Contractors’ Questions: Who’s liable for third-party goods I supply?

Contractor’s Question: I'm a contractor who recently did some work for an institution. Largely their order was a request for some standard IT services, which I said would be fine for me to produce and provide. But at the very last-minute, the end-user requested an additional, less straightforward service which warrants the use of third-party goods. The problem is that the goods I’ve received from the external party, with whom I have a contract with, are not up to any kind of professional standard.

This is the first time I've had quality issues with the third party in question. I’m now concerned about my position, legally, and wonder if their goods will negatively reflect on me and my business. Could I even face a liability from my customer for the third party’s shoddy goods which I obviously don’t have control over, but which will eventually be supplied by me to the end-user? Because the institution is on a deadline, I’ve now had to approach a second provider who I’m paying to provide the goods to a professional standard. 

Expert’s Answer: From what you have said, it is clear that you placed a contract with the third party to provide some goods. Services related to that order that your own company has been requested to provide are fine but the quality of the goods provided by the third party is “not up to any kind of professional standard”.

Section 14(2) of the Sale of Goods Act 1979 says that any goods sold in the course of a business must be of “satisfactory quality”.

Often there is a dispute over whether the quality was so bad as to be unsatisfactory. A good test is to consider whether the goods were so bad that no reasonable provider of those goods would have produced them. If that is the case, then they will be unsatisfactory in law and the third party will be in breach of contract.

As you have had to approach a second provider to provide the goods, you would be entitled to deduct the new provider’s charges from what you had agreed with the original provider and just pay them the balance. You should explain why in writing: that the goods were of terrible quality that no reasonable provider of those goods would have produced them. You should also state why you went to the new provider rather than give them (the original provider) the chance to correct their work. For example: “I went to the new provider as I had to produce good quality goods quickly for my own business customer.”

It would also help if you asked your new provider to comment in writing (on their letter-heading) on the quality of the work produced by the original provider and whether they believe that they were of such bad quality that no reasonable provider would have produced the goods. Also, keep copies of the original provider’s work or provision as evidence.

The expert was Gary Cousins, solicitor and co-founder at Cousins Business Law.