Are there any standard contract terms I should have with my supplier regarding the quality of the products they supply us?
Is there any wording that would ensure it doesn’t turn into an endless subjective argument that ends up in a major dispute?
There are no “standard” contract terms that can be included in a supply contract that will ensure 100% that arguments do not arise between the supplier and purchaser.
However, the law does provide for some minimum statutory terms and there are strategies to provide you with added protection in addition to what is provided under law.
Protections provided under Australian Consumer Law
The Australian Consumer Law sets out a number of “consumer guarantees” that suppliers and manufacturers automatically provide in relation to certain goods they sell, hire or lease to consumers.
These rights exist regardless of any contractual warranties provided by the supplier/manufacturer and, importantly, cannot be excluded by a term of any contract.
A consumer is a person who buys:
- goods or services costing up to $40,000;
- a vehicle or trailer used mainly to transport goods (regardless of cost); or
- goods or services costing more than $40,000 which are normally used for personal, domestic or household purposes (that is, non-commercial purposes).
Therefore provided you are buying your products as a “consumer” you will usually have some minimum level of protection under Australian Consumer Law.
In relation to the quality of goods, suppliers and manufacturers automatically guarantee at law (amongst other things) without you having to do anything extra that:
- the goods are of acceptable quality (for example, the goods are fit for all purposes for which goods of that kind are commonly supplied, having regard to certain factors including the nature of and the price paid for the goods);
- the goods will be reasonably fit for any purpose the consumer or supplier specified;
- the supplier’s description of the goods is accurate; and
- the goods will match any sample or demonstration model and any description provided.
If the manufacturer or supplier breaches any of these minimum guarantees, you as the consumer will be entitled to a remedy.
The nature of the remedy will depend on the seriousness of the supplier’s breach of guarantee.
Where the Australian Consumer Law does not apply
If you are not buying goods as a consumer (that is, where the goods cost more than $40,000 and are being purchased for business purposes) then you may consider requiring the supplier to include some specific guarantees in the supply contract.
For example you may require the supply contract to include the type of guarantees along the lines of those outlined above that would have been otherwise available to consumers.
Strategies for additional protections
If the Australian Consumer Law does apply but you require additional protection, you may request that the contract include warranties that go over and above those that are provided under the Australian Consumer Law.
For example, you could require that in the contract the supplier warrants that the goods will last for a particular period and that, if they do not, the purchaser will be entitled to a specific remedy (such as a refund).
Another example is if you require the supplier to ensure that the goods supply will comply with certain basic standards that are specifically spelt out in the contract.
Basically, if you require the products to perform or look a certain way, then you should ensure the supplier specifically warrants those features in the contract and agree what would happen if they do not meet that warranty.
Providing clarification in this way reduces the risk of arguments about what the parties’ intentions and expectations were, and reduces arguments about what the remedies are.
Also, to avoid arguments about what was or was not promised by the supplier in relation to the goods, you should make sure that any representations or promises made by the supplier are specifically restated as warranties in the contract.
If these promises are not included as warranties in the supply contract, if there is a dispute you may find it difficult to prove that the supplier ever made the relevant promises. Again, the tip is to put it into writing in the contract.
In short, there are terms that are automatically added in under Australian Consumer Law.
However, if you have specific expectations for the goods or have any concerns regarding the quality of the goods, you should ensure the supplier provides specific warranties in the supply contract to address them.