the goods in question.

Samples and models. As mentioned above, if the contract was entered into on the basis of a sample or model, the goods delivered must possess the qualities of that sample or model. Of course, this does not apply if the seller indicates, at the time of entering into the contract, that in certain respects the sample or model differs from the goods that will be delivered. In that case, the goods must have the qualities of the sample or model that the seller claims are possessed by the goods to be delivered.

Packaging. CISG Article 35(2)(d) includes, as one of the seller’s obligations regarding conformity of the goods, that they “are contained or packaged in the manner usual for such goods”. This provision sets forth a minimum standard. Packaging has been the subject of various court proceedings. While it may take time to establish the existence of product defects, damaged packaging and defects caused by improper packaging are easy to establish quickly. That is why courts tend to require particularly short periods of time for inspection upon arrival of the goods.

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