Case 1: Faulty delivery

As is well known, in trading business, defective deliveries are one of the major causes of dispute. How to deal with such a situation? Mrs. Boll and Mr. Rau became involved in such a dispute. The following case will show you how Mrs. Boll and Mr. Rau found an economically and respectful way to resolve the situation.

Background

Mr. Rau runs a tailoring and curtain shop in Hamburg. Last winter he ordered (as a business customer) a set of sewing machines through Mrs. Boll’s online shop. Mrs. Boll is only trading online with other businesses (business to business sale only). Her contract terms and conditions of sale are published on her website. The acceptance of the terms is included as part of the purchasing process. Mr. Rau accepted the business terms and conditions of sale, paid via credit card and received an automatic confirmation email acknowledging the purchase of 30 sewing machines. About ten days after ordering, the sewing machines were delivered.

A little over two weeks after the purchase, one of Mr. Rau’s employees complained about the new sewing machines. Some of them could not transport thick and heavy material.

Mr. Rau was hoping to resolve this situation quickly; therefore he contacted the online shop's 24-hour claim services. But he was told that he missed the deadline for making claims for recognizable defects and that there was no way to replace the defective goods. According to the contract terms and conditions of sale, Mr. Rau was obligated to notify the supplier of defects within three business days after receipt of the delivery.

Mr. Rau did not give up and wrote a letter to Mrs. Boll. Mr. Rau stated that the reasonable time for giving notice after the buyer discovered or ought to have discovered the lack of conformity varies depending on the circumstances. In some cases, he continued, three days might be sufficient but in other cases a longer period might be more appropriate. No fixed period should be considered as reasonable in the abstract without taking into consideration the circumstances of the case. Mr. Rau explained that in the proper course of business, he could not have discovered the defects earlier.

After Mrs. Boll had read the letter she felt insecure, but she did not want to give in. She was new to the business and wanted to protect it from a negative reputation. She called her lawyer and asked for legal advice. The lawyer said to Mrs. Boll, that if she wanted to avoid negative reputation, she should consider alternative ways to resolve her dispute without giving in. More and more people are using other ways to solve their legal problems outside of court. These alternatives are called “alternative dispute resolutions”, the lawyer explained. Mediation, the lawyer clarified, is an effective and voluntary process, which can help to solve business disputes. Confidentiality before, during and after the process is vital to the principles of mediation and might be advisable in this case.

After Mrs. Boll had heard all this information, she took a few minutes for reflection and asked her lawyer to arrange mediation.

How do I arrange Mediation? How do I select a mediator?

Mrs. Boll’s lawyer called Mr. Rau in order to discuss the possibility of mediation. Mr. Rau, who already knew about mediation, agreed. But Mr. Rau, who does not trust lawyers, persisted on starting the mediation without any lawyers. Mrs. Boll was not taken by that fact, but she wanted to avoid a trial that she perceived to be adversarial. When Mrs. Boll had agreed to look for a mediator with a juridical background, Mr. Rau agreed to start the mediation without legal assistance of her lawyer. They started to look for mediators by themselves. Mrs. Boll knew that the Chamber of Commerce in Hamburg assists in finding a mediator suitable for business disputes. She completed a mediation registration form which she found on the Chamber’s website. The Chamber of Commerce suggested three mediators with a juridical background to the case. After the parties agreed on a mediator and a mediation date, the mediation began.

The Mediation process

It took three Mediation sessions to create a final settlement agreement. The first Mediation session was scheduled for two hours, the second and third session took 90 minutes, all held in a private meeting room at a hotel.

At the beginning of the first session the mediator explained the Mediation process, including the basic rules for each session, his role, the goals of Mediation and the fees. Before asking both parties to sign an agreement to mediate, he emphasized that an attorney would have the possibility to review all documents in every stage of the process. The mediator encouraged the parties to seek advice from attorneys whenever they felt it appropriate, both during the mediation process and prior to signing their Mediation agreement. The Mediator is neither a judge nor an arbitrator and does not adjudicate or hand down a decision in relation to a dispute, he explained.

After all open questions were answered and the agreement to mediate was signed (Mrs. Boll’s lawyer had a look over the agreement to mediate before the first session), the mediator asked each participant to describe the nature of the dispute.

Mrs. Boll’s position

Mrs. Boll made clear that she is new to the business, but knows the rules and believes that three days are more than enough to discover a defect. She emphasized that the dispute was only about 30 sewing machines. Within a business-to-business relationship everyone should accept the rules! Mrs. Boll furthermore explained that she is only a seller and that she does not know the sewing machines inside out. For her checking whether all complaints are right and justified would mean high cost and time expenditures.

Mr. Rau’s position

Mr. Rau explained that his company seeks long-term relationships. He appreciates Mrs. Boll’s exceptional price/performance ratio and explains that he was just about to order needles, buttons, curtain rails and curtain materials from her shop, but that he expects loyalty and generosity if default goods were delivered. His old supplier is very expensive, but he has never had any trouble with the replacement of default goods.

How to reach a win-win agreement?

The mediator ensured that both parties understood the other person’s point-of-view. By seeing both sides of the problem they found out that Mrs. Boll and Mr. Rau were both interested in long-term business relations and both agreed that on the one hand the insistence of a right might let you win a case admittedly, but on the other hand you may loose a customer in the long-run.

During a brainstorming session they started to collect different ideas to solve their situation. They tried to avoid rehashing the past and focused on the future. In the end they found a solution profitable for both. Mrs. Boll’s lawyer reviewed the agreement and did not raise any objections.

The resolution

Mr. Rau committed to acquire goods for at least 30.000,- € per year from Mrs. Bolls online store. In return, Mrs. Boll would give a 10% discount on each purchase. Concerning the faulty sewing machines, Mr. Rau decided to resell them to an ironmonger.

Conclusion

Both, Mrs. Boll and Mr. Rau were about to lose a business partner, but thanks to mediation they strengthened their relationship and instead of fighting they did business together.

Please note that the identities of the disputing individuals were altered, due to the confidentiality element mediation carries.

Project Partners

  • Eurochambres, Brussels, Belgium (Project coordinator)
  • Brussels Enterprises, Commerce and Industry Belgium
  • Croatian Chamber of Economy
  • Cyprus Chamber of Commerce and Economy
  • Centre for Mediation and Arbitration of Paris, France
  • Handelskammer Hamburg Service GmbH, Germany
  • The Union of Italian Chambers of Commerce, Industry, Handicraft and Agriculture
  • Open University of Italian Chambers of Commerce
  • Latvian Chamber of Commerce and Industry
  • Iasi Chamber of Commerce and Industry, Romania
  • Barcelona Chamber of Commerce, Industry and Navigation, Spain