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? A Claim of “Non-Conformity”

A defective product is a term for “non-conformity.” Section 11 of the Sale of Goods Law, 5728-1968 stipulates that non-conformity occurs when the seller delivers a product to the buyer that does not conform to the agreement between the parties. More specifically:

1. Only part of the agreed-upon product was delivered. For example: only the tabletop of a dining set was delivered, without the legs;
2. A larger or smaller quantity than agreed upon was delivered. For example: only 3 chairs were delivered from a seating set that includes 4 chairs;
3. A different product, type, or description than agreed upon was delivered. For example: black sofas were ordered and brown sofas were received; or sofas of size X were ordered and sofas of size Y were received;
4. A product lacking the quality or characteristics required for its regular or commercial use or for a specific purpose implied by the agreement was delivered. For example: an orthopedic mattress was ordered and a non-orthopedic mattress was received;
5. A product that, in terms of its type, description, quality, or characteristics, does not conform to the model or sample shown to the buyer, except in cases where the product was shown to the buyer without an undertaking to conform;
6. A product that is otherwise non-conforming to the agreement between the parties.

Note! According to sections 3-1 of the Law, a non-conformity claim 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 Non-Conformity Claim?

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

1. The buyer knew about 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 rules of examination (section 13 of the Law);
3. The buyer did not comply with the rules of notification of non-conformity (section 14 of the Law).

Important Note! There are exceptional circumstances where, even if the buyer did not comply with the above rules (examination and notification), they may still raise a non-conformity claim.

Rules of Examination – Failure to Comply May Bar a Product Non-Conformity Claim

According to section 13 of the Sale of Goods Law, a buyer must comply with the “examination rules”:

1. The buyer must examine the product immediately upon receipt;
2. If the product’s transport was agreed upon, the buyer must examine it immediately upon arrival at the transport destination.
3. Transport to another location without the buyer’s knowledge: if the seller knew or should have known that the product might be transported to another location, the buyer must examine the goods immediately upon arrival at that other location.

Note! The seller must allow the buyer to examine the product before the earlier of the above two times; that is, before the buyer receives the product or it is delivered to them.

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

According to section 14 of the Sale of Goods Law, the buyer must notify the seller of the non-conformity immediately after the examination or immediately after the discovery of the non-conformity, whichever is earlier. If the buyer does not notify within these times, they will not be entitled to a non-conformity claim. (There are exceptions to this).

Example: Yitzhak purchased furniture that was supposed to arrive at his home within 60 days. About a week later, Yitzhak discovered a non-conformity, but despite this, he did not notify the seller. 60 days passed, and the furniture arrived at Yitzhak’s home. Only then did Yitzhak examine the furniture and only then did he notify the seller. In this case, Yitzhak will not be entitled to a non-conformity claim.

As mentioned, Yitzhak should have notified the seller at the earlier of the two dates (the examination date or the discovery date). In this case, the earlier date was the discovery date, and Yitzhak should have notified immediately thereafter. Since Yitzhak notified with a delay of about two months, he will not be entitled to a non-conformity claim. This ruling is consistent with logic: if Yitzhak had notified the seller at the time of discovery, the seller could have rectified the non-conformity beforehand, saving time and money.

Did you not submit a “non-conformity” notice immediately upon receipt of the product or immediately after discovery? These are the situations where, despite exceeding the time limits, you can still claim non-conformity: “Justified” negligence of the buyer or intentional concealment by the seller

A. “Justified” Negligence of the Buyer:

A buyer will be entitled to a non-conformity claim even if they did not meet the statutory deadlines for notification (section 15 of the Sale of Goods Law). This is only if all 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 upon its discovery; and there are caveats to this:

• If notification was given after two years from the date of sale, the buyer cannot rescind the contract. However, the buyer can insist on receiving other remedies to which they are entitled under the contract or law.
• If notification was 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 for damages caused by the non-conformity.

B. Concealment of Non-Conformity by the Seller:

A buyer can rely on non-conformity even if, under normal circumstances, they would not have been 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 about the non-conformity when they decided to enter into the sales contract;
4. The buyer notified the seller of the non-conformity immediately upon its discovery.

If all conditions are met, the buyer can rely on the non-conformity, even if they did not examine the goods immediately after they were delivered; and even if the non-conformity was discoverable upon reasonable examination. In addition, a buyer who meets the last two conditions above will not be subject to the time limits (two to four years) regarding the remedies the buyer can claim.

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

1. Examination: The buyer must examine the product immediately upon receipt (section 13 of the Sale of Goods Law). We note that the speed of examination is a significant interest of the buyer, since they have a limited time to demand “contract cancellation” under both the Law and the Consumer Protection Regulations (for more information on contract cancellation under the Consumer Protection Law). For a non-conformity that is not discoverable upon reasonable examination, the buyer must notify of the non-conformity immediately upon discovery, according to the examination rules and notification rules.

1. Notification of Non-Conformity: Immediately upon discovering 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).
2. Opportunity for Examination: The buyer must give the seller a reasonable opportunity to examine the product claimed to be defective/non-conforming (section 17(a) of the Sale of Goods Law).
3. Reduction of Difference in Value: A buyer who wishes to “live with” the non-conformity is entitled to reduce the consideration by the difference in value resulting from the non-conformity. For example: Yitzhak purchased a product for NIS 70, but due to the non-conformity, the product is worth NIS 50. Yitzhak is entitled to reduce the transaction value by NIS 20.
4. Notification of Cancellation or Performance of Contract: If the seller does not rectify the non-conformity within a reasonable time, the buyer has two options:

• To demand performance of the contract (i.e., rectification of the “non-conformity”); or –
• To cancel the contract.

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

Transaction Complying with the Conditions of the Consumer Protection Law: The main law designed to regulate relationships between a business and a consumer 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 and cancel certain transactions unilaterally, without any reason. Breach of the provisions regarding cancellation of a transaction grants the consumer the right to claim damages without proving harm. For a complete consumer guide on canceling 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 it involves products that cannot be returned. For a complete consumer guide on transactions that cannot be canceled.

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, the Sale of Goods Law, and perhaps also under the Tort Ordinance.

In a situation of non-conformity, these are the main remedies that can be claimed (sections 28-27 of the Sale of Goods Law):

1. Performance of the contract;
2. Cancellation of the contract and return of consideration;
3. Reduction of difference in value: A buyer who wishes to “live with” the non-conformity is entitled to reduce the consideration by the difference in value resulting from the non-conformity. For example: Yitzhak purchased a product for NIS 70, but due to the non-conformity, the product is worth NIS 50. Yitzhak is entitled to reduce the transaction value by NIS 20.

The buyer is entitled to demand the above remedies from the seller even without resorting to court. If the buyer has to file a lawsuit, they can add other damages to the above remedies. For example: tort damages, damages for breach of the sales contract, and any other appropriate remedy.

What is the Law if a Larger Quantity of Products/Components Than Ordered Was Received?

The answer to this question depends on another question: Is the excess quantity separable without unreasonable expense or trouble?

1. If yes: The buyer will not be entitled to cancel the contract for this reason (section 29 of the Sale of Goods Law). However, the buyer is entitled to notify the seller (within a reasonable time) that they are rejecting the excess quantity received. It should be emphasized: the provision that prevents a buyer from canceling the contract for this reason does not prevent them from canceling the contract for other reasons.
2. If no: The buyer will be entitled to cancel the contract for this reason.

Note! Notification of rejection of the excess quantity within a reasonable time is extremely important. Otherwise, the buyer will have to pay for the excess quantity at the agreed rate.

Sale According to Specifications: What is the Law if a Buyer Delays in Providing Details?

There are situations where buyers purchase products according to specifications determined by the buyer. Specifications = size, quantity, weight, and other data relating to the product or the conditions of its purchase (section 30(a) of the Sale of Goods Law). If the buyer does not provide the specifications within the time stipulated in the contract, the seller will be entitled, within a reasonable time:

1. To withdraw from the contract as if it were breached; or –
2. To determine the missing specifications or data themselves, taking into account the buyer’s needs as known to the seller. Note: the seller’s determination will be binding if: (1) the seller notified the buyer; (2) the buyer did not specify the data immediately after receiving the seller’s notification.