Defective Product or Non-Conforming Goods? An Introduction to the Sale of Goods Act and the Claim of Non-Conformity.

What Constitutes a Defective or Non-Conforming Product? The Claim of “Non-Conformity”

Understanding a Defective Product: What is Non-Conformity?

A defective product signifies “non-conformity.” According to Section 11 of the Sale of Goods Law, 5728-1968, this occurs when a seller delivers goods not matching the buyer-seller agreement. Specifically, non-conformity includes:

• Partial delivery: Only a portion of the agreed product arrives
• Incorrect quantity: The delivered quantity differs from the order
• Wrong product: A different item, type, or description is delivered
• Missing quality/features: The product lacks necessary qualities for regular use or a specified purpose
• Mismatch to sample: The product doesn’t match the shown model or sample, unless responsibility for conformity was explicitly disclaimed
• General non-conformity: Any other instance where the product fails to align with the agreement

Understanding these points helps buyers identify a defective product and assert their rights.

Note! According to sections 3-1 of the Law, a claim of non-conformity does not apply to products delivered free of charge. The claim applies only to products delivered for a price or in a barter transaction.

When Can a Buyer Not Raise a Claim of Non-Conformity?

A buyer cannot raise a claim of non-conformity in the following circumstances (sections 15-13 of the Sale of Goods Law):

1. The buyer knew of the non-conformity when they decided to enter into the sales contract (section 12 of the Law);
2. The buyer did not comply with the #Examination Rules (section 13 of the Law);
3. The buyer did not comply with the #Notification Rules (section 14 of the Law).

Important Note! There are #Exceptional Circumstances where, even though the buyer did not comply with the above rules (examination and notification), they may still raise a claim of non-conformity.

Product Examination Rules: Avoid Losing Your Claim

Under Section 13 of the Sale of Goods Law, buyers must follow “examination rules” to avoid losing product non-conformity claims:

• Examine the product immediately upon receipt.
• If transport was agreed, examine upon arrival at the destination.
• If the seller knew or should have known about further transport, examine upon arrival at that new location.

Important: The seller must allow examination before either the buyer receives the product or before it’s transported to them.

Notification Rules: Failure to Comply May Bar a Claim of Non-Conformity

Reporting Product Non-Conformity in Israel

According to Section 14 of the Sale of Goods Law, buyers must promptly inform the seller about any product non-conformity. This notification is essential right after examining the product or discovering the non-conformity, whichever occurs first. Missing these deadlines might cause the buyer to lose their right to claim non-conformity, although some exceptions apply.

Consider this scenario: Itzik bought furniture, due in 60 days. A week later, he discovered a non-conformity but failed to inform the seller. After 60 days, the furniture arrived. Only then did Itzik inspect it and notify the seller. Consequently, Itzik cannot claim non-conformity.

Did you miss the immediate notification for “non-conformity” upon receipt or discovery? Even when exceeding time limits, you might still claim non-conformity under specific circumstances. These include “justified” negligence by the buyer or intentional concealment by the seller.

A. “Justified” Negligence of the Buyer

A buyer will be entitled to a claim of non-conformity even if they did not meet the statutory deadlines for notification (section 15 of the Sale of Goods Law). This is only if all of the following conditions are met:

1. The non-conformity was not discoverable upon reasonable examination;
2. The seller was notified of the non-conformity immediately after its discovery; and there are qualifications to this:

• If notification is given after two years from the date of sale, the buyer cannot rescind the contract. However, the buyer may be entitled to other remedies under the contract or law.
• If notification is given after four years from the date of sale, the buyer will also not be entitled to other remedies for breach of contract. However, the buyer may raise other claims, such as those relating to damages caused by the non-conformity.

B. Concealment of Non-Conformity by the Seller

A buyer may rely on non-conformity even if, under normal circumstances, they would not be entitled to do so, if all of the following conditions are met (sections 12 and 16 of the Sale of Goods Law):

1. The seller knew or should have known of the non-conformity at the time of concluding the contract;
2. The seller did not disclose the non-conformity to the buyer;
3. The buyer did not know of the non-conformity at the time they decided to enter into the sales contract;
4. The buyer notified the seller of the non-conformity immediately upon discovery.

When all conditions are met, buyers can claim non-conformity. This holds true even if immediate inspection wasn’t performed. It applies even when the non-conformity was reasonably discoverable. Furthermore, buyers meeting the last two conditions bypass the standard two-to-four-year remedy time limits.

What Should the Buyer Do in the Case of a Defective or Non-Conforming Product?

Examination

The buyer must examine the product immediately upon receipt. The speed of examination is in the buyer’s best interest. Since they have a limited time to demand “contract cancellation” under both the Law and Consumer Protection Regulations (for more information on contract cancellation under the Consumer Protection Law). Where the non-conformity is not discoverable upon reasonable examination, the buyer must notify of the non-conformity immediately upon discovery. This is in accordance with the #Examination Rules and #Notification Rules.

Notification of Non-Conformity

Immediately upon discovery of the “non-conformity,” the buyer must notify the seller (preferably in writing) with a reasonable description of the non-conformity (sections 14 and 17(a) of the Sale of Goods Law).

Opportunity to Examine

The buyer must give the seller a reasonable opportunity to examine the product that is claimed to be defective/non-conforming (section 17(a) of the Sale of Goods Law).

Reduction in Difference in Value

A buyer who wishes to “live with” the non-conformity is entitled to deduct from the consideration the differences in value resulting from the non-conformity. For example: Itzik purchased a product for NIS 70, but due to the non-conformity, the product is worth NIS 50. Itzik may deduct NIS 20 from the value of the transaction.

Notification of Contract Cancellation or Performance

If the seller does not correct the non-conformity within a reasonable time, the buyer has two options:

1. To demand performance of the contract (i.e., correction of the “non-conformity”)
2. To rescind the contract.

What Can Be Claimed in Case of a Defective or Non-Conforming Product?

Transactions Subject to the Consumer Protection Law: The main law designed to regulate relationships between a business and a consumer. This is the Consumer Protection Law, 5741-1981. The law grants the consumer a unilateral right of withdrawal. This right allows the consumer to withdraw from certain transactions unilaterally. And without any justification. A breach of the provisions regarding cancellation of a transaction gives the consumer the right to claim damages without proof of harm. For a complete consumer guide to cancelling transactions.

Remedies under the Sale of Goods Law: There are situations where the consumer does not have a right of action under the Consumer Protection Law and must seek recourse in other legislation. For example, if the products cannot be returned. For a complete consumer guide to transactions that cannot be cancelled.

And there are situations where even if the consumer has a right of action under the Consumer Protection Law. They wish to “have their cake and eat it too.” How? To file a claim under both the Consumer Protection Law and the Sale of Goods Law. And possibly also under the Tort Ordinance.

Buyers can claim remedies from the seller without court intervention. If a lawsuit is necessary, buyers may seek additional damages. This includes tort damages, breach of sales contract damages, and any other suitable remedy.

What is the law if a larger quantity of products/components than ordered was received?

Receiving excess quantity depends on its separability. If easily separable, without undue expense, the buyer cannot rescind the contract (Sale of Goods Law, Section 29). However, the buyer can notify the seller to reject the surplus within a reasonable time. This does not preclude rescission for other reasons.

If not separable, the buyer may rescind the contract. Timely rejection notification is crucial. Otherwise, the buyer pays for the excess at the agreed rate.

Sale According to Specifications: What is the law if the buyer delays in providing details?

Buyers sometimes order products to their own specifications. These include size, quantity, weight, and related product or purchase details. Section 30(a) of the Sale of Goods Law defines this. If the buyer does not provide the specifications within the time stipulated in the contract.. The seller will be entitled, within a reasonable time:

Buyers can choose to rescind the contract, treating it as if breached. Alternatively, they may define any missing specifications or data. This decision should consider the buyer’s known needs. The seller’s decision becomes binding. This happens if they notify the buyer. It also requires the buyer to fail in promptly specifying the data.