Certificate is final as to quality...

• International Trade

This wording is often set out in trade contracts. In this article, let us answer what is real essence of such a provision.

In practice, it means that the certificate is final and binding for relations between the Seller and the Buyer regarding quality of the goods, unless the certificate is a forgery (which is very difficult to prove) or unless quality of the product was tested in a different way than agreed upon by the parties (the actual content should be clarified).

In practice, its legal effects are the following:

     1. No other evidence of quality at all can be considered to show that the goods do not conform to contractual quality (even if the goods are inspected upon arrival and found out as of non-conforming quality);
     2. Once a certificate is issued, it shall be deemed as final; and
     3. Even if the same inspector re-inspects the goods and gets a different result or admits that (s)he made a mistake and re-issues the certificate, the original counterpart remains valid.

In this way, the Seller tries to avoid potential disputes regarding quality of the goods and the corresponding non-payment by the Buyer, unwanted discounts and other legal effects.

But, as shown by the aforesaid, such provision of the contract can have a negative effect on the Seller itself, since in fact it permanently fixes the results of the product quality study.

The same will be rightly noted with regards to the Buyer, who, having agreed on adding such a provision, ultimately loses an opportunity to contest quality of the goods (if after receiving the goods the analysis shows non-compliance with the contractual quality).

A similar position is laid out in the case AIC Ltd. v. ITS Testing Services (UK) Ltd:

“In a typical case, the cargo can be checked at the destination and found that its quality does not meet the certificate or even the specifications. The contract stipulates that, if requested, further testing will be conducted by mutual consent, with the samples officially sealed and preserved, and likely by an independent party. In the end, it can be concluded that the certificate is inaccurate, perhaps even due to negligence. Nevertheless, a certificate remains binding if it is expressed to be final and binding, absent evidence of fraud or manifest error”.

That is, if the parties agreed in the contract the following provision: “Certificate is final as to quality at port of loading”, even if the Buyer, with the Seller’s consent, shall test quality of the goods upon receipt and it will not match the one stated in the Seller’s certificate, or the goods will not match specifications - the result of the quality analysis received at the Port of Loading will still be treated as final and conclusive.

When including such a provision, the Seller and the Buyer should:

     1. Know how it will affect their contractual rights;
     2. Trust the surveyor;
     3. Agree, if possible, which methods should be used for inspection.

We advise you to be careful when entering into contracts and to pay attention to the practical essence of the provisions incorporated therein. Our team of international trade experts - junior lawyer Denys Bakaiev and partner Alexey Remeslo - are ready to help you upon this one and other questions.

Alexey Remeslo

remeslo@interlegal.com.ua