Martin Silver is a practicing attorney with offices in Hauppauge, N.Y. He was a flooring installer before and during the time he went to law school and has since represented numerous industry people and companies. To contact him, call 631-435-0700.
Complaints and lawsuits
What do you do when your customer is unhappy with the carpet you just sold her, and, after inspecting the carpet, you are positive that: 1) There is absolutely nothing wrong with it, and 2) Even if there is, it's a manufacturing condition?
Under the law, as contained in both the Uniform Commercial Code (UCC) and various state consumer protection statutes, a seller of goods almost always guarantees to his buyer that the goods he is selling are "good," and they will be fit for general use. This means even if the alleged defect really is a manufacturing condition, each seller of those goods- the manufacturer to the distributor, the distributor to the retailer and the dealer to the consumer- guarantees to his customer what is being sold is not defective.
Not only is the retail seller totally responsible to his buyer for the condition of goods, but in most situations, he is the only one the consumer can sue. In most cases, the guarantee is treated as a contract right made a part of every sales agreement.
If we follow the above rules in a textbook "defect" situation, the consumer will look to the retailer, the dealer will look to his seller- the distributor- and the distributor will throw the problem back to the manufacturer. In most cases, this works fairly smoothly. The retailer will inspect the complaint and report it to the distributor, or to the manufacturer if a direct sale. The distributor or manufacturer will then, after either inspecting it himself or accepting the retailer's report, agree there is a defect and offer a replacement or an allowance. Probably 98% of all claims are settled in this manner.
But, what happens when the manufacturer concludes the problem is not a manufacturing defect? The retailer- sure he didn't create the problem- must now go back to his consumer and tell her the mill declined her complaint and then either: 1) Offer to do something on his own, or 2) Tell her there is nothing he can do.
Let's assume the dealer in this situation chooses the second option, and one week later the distributor or manufacturer who sent the goods to the dealer bears the ultimate legal responsibility for the defect. The problem is the consumer has only sued the retailer, and it is he who must defend the lawsuit unless he somehow gets his seller involved.
Generally speaking, this can be accomplished in two ways. First, the dealer can actually sue the manufacturer within the same lawsuit- third-party action. Therefore the actual lawsuit will be: 1) Consumer against retailer on a claim of "defective goods," and 2) Retailer against mill on a claim of "indemnification." (If the consumer can prove the retailer is responsible for damages because he delivered "defective" carpet, then the mill is equally responsible to the dealer and must indemnify him for those damages).
Instead of actually suing the mill at this time, the dealer might choose the second choice: The UCC states, in part, when a buyer (the retailer) is sued for breach of warranty by his buyer (the consumer) which breach is really his seller's (the mill's) responsibility, he may give that seller written notice of the lawsuit. If the notice states the seller may "come in and defend," and he does not, he will be bound by any determination made in that lawsuit with regard to these goods. Thus if the manufacturer ignores the notice and the retailer looses the lawsuit because the judge agreed that the goods were in fact defective, the manufacturer cannot, if the retailer then sues him, even attempt to prove there was no defect, and the retailer automatically wins.