Introduction to negotiation (V)

By Alejandro Casas

Liability of manufacturing companies for non-compliance of the products transferred to consumers and users.

By Xavier de Bernat

Introduction to negotiation (V).

Introduction to negotiation (V).

Alejandro Casas

THE COMMITMENT

Commitment constitutes another fundamental element in the Theory of Negotiation developed by the Harvard Negotiation Project.

Commitment may be defined as the oral or written statement of will made by the parties in relation to the obligations they are willing to assume.

A key point to be highlighted is the one referred to the commitment purpose. Frequently, “commitment” is understood as such agreement on the merits of the matter to be negotiated, it being considered as the last stage culminating the negotiating process.

Consequently, once the parties have reached a final agreement on an underlying problem, they undertake to perform that stipulated in such agreement.

However, there may be also commitments relating to the manner how the negotiating process is to be governed, i.e., on the way the parties will carry out the negotiation.

Prematurely accepting agreements is one of the most common errors in the negotiating process and in the majority of cases the parties are finally unsatisfied.

For example, when the parties are companies that will use several representatives in their negotiating teams, before carry on with the negotiation, they may undertake to:

i. Keep the same interlocutors during the whole process.

ii. Establish a time schedule for periodical meetings.

iii. Agree the contents or purposes of the meetings.

With the establishment of these preliminary issues, the negotiating process is more efficient: time is saved to the extent the meeting may be prepared in advance, which in turn allows greater understanding between interlocutors.

Upon initiation of the negotiating process, very often it is confirmed that the parties face up the underlying problem by continuously and reciprocally adopting commitments. This situation usually results in a mere bargaining that, as a general rule, complicates the achievement of a negotiated agreement or, if achieved, the parties are usually finally unsatisfied.

For this reason, one of the principal recommendations of the Harvard Negotiation Project theory consists of undertaking from the very begging the formal issues that will govern the negotiating process and deferring, to any possible extent until the end of the process, any commitments on underlying issues, i.e., once all fundamental elements (alternatives, interests and options, particularly) that may be involved in the agreement, have been analysed.

However, in negotiations where a great number of variables are involved, the adoption of partial commitments during the negotiation are likely to facilitate development of the process and allow the continuation of the process based on such partial agreements adopted.

As an example, during the negotiation of a long-term industrial parts supply agreement, the parties may initially agree the quality of the good (partial commitment) and based on such agreement, they may then agree the amount, delivery terms and according thereto, the final price of the deliverable material. This is only an example.

One of the basic drivers for success in the achievement of a negotiated agreement consists of the parties attending the negotiation sufficiently prepared, since on many occasions it is proven that commitments on the merits of the matter have been assumed too early or even, unexpectedly, before a proposal that has been immediately accepted because it seemed to be very interesting but then, after thoroughly analyzing the proposal, the same is not so attractive or profitable as it initially seemed to be.

Prematurely accepting agreements is one of the most common errors in the negotiating process and in the majority of cases the parties are finally unsatisfied.

Therefore, the preliminary arrangements are a fundamental tool to protect the negotiator from the possibility to reach unexpected or premature agreements that may undermine its own interests.

(…) the preliminary arrangements are a fundamental tool to protect the negotiator from the possibility to reach unexpected or premature agreements that may undermine its own interests.

Preparing a draft or scheme containing the basic issues to be included in the final agreement, trying to predict the interests of the parties, deeply analyzing the majority of possible options, as well as the possible commitment that would be accepted if a final agreement is reached, could be a good way to prepare the negotiation.

The negotiating process being on an advanced stage and in the event the parties have reached an agreement, the parties should only, before executing the final commitment, analyze the most important parameters to be taken into account by such agreement:

i. Assumable. Agreements must be realistic, avoiding unreachable commitments or commitments difficult to be performed.

ii. Durable. Agreements must be broad, providing for the interests of the parties to avoid future disagreements that may frustrate their performance.

iii. Practical. The more functional an agreement is, the better, considering all options and selecting the optimal one.

iv. Understandable. The terms on the negotiated agreement must be easily understood by the parties.

v. Verificable. If necessary, the agreement should be subject to verification by any of the parties.

In short, although a commitment may be adopted at any stage of the negotiation, the most advisable guidelines to be followed are:

i. To be committed to the merits of the matter at the end of the negotiation. Commitments may be adopted in the course of the negotiation, but it is advisable to assume commitments on the underlying matters at the end of the negotiation, once all factors involved in the process have been analyzed.

ii. Prepare the negotiation. The negotiator appropriately prepared in advance will be more protected against the risk to reach agreements prematurely and may also assess more accurately the consequences of the obligations contracted.

Liability of manufacturing companies for non-compliance of the products transferred to consumers and users

Xavier de Bernat

Royal Decree 1/2007, of 16th November, approving the redrafted text of the General Act for the Defence of Consumers and Users and other ancillary laws (hereinafter referred to as "TRLGDCU"), is the leading rule regulating the legal system of consumers and users.

A very important aspect provided and developed by this Royal Decree is the non-compliance of the goods delivered to consumers and users and the consequences resulting from such non-compliance.

To thoroughly analyze this issue, we must take into account the following aspects: i) what does non-compliance mean, ii) who will be liable in the event of non-compliance, iii) and what measures will be implemented to remedy such non-compliance.

i) Our regulations on consumers do not strictly define what we must understand by non-compliance, but they establish the liable party (a priori, the seller) for any kind of non-compliance as follows: "deliver to the consumer or the user products in compliance with the contract, the same being liable for any non-compliance that may exist upon delivery of the product” (art. 114 TRLGDCU).

Although it is true that this definition does not clarify or determine the requirements for non-compliance to exist, art. 116 TRLGDCU complements and clarifies this concept when it details some of the requirements to be considered, such as: the preliminary description made by the seller of the product transferred, the ordinary and/or special use expected for such product, the quality and features existing in other products of the same type, etc.

(…) direct action against the manufacturer is of a subsidiary nature, so that the consumer and user shall verify that the requirements in art. 124 TRLGDCU concur (…)

It goes without saying that requirements on compliance of products with the contract established in our regulations are not only those provided therein, but they allow to outline the guidelines on which such a generic and vague concept as compliance must be based in order to avoid defencelessness of sellers or manufacturers to any possible abuse of law by malicious consumers.

ii) Once such guidelines have been established to understand the existence of a possible non-compliance, we must analyze who will be the party to be liable to the consumer in the event of non-compliance, despite of the fact that, initially, the seller, rather than the manufacturer, would be the liable party.

However, a priori, we would consider that the manufacturer or producer should not be liable for non-compliance since it has not been party to the sale entered into with the consumer and user. But, and despite this logical rationale, the TRLGDCU does not release the manufacturer from any possible contingency caused by any good or product manufactured thereby in order to avoid defencelessness of the consumer and user in the event that the seller may decide to omit the claim.

For this reason, art. 124 TRLGDCU extends to the manufacturer or producer such liability when it says: “when it is impossible or an undue burden for the consumer or user to claim against the seller for non-compliance of the products with the contract, the consumer or user may claim directly to the producer in order to have the product replaced or repaired”.

This way, such article allows subsidiary liability of the manufacturer or producer given the impossibility of the consumer and user to obtain an amicable solution with the seller. Although such article talks about “the impossibility or undue burden to claim against the seller”, the truth is that in practice, many sellers deliberately omit the petitions by consumers and users, thus leading them to claim against the manufacturer.

Given all that, any manufacturing company must take into account that before answering any possible product non-compliance, the manufacturer must ascertain if such impossibility or undue burden for the consumer and user to claim against the seller of the good has effectively existed.

Otherwise, the action by the consumer which contravenes our Legal System would be covered for ignoring the main liability of the seller.

Consequently, as partly provided by our case law (SAP Madrid nº 2/2012, 10 January, among others), direct action against the manufacturer is of a subsidiary nature, so that the consumer and user shall verify that the requirements in art. 124 TRLGDCU concur, whereby it shall not be sufficient to say that the non-compliance is attributable to the manufacturer.

iii) Once the liable party for product non-compliance has been determined, we must know the manner how such non-compliance will be resolved. For this reason, art. 118 TRLGDCU establishes that “the consumer and user is entitled to have the product repaired or replaced or to a discount on the price or to termination of contract pursuant to that set out in this title”.

We are dealing again with numerous actions that operate alternatively and selectively, the consumer and user being obliged to opt for one of them, provided that the adoption of an alternative measure may not be more appropriate.

Consequently, we must take into account that the main actions of consumers and users to resolve the discrepancy are: a) repair the product, or b) replace the product.

Additionally and on a subsidiary manner they may request: c) a discount on the purchase price or d) terminate the sale executed.

However, actions to have a discount on the price or termination of the sale may imply serious problems when the liable party for the product non-compliance is the manufacturer or producer to the extent that the latter has not been party to the legal relation subject matter of termination (the sale between the seller and the consumer or user) and has not received any price by the consumer and user that allow it to lower the price and thus to return part of such amount.

All in all, any manufacturing company must take into account that its liability for any product non-compliance shall arise in the event that the impossibility of the consumer and user to claim against the seller has been proven.

Similarly, the manner how such product non-compliance will be remedied shall not depend on the consumer and user’s free will, but the appropriateness of the measure adopted shall prevail over the rest of the existing options, as for example for such measure to be the less burdensome for the manufacturer.

Finally, we must remind that this summary of measures designed to identify the liable parties of product non-compliance is usually altered by our courts when acting in favour of consumers and users and assigning joint and several liability to the manufacturer, despite the fact that the requirements set out in art. 124 TRLGDCU (impossibility or undue burden to claim against the seller) are not met.