When you order goods, you expect that they will meet your expectations and be in proper working order. While most purchases will be covered by the Australian Consumer Law (ACL) and require suppliers to meet the consumer guarantees, other purchases may fall outside of the ACL. Here, you will need to rely on what you have agreed to in the contract. This article will outline clauses for samples and testing regimes so you can ensure that goods you order are of high quality.

The Australian Consumer Law

Under the Australian Consumer Law, consumers are automatically provided guarantees that the goods they purchase will work and do what you asked for. A person or business will be considered a consumer under the ACL if:

  • the goods cost up to $40,000;
  • the good cost more than $40,000 and was of a kind normally acquired for personal, domestic or household use; or
  • a vehicle or trailer used mainly to transport products on public roads.

The consumer guarantees will not apply to a business if the business buys goods to resell them or transform them into a product to sell.

This means that often, when businesses are making large purchases over $40,000, for example, buying some equipment, or if they intend to resell the goods, the consumer guarantees will not apply. As such, you will need to ensure that the contract addresses that you will receive the goods as requested.

Sample Goods

Before requesting a large quantity of goods, you may wish to request a sample of the goods. This way, you can ensure you are happy with the quality of the goods and can ensure they match any specifications you provided to the supplier. 

When drafting a sample goods clause, you should ensure that:

  • you have the ability to accept or reject sample goods, or request any modifications to the sample goods;
  • there is a set time frame for any adjustments to the sample goods to be made and delivered to you; 
  • you know who is covering the costs of producing and delivering the samples; and
  • once you have accepted the sample goods, all goods to be provided later will match the sample goods.

Acceptance Testing

Acceptance testing involves the testing of a product to make sure that it matches the requirements of any product specifications that you requested. 

For example, if the goods that have been delivered do not match the sample goods you had previously approved, you may consider that the goods are not acceptable.

An acceptance testing clause provides a regime where you can have a set period of time to accept or reject the goods. Of course, if you reject the goods, generally it would need to be as a result of an act or omission of the supplier, not merely a change of mind.

If you do reject goods under the acceptance tests, you should have a choice for how you will proceed. You may wish to have the opportunity to:

  • waive the need for further acceptance tests;
  • request that the goods be amended to satisfy the acceptance tests; or
  • accept the goods on the basis that you will allow the supplier a set timeframe to amend the non-compliance.

The acceptance testing clause should also cover costs. Ideally, the supplier will be responsible for amending the goods, and any delivery costs, at no additional cost.

Defective Goods

You may wish to include a clause in your contract outlining that you may, at any time, reject any goods you deem to be defective and return them to the supplier. This may occur because the product:

  • does not work as you would have expected it to;
  • it is not safe to use; or
  • does not match the description you agreed upon.

As a customer, you will want the definition of ‘defects’ to be as broad as possible. This way, it will include all of the defects you initially considered a possibility will be captured, but will also capture those you have not.

An example definition of defects is as follows:

Defects or Defective mean any defects, errors, omissions, faults or flaws in the goods, or where the goods are not of merchantable quality, or are non-compliant with the relevant sample goods, the client’s specifications, any legislative requirement, good industry practice, or any requirement of this agreement.

Importantly, the defective goods clause should address:

  • the period which the supplier is warranting the goods will not be defective;
  • a process for how the goods will be fixed or replaced; 
  • how you will notify the supplier of any concerns; 
  • that the supplier will cover the costs of any additional work, call out or delivery fees; and
  • the timeframe in which the supplier will respond to any request of yours.

Key Takeaways

When ordering goods for your business, particularly if they are bespoke or very expensive, you must ensure that the goods are of good quality and match what you were expecting. You can do this by asking for sample goods before you make any large orders to confirm you are happy with the product. This will also set a benchmark for the quality of the product. You can also include acceptance testing and defective goods clauses into your contracts so that you have an opportunity to have any goods fixed if they do not match what you asked for or do not work as expected. If you need assistance with your supply contracts, contact LegalVision’s contracts lawyers on 1300 544 755 or fill out the form on this page. 

 

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Lauren McKee
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