Business Weekly: Warranty Limit

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A Project of the Business Halacha Institute

Under the auspices of HaRav Chaim Kohn 

Warranty Limit

by Rabbi Meir Orlian, Yerushalayim 

Abadi Apparel was preparing its new winter collection. The owner, Joseph Abadi, reviewed the plans with his plant manager and verified the rolls of fabric that would be used. A roll of gold-tone was to be incorporated as a designer stripe on the pants.

Mr. Abadi walked around the plant, tossing an encouraging word here and there to his employees. He made a special stop at the quality control station. “Keep a good lookout,” he cautioned. “No shoddy pants come out of here!”

“Get the first run going,” he told the manager, satisfied.

Machines whirred into action, cutting, stitching, pressing, and labeling. Some hours later, Mr. Abadi was interrupted by an urgent message from quality control: “60% of the new pants are defective!”

“Halt production immediately and meet me at quality control!”  Mr. Abadi ordered the plant manager. He rushed over to the quality control supervisor. A large pile of pants was heaped on the inspection table. 

“What’s going on?” shouted Mr. Abadi. 

“You know the gold-tone stripe? The roll had a defect running through most of it,” said the supervisor. “These pants all have defective fabric sewn in them.” 

Mr. Abadi turned to his plant manager. “Didn’t you check the rolls?” 

“We checked the beginning of each roll,” he answered, “and they looked perfect.” 

“So what happened?” thundered Mr. Abadi. 

“The first two lots of pants came out fine,” explained the quality control supervisor. “The roll was defective only towards the middle.” 

“Get inventory to locate the supplier,” snapped Mr. Abadi. “He’s going to have to refund the cost of the roll and today’s ruined production run. And we’ll need a new fabric for the stripe.”

A few minutes later, Mr. Abadi’s cell phone buzzed. “Hello, this is inventory. The defective roll was purchased from Fried’s Fabrics in 2007, order #1673.” 

Mr. Abadi went back to his office and rang Fried’s Fabrics. “Hello, Joseph Abadi speaking. Give me Mr. Fried.” 

Mr. Fried got on. “Hi, Joseph! I hear your new winter line’s coming out.” 

“It is,” Mr. Abadi responded. “But one of your rolls proved defective!” 

“I’m sorry,” said Mr. Fried. “Just return it and we’ll replace it promptly.” 

“I can’t return it,” said Mr. Abadi. “It was left over from an order three years ago and was already used for today’s run. Hundreds of new pants are useless. In addition to a refund for the defective fabric, I expect compensation for the damaged pants!”

“Just a minute,” responded Mr. Fried. “Three years? You had plenty of time to return the roll! Furthermore, had you returned it, I could have sold it as irregular. Now you cut the roll and want me to pay you damages in addition?! That’s a bit much, even for a valued client like you.” 

“Well,” retorted Mr. Abadi, “the defect was inside, so we couldn’t know about it until now.”  

“Neither could we,” said Mr. Fried. “I don’t think we’re responsible. Let’s take the issue to Rabbi Dayan.” 

Rabbi Dayan listened to both sides and ruled: “If the invoice specified warranty terms, they are binding. If nothing was specified, Mr. Fried must refund the entire cost of the defective roll and is entitled to receive whatever remains of the fabric. However, he does not owe Mr. Abadi compensation for the damage to the run.”

Rabbi Dayan explained his ruling: “If merchandise is discovered to be defective, the sale is invalid and the buyer may return it even after many years (H.M. 232:3). Furthermore, if the buyer used the merchandise in the intended manner and thereby ruined it further before discovering the defect, he is not liable for that damage. Therefore, Mr. Abadi is entitled to a full refund even though he already cut the roll (232:13). At the same time, since Mr. Fried was also unaware of the defect, he is not accountable for the consequential damage that was caused to the production run (232:20-21).  

“But what about the warranty terms of the supply contract?” asked Mr. Fried. 

“All this is the ruling of the Shulchan Aruch,” concluded Rabbi Dayan. “However, halacha usually validates predefined agreements between the parties and common commercial practice. So if the supply contract stipulated different warranty terms and limitations, that agreement is most likely binding also according to halacha.” (See 225:5 and 232:7,19)

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Please be advised: These articles are for learning purposes only and cannot be used for final halachic decision.

(YWN Desk – NYC)