Essential for the preservation of defect claims: timely incoming goods control and notification of defects

18.01.2017

Our legal practice in the food sector has shown us that, if defec­tive products are delivered, the purchaser often neglects to provide timely notification of such defects. This has drastic conse­quences for such purchaser. The reason for this is that merchants are obligated to inspect incoming goods as soon as possible, and to provide immediate notification of any defects that are recognized (§ 377 of the German Commercial Code (Handelsge­setzbuch)). Any party who violates this loses all rights arising from the defectiveness. The goods are then deemed to be approved, despite the defect. The idea behind this is to promote the rapidity of the trade in goods and to provide legal certainty to suppliers. A party who does not hear from the purchaser after delivery should be able to assume that the goods have met the purchaser’s satisfaction.

Therefore, purchasers of preliminary products and end products should organize their processes so that a goods inspection is carried out immediately after receiving any goods. With respect to foods, samples are sufficient, but they must be drawn in such a way that they are conclusive for the overall batch. This applies both to the quantity and to the distribution of the samples.

For instance, if several pallets are delivered with cocoa, it is not enough to draw samples from one pallet; rather, the sampling must be distributed accordingly. The nature of the inspection depends on the product. With respect to foods, it is sufficient to check the quantity, appearance, smell and taste. If this is not sufficient, however, a sample processing may have to be carried out, if typical defects would appear in doing so.

In general, a particularly careful inspection, which goes beyond what applies with most other product types, is required for foods. The proper investigation should be recorded, as the purchaser must be able to prove any defects, where applicable. If a defect has been identified, notification should be made immediately – and verifi­ably. This also applies if a defect could not be discovered upon the incoming goods inspection, but appears later (a so-called “concealed defect”). Even a delay of three or four days may be too late, and may lead to the loss of all rights arising from the defectiveness. If, in individual cases, a supplier has acted with intent to deceive when making a delivery, it is not entitled to claim that the purchaser has not carried out an investigation or notification on a timely basis. At that point, the supplier is ulti­mately not worthy of protection.

With respect to food, we have repeatedly had cases in which this argument could be used suc­cessfully, although the purchaser had actually reported a defect too late. However, when the purchaser fails to provide a notifica­tion, any success of a “rescue” with this argument is surely the exception. Thus, it is all the more important to precisely establish and document the incoming goods inspection and the proce­dure when a defect is found.

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