Prevention and Remedy of Product Quality Disputes in International Goods Sales Contracts

Product quality disputes and inspection standards in international goods sales contracts have always been key concerns in the field of international trade. From the perspective of Chinese lawyers, this article will explore the causes of quality disputes, the determination methods of inspection standards, etc. The aim is to provide clear legal guidance and practical references for international trade practitioners, so as to effectively prevent and resolve such disputes, ensure the smooth progress of transactions, and balance the rights and interests of all parties. If you need to resolve relevant disputes or require more professional legal services such as review and drafting of foreign - related contracts, you can contact our team of Chinese lawyers.

Prevention and Remedy of Product Quality Disputes in International Goods Sales Contracts

I. Causes of Quality Disputes

(I) Unclear and Incomplete Contract Terms

Many international goods sales contracts lack precise and detailed descriptions of product quality. They use ambiguous terms such as "reasonable quality requirements" and "industry - standard quality", without clearly defining specific quality parameters, specifications, performance indicators, as well as specific industry standards of a certain country or region. This leads to different understandings between the buyer and the seller regarding whether the quality of the goods meets the standard after delivery, thus triggering disputes. For example, in an agricultural product sales contract, it only stipulates "meeting export standards", but fails to clearly define specific indicators such as pesticide residue levels, appearance color, and maturity. When the buyer rejects the goods on the grounds that the color of the goods is not good enough for its market sales requirements, the seller believes that the goods meet the local general export standards. The two parties hold different opinions, and a dispute arises.

(II) Uncontrollable Factors in the Production Process

During the production of goods, various factors such as fluctuations in the quality of raw materials, malfunctions of production equipment, and differences in craftsmanship among different technicians may affect the final product quality, resulting in the quality deviating from the contract agreement. For instance, when an electronic component manufacturer was producing a batch of export - oriented chips, due to slight compositional differences in some raw materials provided by the main raw material supplier or the discontinuation of the original supply material, the manufacturer had to choose materials from other suppliers. Although the manufacturer tried to adjust the process during production, a certain proportion of unqualified products still appeared in the stability test of the produced chips. This triggered quality complaints and disputes from the buyer after delivery.

(III) Damage during Transportation and Storage

During long - distance transportation and storage, goods may be damaged due to harsh transportation conditions (such as high temperature, humidity, vibration), improper handling operations, and imperfect storage facilities, affecting the quality and performance of the goods. This is especially true for fragile, perishable, easily damaged, and precision goods. For example, in a case I received for consultation, a batch of cheese was transported from Europe to China. The inspection certificate provided by the seller from the exporting country was qualified. However, during the sea transportation, due to improper storage and an extended transportation time affected by the epidemic, the buyer found that the goods had seriously deteriorated after receiving them, not meeting the quality of the goods stipulated in the contract. As a result, a dispute arose between the buyer and the seller regarding liability and compensation.

II. Prevention and Remedy of Quality Disputes

To prevent quality disputes and avoid being in a disadvantageous position, or to safeguard their rights and interests after a quality dispute occurs, we, as Chinese lawyers, suggest that international trade practitioners can start from the following aspects:

(I) Clearly Define Product Quality Standards or Inspection Standards in the Contract

International goods sales generally involve a large amount of money. Therefore, it is necessary to sign a formal international goods sales contract, clearly defining quality standards, liability for breach of contract, and compensation standards. Generally, product quality standards can be agreed upon in the following ways:

1. Detailed Technical Specifications: The buyer and the seller can stipulate detailed technical parameters of the goods in the contract. For example, in an electronic product sales contract, clearly specify the chip model, memory capacity, processor speed, screen resolution, and other specific indicators of the electronic product. For mechanical products, parameters such as dimensional accuracy, material composition, power, and rotational speed will be listed in detail.

   
   

2. International or National (Regional) Standards: Refer to international general standards or the national standards of the importing/exporting country. For example, in the chemical product trade, relevant standards of the International Organization for Standardization (ISO) may be used, such as the ISO 9001 quality management system standard to regulate the quality management of enterprises. In the steel trade, China's GB/T standards (recommended national standards) are often cited.

   
   

3. Industry - Specific Standards: Determine the quality according to the specific standards of the industry to which the goods belong. For example, in the textile industry, there are standards of the International Association for Research and Testing in the Field of Textile and Leather Ecology (OEKO - TEX), which are used to detect whether textiles contain substances harmful to the human body, as well as quality indicators such as color fastness and fiber composition of textiles. In the food industry, there is the Hazard Analysis and Critical Control Points (HACCP) system standard to ensure food safety and quality.

   
   

4. Specific Brand or Enterprise - Internal Standards Recognized by Both Parties: If the goods are produced according to the standards of a specific brand, the contract can stipulate that the quality standards of that brand shall be followed. For example, in the auto parts trade, the contract stipulates that the auto parts must meet the internal quality control standards of the auto brand manufacturer (such as Toyota, Volkswagen, etc.), including durability tests and compatibility tests of the auto parts. Or for some large enterprises with strict internal quality standards, the buyer and the seller can agree to use these as the inspection basis.

   
   

   If the parties fail to clearly agree on relevant standards through the contract, only the following supplementary standards can be used to determine whether the product quality is qualified after a dispute:

   
   

   (1) The Standard for the Usual Purpose of the Goods: The minimum standard stipulated by the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the domestic laws of many countries;

   
   

   (2) The General Standard of Similar Goods in Similar Transactions: For goods without clear quality standards, the general market quality level of similar goods in similar transactions can also be referred to.

   
   

   (3) The Reasonable Quality Requirements for a Specific Target Market or Use: If the goods have a specific target market or use, and the seller is aware of this situation, the goods delivered by the seller should meet the reasonable quality requirements of that specific market or use. This is determined based on the seller's reasonable duty of care and the principle of commercial integrity.

(II) Clearly Define the Inspection Institution and Inspection Method

In addition to determining the quality inspection standard, the choice of the inspection institution and inspection method also has an important impact on the resolution of quality disputes. This involves the "power distribution" of the buyer and the seller regarding the "qualitative" assessment of product quality, that is, which party's inspection result will be taken as the final conclusion.

The two parties to the contract can agree that a specific internationally renowned inspection institution (such as SGS, BV, etc.) will conduct the inspection. These institutions usually have professional testing equipment, experienced technicians, and are widely recognized. The inspection reports they issue have high credibility in international trade.

At the same time, the contract should also clearly define the time, place, and method of inspection. For example, for perishable goods, the inspection may need to be carried out within a short time after the goods arrive at the port of destination, in a specific refrigerated environment, using sampling and testing methods recognized by both parties, to ensure that the inspection results can accurately reflect the true quality of the goods at the time of delivery. Regarding the inspection method and time, to ensure fairness, we, as Chinese lawyers, recommend the method of "inspection in the exporting country and reinspection in the importing country", that is, the seller delivers the goods to the buyer based on the inspection certificate issued by the inspection department of the exporting country. After receiving the goods, if the buyer believes that there are no major quality or quantity problems with the goods, the buyer will give tacit consent and no longer conduct an inspection. Only when the buyer determines that there are serious quality or quantity problems with the goods will he first "declare" the problem to the seller. Subsequently, an inspection will be carried out, and then a claim will be made to the seller based on the test results.

(III) Inspection within a Reasonable Period and the Obligation of Timely Notification

The buyer has the obligation to inspect the goods within a reasonable period after receiving them and notify the seller within a reasonable time after discovering quality problems. The CISG stipulates that if the buyer fails to inspect the goods and notify the seller of the non - conformity of the goods within the shortest time that is practically feasible, the buyer will lose the right to claim that the goods do not conform to the contract, unless the non - conformity becomes apparent within a reasonable time after the buyer discovers or ought to have discovered it. For example, after receiving a batch of clothing, the buyer should conduct inspections of appearance, size, sewing quality, etc. within the time allowed by normal business practices (such as within one week). If quality problems are found, the seller should be notified immediately, and the specific situation of the problems should be explained. If the buyer raises a quality objection several months later and cannot prove that the quality problem became apparent later, the seller may refuse to bear the responsibility on the grounds that the buyer failed to fulfill the inspection and notification obligations in a timely manner.

(IV) In Case of a Quality Dispute, Collect Evidence as Soon as Possible to Ensure a Complete Chain of Evidence

In judicial practice, the court usually attributes the burden of proof of the identity of the goods to the buyer. For some specific types of goods, it is actually very difficult to prove their identity. Regarding the issue of the identity of the goods, a relatively complete chain of evidence can include the purchase order, inspection reports (export/import), shipping photos, electronic bills of lading, customs declarations, markings related to the goods packaging, on - site unpacking photos/videos, and other evidence materials to form a complete and effective chain of evidence, as well as the content of the correspondence between the two parties regarding the quality problem of the goods.

Therefore, in international goods sales contracts, the buyer and the seller should, as much as possible, clearly define specific quality standards, inspection methods, and inspection institutions. After receiving the goods, the buyer should promptly fulfill the inspection obligation and notify the seller in writing within a reasonable time after discovering quality problems, specifying the details of the quality problems. At the same time, pay attention to retaining relevant evidence so as to effectively safeguard their rights and interests in case of disputes. During the dispute - resolution process, both parties should maintain a rational and open attitude, actively seek ways to resolve the dispute through negotiation, and if necessary, seek the help of professional third - party institutions (such as inspection institutions, law firms, trade mediation institutions, etc.) to reach a fair and reasonable solution and maintain a long - term trade cooperation relationship. If you also have relevant issues to deal with, you can contact us.