A Buyer's 40% Price-Reduction Demand: Drafting the Reply Without Admitting Liability

Subject: Re: Quality claim - 12,000 units vitamin-C serum, PO DC-2214

Dear Mr Weber,

Thank you for your email of 12 May, which we have reviewed with our technical team. We value this account and we want to resolve the matter commercially; we also need to be precise about the facts, so that we do not mislead you.

We are not able to accept the claim as presented, for three independent reasons.

1. Timeliness. Clause 9 requires quality claims within 30 days of arrival. The container arrived on 27 February and your notice is dated 12 May - approximately 75 days later. A claim notified outside that period is not effective under the contract, and the same conclusion follows under article 39 of the CISG, which requires notice of non-conformity within a reasonable time.

2. Cause. The serum is formulated to remain stable between 15°C and 25°C, and the carrier's reefer log shows that range was maintained throughout the voyage. Your survey was carried out after eleven weeks in an unheated warehouse during a winter with sub-zero night temperatures. Phase separation is a recognised consequence of freeze–thaw cycling, which is a storage issue rather than a manufacturing defect.

3. Scope. 1,800 of 12,000 units is 15% of the shipment and we have received no lot number or production record linking those units to a specific batch.

Without prejudice to the above, and purely as a commercial gesture to protect the relationship, we offer either (i) replacement of up to 1,800 units free of charge with your next order, or (ii) a credit note of EUR 1,440 against future orders. Our liability is in any event limited by clause 12 to the invoice value, and consequential loss such as lost retail sales is excluded; the figure of EUR 250,000 is not one we can entertain.

Please send the retained samples and the survey report by 19 May so that our laboratory can respond. If we do not hear from you by then we will assume you wish to proceed with option (i).

Yours sincerely, J. Park, Export Manager, Daehan Cosmetic Materials

Separate the three defences. Notice, causation and scope each fail independently. Presenting them as numbered points stops the buyer from treating a concession on one as an admission of the others, and it reads as analysis rather than stonewalling - which matters in German B2B correspondence, where structure and Sachlichkeit are expected.

Words that create risk. 'We apologise for the defect' is an admission of non-conformity. 'We will compensate you' is an open-ended undertaking. 'You are right to be concerned' can be quoted back in arbitration. 'We accept the return' concedes that the goods were non-conforming when risk passed. Under the CISG there is no writing requirement, so every email is potential evidence - a careless line can defeat a good contractual defence.

Words that protect. 'We have reviewed', 'we note your report', 'we are not able to accept the claim as presented', 'without prejudice', 'as a commercial gesture', 'our liability is limited by clause 12'. The offer must be conditional and time-bound, and should be visibly less than what was demanded so that it does not read as capitulation.

Process points. Respond within the 48 hours - ignoring an ultimatum looks like weakness - but say that a full technical answer will follow the laboratory review. Ask for the evidence (samples, survey report, lot numbers): if the buyer cannot produce it, the claim weakens; if it can, Daehan learns the real exposure early. Keep the relationship alive by offering a face-saving route (replacement units) rather than a cash refund.

Escalation hygiene. Do not discuss settlement figures in the same thread as liability arguments. If talks move to money, open a separate 'without prejudice' channel so that the settlement discussion cannot be used to prove liability.

(a) Rewrite: 'We hereby declare the contract avoided in respect of the 1,800 affected units pursuant to article 49(1)(a) of the CISG, and reserve our right to claim damages; our loss to date is quantified at EUR 250,000 and will be substantiated with supporting records.'

Why: 'Cancel' is not a CISG concept. The remedy is avoidance, and it must be declared by notice to the other party (article 26). Avoidance of the whole contract requires a fundamental breach (article 25) - here, if anything, the failure affects 15% of the units, so a blanket avoidance is vulnerable. Lost profit is recoverable under article 74 but only to the extent foreseeable and proved, so 'we claim EUR 250,000' should be split into a declaration and a quantified, evidenced loss.

(b) Rewrite: 'The goods were defective, and you are liable for the resulting loss, including lost profit.'

Why: 'Goods' is plural, so the verb must be 'were'; 'defect' is a noun, the adjective is 'defective'. 'All our damages' is vague - damages must be pleaded by head of loss and causation, and the mitigation duty in article 77 applies.

(c) Rewrite: 'Please let us have your substantive response by 17:00 CET on 14 May. If we have not received it by then, we will refer the dispute to arbitration under clause 18 without further notice.'

Why: An ultimatum should be specific (date, time, time zone), should name the consequence, and should point to the contractual remedy. 'Claim everything' is not a remedy and invites a reply that ignores it; naming arbitration under a specific clause signals that the threat is real and shows the writer understands the contract.