Commodity trading transactions, especially those with large value, usually have goods with complex structures as the object of the transaction, for example, industrial machinery, cars, motorcycles, electronic items, etc. are goods which are considered to have a relatively long exploitation period. Thus, it is very important to set the seller’s warranty responsibility even though the goods have been inspected and accepted by the buyer. This stems from the fact that, at the time of purchase, the test results show that the goods are in normal and stable operation, but after a certain period, the problems with the goods that are not caused by errors of the buyer somehow arise.
What is a warranty?
Warranty is the responsibility of the seller to repair, replace the components, accessories of the defective goods or replace the defective goods with the new ones within a certain period of time from the point when the goods are delivered to the buyer as agreed by the parties or by law. However, in the majority of cases, the seller has warranty obligation only in cases where the defects arise on the ground of the manufacturer’s or the seller’s fault. The warranty liability is not applied for the damage caused by the fault of the buyer.
Term of warranty?
Currently, except for the compulsory warranty for construction works according to laws on construction, there are no legal documents specifying the warranty period applicable to ordinary goods. In fact, the warranty period is agreed upon by the parties depending on the characteristics of each specific type of goods and usually includes the following basic features:
- Commencement of the term of warranty: In most cases, the term shall be counted when the seller delivers the goods to the buyer. However, in some special cases where the purchased goods are not used immediately, the parties agree that the term of warranty shall commence when the buyer puts the goods into operation and use.
- Criteria for determining the term of warranty: Given that the parties are free to decide the term of warranty, in most cases, the determination of the term of warranty may be based on the following criteria: (i) features and uses of the goods, (ii) the applicable practice of buying and selling goods (iii) the business relationship of the parties to the transaction, etc.
Responsibilities of the seller in a warranty?
According to the Civil Code 2015, warranty obligation of the seller shall be valid upon the agreement of the parties or otherwise provided by law. Currently, except for the cases of compulsory warranty for construction works stipulated by laws on construction, the list of goods subject to compulsory warranty has not yet been specified by law. In other words, the seller’s warranty obligation is only set if, at the time of the transaction, the parties have agreed with each other on warranty-related issues such as, warranty period, the scope of warranty, warranty procedures, etc.
By law, the seller shall have the following warranty obligation towards the purchased goods:
- The seller must perform the warranty obligation as soon as possible.
- The seller must bear the costs of the warranty, unless otherwise agreed.
- The seller must repair the goods and ensure that the goods meet the quality standards or have all the committed
- The seller must bear the cost of repairing and transporting the goods to the place of repair and from the place of repair to the residence or headquarters of the buyer.
Rights of the buyer in a warranty?
During the term of warranty, if the buyer finds out any defects in the goods, it has the right to request the seller to repair such defects without additional payment, or to reduce the price, or to replace the defective goods with new ones, or return goods and get the refund.
The buyer has the right to request the seller to complete the repair within the time limit agreed upon by the parties or a reasonable time; if the seller cannot repair or cannot complete the repair within that time limit, the buyer has the right to request for a discount, or replacement of the defective goods with the new ones or return the goods and get the refund.
In addition to requesting the implementation of warranty measures, the buyer has the right to request the seller to compensate for any damage caused by technical defects of the goods during the term of warranty. However, the seller is not required to compensate for damage if it can prove that the damage occurred due to the buyer’s fault. At the same time, the seller is entitled to a reduction in the amount of compensation if the buyer fails to take necessary measures that are permissible in order to prevent and limit the damage.
Given that at the time of delivery of the goods, the parties have checked and verified the quality of the goods, it is still not the most optimal measure to protect the interests of the buyer in the transactions, which the defects arise after the transfer of ownership, and could not be detected by the buyer at the time of inspection. Therefore, in transactions involving goods of large value, especially machines with complex functions, it is necessary to clearly specify terms related to warranty and liability such as warranty coverage, warranty period, warranty procedures, buyer’s responsibility, warranty claim processing time, etc. which are of particular importance in terms of goods warranty as well as settlement of related disputes.
Date: 22 June 2021
The article is based on the current law at the time noted above and may no longer be appropriate at the time the reader approaches this article due to the change in the applicable law and the specific case that the reader wants to apply. Therefore, the article has only reference values.