Full question:
I received a purchase order from a customer to produce a product. I produced the product and shipped to my customer. I invoiced product the day it was delivered. My customer then sold product to his/her customer. My customer has received a few minor complaints about my product. However, no one has asked for a refund and no refund has been provided. My customer has now informed me that this is not what they ordered and will not pay the invoice. What legal recourse do I have.
- Category: Warranties
- Date:
- State: Georgia
Answer:
Any claim you may have relating to sale will likely be governed by contract law. It will be a matter of determination for the court, based on all the facts and circumstances involved, to decide whether there was a breach of the contract or warranty terms that would excuse the customer from payment. The terms of your contract and warranty language with the customer will generally determine your rights and obligations as well as those of the customer. You should carefully review the terms of the agreement, to determine your rights and obligations. If you wish to use the legal system to resolve your dispute, you may want to review the following general information regarding contract law and breach of contract actions:
Contracts are agreements that are legally enforceable. A contract is an agreement between two parties that creates an obligation to do or refrain from doing a particular thing. The purpose of a contract is to establish the terms of the agreement by which the parties have fixed their rights and duties. An oral contract is an agreement made with spoken words and either no writing or only partially written. An oral contract may generally be enforced the same as a written agreement. However, it is much more difficult with an oral contract to prove its existence or the terms. Oral contracts also usually have a shorter time period within which a person seeking to enforce their contract right must sue. A written contract generally provides a longer time to sue than for breach of an oral contract. Contracts are mainly governed by state statutory and common (judge-made) law and private law. Private law generally refers to the terms of the agreement between the parties, as parties have freedom to override many state law requirements regarding formalities of contracts. Each state has developed its own common law of contracts, which consists of a body of jurisprudence developed over time by trial and appellate courts on a case-by-case basis.
An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.
Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity.
Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds.
Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach
Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise. Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when a promise was made; reliance on the promise was reasonable or foreseeable; there was actual and reasonable reliance on the promise; the reliance was detrimental; and injustice can only be prevented by enforcing the promise. Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered.
Reasonable reliance is usually referred to as a theory of recovery in contract law. It was what a prudent person might believe and act upon based on something told by another. Sometimes a person acts in reliance on the promise of a profit or other benefit, only to learn that the statements or promises were either incorrect or were exaggerated. The one who acted to their detriment in reasonable reliance may recover damages for the costs of his/her actions or demand performance. Reasonable reliance connotes the use of the standard of an ordinary and average person.
Under the Uniform Commercial Code (UCC), which has been adopted in some form by almost all states, there are implied warranties in every sales transaction that the goods sold are fit for the ordinary purposes for which such goods are used. This is called the "implied warranty of merchantability". Under the implied warranty of merchantability, the good sold:
Are fit for the ordinary purposes for which such goods are used,
Would pass without objection in the trade
Is adequately packaged, labeled, and contained
Conforms to the promises made in the label
There may also be an "implied warranty of fitness for a particular use". This warranty is created when:
At the time of sale, the seller has reason to know the uses the buyer has for the goods, and
The buyer relies on the seller’s judgment in selecting the goods
This implied warranty is not created if the buyer’s knowledge of the goods is as great as the seller, or the buyer has a professional consultant, or the buyer supplies specifications to the seller
Implied warranties are part of every UCC contract unless disclaimed by the seller. Implied warranties are often disclaimed, which is legal as long as the disclaimers are conspicuous, such as in bold face print. Warranty disclaimers have been held a material alteration, such that they would not be part of the contract if the term was added in the acceptance. Although a seller cannot disclaim an express warranty, he can disclaim implied warranties.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
