Imagine your business bought a specific type of food in bulk from a reseller, paid for it, and subsequently sold it to over 500 customers. Then, after your business paid for and resold that food item, you receive notification from the reseller who originally sold you the item stating that the ingredient was unsafe and there has been a recall of the goods.
What do you do?
Typically, after issuing a recall of a product over a safety issue, manufacturers provide issue instructions on how to arrange for pickup of the unsafe product and any processes for issuing either a refund or replacement product. Manufacturers often retain a compliance company specializing in the disposal of recalled goods. The compliance company will typically advise of the processes and procedures for pickup.
Following the recall, you will need to provide refunds to customers who bought the tainted food from you. After giving out these refunds, you will want to seek a refund from the reseller who originally sold you the food product. If there is a dispute between the reseller and the manufacturer over how to address payment or a replacement product, it could create additional problems for you. You only previously dealt with the reseller but now may be forced to deal with the manufacturer with whom you never dealt with.
Resellers of products in bulk will typically have terms and conditions in their agreements that address a limitation of their liability. Often, the liability of the reseller will be limited to the replacement of the product. The resellers will most likely disclaim all warranties to prevent lawsuits for the breach of warranty of merchantability or warranty of fitness.
The Uniform Commercial Code (UCC) gives the seller of goods that are defective or “non-conforming” the right to “cure” by delivering replacement goods that conform to the original purchase. The seller must be given the right to cure the defect before the buyer can cancel the agreement. The notification of intention to cure must be “reasonable” or soon after the rejection/recall of the goods.
It should be noted that in New York it is not enough to offer to cure the delivery of the defective product. Under New York case law, the seller needs to notify the buyer of its intention to cure and provide a “conforming tender” of the replacement goods available for the buyer with proper notice to the buyer.
Under the UCC, if the seller does not offer the right to cure, the buyer can cancel the agreement. The buyer is entitled to a return of the amount paid to the seller as well as incidental and consequential damages unless the terms and conditions of the agreement between the buyer and seller state otherwise.
Assuming the reseller does offer the right to cure, the terms of the contract determine the party that bears the cost of the delivery of the replacement goods.
If you have a debt collection matter you need assistance with, contact Frank, Frank, Goldstein and Nager. We have the experience that pays.
