INSPECTION, ACCEPTANCE

AND REJECTION
Prepared by Pham Nguyen Minh Chau

Right or Duty?
Article 38 (VIENNA SALES CONVENTION)
(1) The buyer must examine the goods, or cause them
to be examined, within as short a period as is practicable
in the circumstances.
UNIFORMED COMMERCIAL CODE (USA)
2-513. Buyer's Right to Inspection of Goods.
(1) ...the buyer has a right before payment or
acceptance to inspect them at any reasonable place
and time and in any reasonable manner. When the
seller is required or authorized to send the goods to the
buyer, the inspection may be after their arrival.

Purpose of inspection:
To examine the goods to make sure they came
in good condition (no defect or damage) and
full quantity.
To decide whether to reject the goods (due to
defects) or accept them in partial or full
quantity.

Time, place and expenses of inspection

Before payment or acceptance (UCC 2-513)
After the goods have arrived at their destination
Expenses of inspection must be borne by the buyer
but may be recovered from the seller if the goods
do not conform and are rejected.
A place or method of inspection fixed by the
parties is presumed to be exclusive but unless
otherwise expressly agreed it does not postpone
identification or shift the place for delivery or
for passing the risk of loss.

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Patent and latent defects, defect liability period

In general terms defects or defective works is where the
standard and quality of workmanship and materials as specified
in the contract is deficient
Patent defects (apparent defects):

Patent defects are defects that can be discovered by

normal examination or testing
Wrong item, broken or missing parts, scratches, etc.
Latent defects:
Latent Defects are defects that are not discoverable by
normal examination or testing which manifests itself after a
period of time.(the defect liability period) warranty period,
normally for 12 months).
Structural weaknesses, failure to operate at high or low
temperature, etc.

An implied warranty of merchantability is an unwritten and

unspoken guarantee to the buyer that goods purchased conform
to ordinary standards of care and that they are of the same
average grade, quality, and value as similar goods sold under
similar circumstances. In other words, merchantable goods are
goods fit for the ordinary purposes for which they are to be
used. TheUniform Commercial Code(UCC), adopted by most
states, provides that courts may imply aWarrantyof
merchantability when (1) the seller is the merchant of such
goods, and (2) the buyer uses the goods for the ordinary
purposes for which such goods are sold ( 2-314).

Implied warranty of fitness merely requires that the

seller possess knowledge and expertise on which
the buyer may rely.

Before a court will imply a warranty of fitness, three

requirements must be met: (1) the seller must have
reason to know of the buyer's particular purpose for
the goods; (2) the seller must have reason to know
of the buyer's reliance on the seller's skill and
knowledge in furnishing the appropriate goods; and
(3) the buyer must, in fact, rely on the seller's skill
and knowledge.

* Australia:
- Defined in Trade Practices Act (TPA), Division 2 and 2A of part
- That: If the goods failed to reach the basic level quality ( the
were defective or broken), then the TPA has been breached.

* International sales law:

- Defined in Article 35(2)(a) of the United Nations Convention of
Contract for the International Sale of Goods
- That: A seller must provide goods fit for their ordinary
purpose

Acceptance or Rejection

Acceptance or Rejection

Acceptance or Rejection

The benefit of Right to Cure: Cure any defect

in his delivery is of great advantage to the
exporter:
- Not immediately lose the contract
- Not lose the reputation as well as the customers
belief

When does the exporter have right to cure?

the seller may, even after the date for delivery, remedy at
his own expense any failure to perform his obligations, if he
can do so without unreasonable delay and without causing
the buyer unreasonable inconvenience or uncertainty of
reimbursement by the seller of expenses advanced by the
buyer. ( Vienna Sales Convention. Article 48-1)
The necessary provision should be contained in the contract if
the exporter want the right to cure.

GUARANTEE- Promise about

someone elses performance

PROCESS Guarantee
PRINCIPAL
Seller or Buyer
The Principal asks
the Guarantor to
issue a

Guarantee
GUARANTOR
Bank or Insurance
Company

Promise
The Principal
makes a promise

BENEFICIARY
Buyer or Seller

Guarantee
The Guarantor
promises to pay money
to the Beneficiary if the
Principal breaks its
promise

PROCESS - Warranty

Warranty

Seller

The Seller
promises to
make good
defects

Buyer

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1. CONTENT

The Guarantee
A contract to
perform a
promise or
discharge
liability

The Warranty
States the
subject of
contract

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2. Parties
Warranty

Buyer

Guarantee

Seller

Guarantor

Principal

Beneficiary

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3. Essence:
WARRANTY
A commitment to make good defects or product or services in a fixed period

It is found to be below assured standard

-> seller is liable to make the complete replacement of repair item

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3. Essence:
GUARANTEE
A promise about somebody else performance

The principal fails to perform its obligation

-> the guarantor has to claim or compensate for the beneficiary

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n loans, credit, purchase, sales or honesty of a pe

e value, show of quality and assurance of produc

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Notices

1. Most contracts contain an assurance that the

exporter will make good any defects in his
products: a warranty
2. A promise about somebody elses performance
(not correct in the context of defects liability): a
guarantee
3. The words guarantee might produce a
dangerous result for the exporter under certain
applicable laws.
4. The term warranty is used in many other
contexts than the product warranty.
5. Probably the best term is defects liability since
this is the only term with an exclusive and
unmistakable meaning.
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