Thoughts over product quality disputes in an international business

发布日期：2016-08-31 作者：胡小华律师

Thoughts over product quality disputes in an international business

Keywords: Alibaba international; disputes of product quality problems, international sales and purchase

1.    The background of the disputes
In year 2015, a buyer named as S from Republic of Trinidad and Tobago country purchased a second-hand loader from Q which located in Yantai, China via Alibaba international website. Both parties did not signed the contract in writing and the amount involved in the purchase is $ 40,000.the requirement ,such as the brand, the type, the years the machine has served and the relevant fitting and so on. , of the loader is stipulated in the Proforma invoice issued by the seller Q. But there is no provisions over quality standards of the machine and no liabilities of breach of contract is set out .In September 2015, when the buyer received the machine and the buyer found: 1 the machine was lack of spare parts and the received parts seriously did not meet the requirements both parties agreed; 2. the machine received is totally a piece of junk and cannot work at all . The seller felt being cheated and contacted the seller trying to talk over the refund of the payment but the seller is totally nonnegotiable and rejected any kind of negotiations. 2、The key of the case
The dispute is of a very typical one over product quality problem in international transaction .the Buyers easily trusted the seller because of the buyer’s trust to Ablibaba international. The reasons why the seller dared to be nonnogetibalbe and do not afraid of any legal liabilities are as followings: 1 No liabilities of breach of the contract are stipulated. Even when the seller violates the contract it’s very hard for the buyer to pursue its serious liabilities. According to Chinese law if without liability of breach of contract is agreed on the defaulting party shall compensate the observant party its actual loss but it’s very hard for the observant party to prove its actual loss; 2 No quality standard is reached by parties and it’s very hard to prove the real status of the delivered machine. When such kind of case come to court and the judge shall require one party of bearing the burden of proof to have the product tested and the testing report shall be a crucial criterion to determine whether the product is qualified or not. In most cases the quality standard is the key for the quality testing party to issue the testing report. The product may be qualified based on some standard but may not qualified if the standard changed. 3. Some of the victims of the international transaction just give up when their right is damaged because the forging-related litigation is much as complicated than domestic ones. The evidences are hard to obtain and the legal papers shall be attested by relevant competent authority. In short, such kind of case is hard to win for the buyer if no lawyer in involved in early stage.

3、How to avoid the potential risk in international business
The buyers need to be more cautious during international trade. One of my foreign clients encounters a first dispute after he has done business in China for 7 years. The reason is that the client is very careful he checked onsite the company of their suppliers. Of course it costs a lot but it can avoid some risks in some degree. How to effectively avoid the risks I advise the followings:
1). Background survey is conducted before a transaction is launched.
If a seller is a formal and serious business doer, even if there is a dispute, the seller will try its best solve the problem out of court. It’s troublesome when a professional cheater is encountered. As per my practice in law the followings tricks are commonly used by international fraud: a. the fraud is hidden under a fake or unregistered company name. Normally international communication is preceded by email or Skype and any other ways other than face to face talk. When the buyer found being cheated he would not know what the real person the cheaters are. Because the company name, the address and person involved are fabricated. There is one point shall be noticed that a Chinese company shall be registered with a Chinese name but not an English name; b. the seller shall deliver some craps but not agreed goods to get the balance. When the buyer realized that he is cheated and the seller disappeared with no trace. Under this situation is hard to trace the company and safeguard its rights.

I suggest that a lawyer shall be employed to make a background survey toward the seller’s company to see if the company is registered, if the company is black named , if the company has a history of fraud, whether lawsuits involved etc; In addition, I strongly suggest that a supervisor shall be sent onsite while the shipping of the cargo to see if the right goods are actually shipped; when the cargo is reached the destination port and when the buyer open the container a video recording shall be made in case the wrong goods are shipped to preserve evidences.

2). the quality standards of the goods to be delivered shall be clearly stipulated in the contract to avoid any quality disputes
As per my professional experience over several quality problem cases, both domestic and international trade happened, goods quality shall be as specific as possible, what the standard can be adopted? It can be national standards, industry standards or enterprise standards or standard specially adopted for the contract. If the enterprise standards is taken the enterprises standard shall be registered with relevant government competent authority; When the goods is handed over from the seller to the buyer a certificate of competency issued by a agreed independent quality test organ shall be provided; a period of quality objection is recommended, as for the buyer the period of quality objection shall be as long as possible in case the problem cannot be found in a short time, but as for the seller the period shall be as short as possible.
The reason for the standard is important is that the standard in some cases shall depend whether the goods are qualified or not. Of course it will lead to different result of the case.

3). A written contract shall be signed by parties and liabilities of breach of the contract shall be detailed agreed on
When disputes arise it’s difficult for the buyers and sellers to reach an agreement by negotiations. Then you will find how important the liability of breach of contract is .For the high amount of the sale of goods, liability for breach of the contract is recommended as specific as possible to make sure each liability for each breach of the contract shall be covered. Such as what kind of problem arises shall lead to repair, what kind of problem shall lead to the penalty and what kind of problem shall lead to refund of the payment and return of the goods.
International business is an area full of potential risks and a local lawyer can safeguard your safety.

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