How to Resolve a Defective Vehicle Dispute Where the Vehicle was Bought for Business Use
Introduction
For any business, a vehicle is more than just a mode of transport; it is a vital commercial asset. It could be a delivery van critical to your supply chain, a fleet car essential for your sales team, or a piece of machinery fundamental to your daily operations. When such a vehicle proves to be defective, the consequences extend far beyond mere inconvenience. The financial impact of operational downtime, the cost of repairs, and the damage to your business’s reputation can be significant.
Unlike purchases made for personal use, business-to-business (“B2B”) transactions are not covered by the Consumer Rights Act 2015. Instead, they are governed by a different legal framework that assumes a greater level of commercial awareness between the parties.
This guide is designed for business owners, directors, and fleet managers, providing expert legal clarity on your rights and the strategic steps to take when a commercial vehicle purchase goes wrong.
This article assumes that the defective vehicle has been purchased for your business use, not any personal use. If it is the latter, this article is not relevant to you as the legislative protections afforded to you would be slightly different. We would recommend in such a scenario that you review our article here.
The Legal Framework: The Sale of Goods Act 1979
The cornerstone of your protection in a B2B transaction is the Sale of Goods Act 1979 (“SGA 1979”). This Act implies certain terms into your contract of sale, creating a baseline of quality and performance that you are entitled to expect from the seller. The two most important implied terms for a defective vehicle dispute are that the vehicle must be of ‘satisfactory quality’ and ‘fit for its particular purpose’.
Satisfactory Quality in a Commercial Context
Under the SGA 1979, goods must meet the standard that a reasonable person would regard as satisfactory, taking into account their description, price, and all other relevant circumstances. For a commercial vehicle, the interpretation of ‘satisfactory quality’ is often more rigorous than for a personal car. Durability and reliability are not just desirable; they are paramount.
A court will consider a range of factors, including the vehicle’s fitness for all its common commercial purposes, its general appearance and finish, its fundamental safety, and its durability over time. A van that frequently breaks down, failing to perform its core commercial function, would almost certainly be deemed not of satisfactory quality.
Fitness for a Particular Purpose
The vehicle must also be reasonably ‘fit for any particular purpose’ that you, the buyer, expressly or by implication, made known to the seller. This is a crucial protection for businesses. For example, if you informed the dealer that you required a truck with a specific payload capacity for a particular type of haulage, and the vehicle subsequently fails to meet that requirement, the seller is in breach of this implied term. The onus was on the seller to either provide a vehicle that met your stated needs or to inform you that their product was unsuitable.
The Critical Hurdle: Exclusion Clauses and the Reasonableness Test
Here we arrive at the most significant difference between consumer and business transactions: the seller’s ability to limit or exclude their liability. In B2B contracts, it is common practice for sellers to include clauses in their terms and conditions that attempt to remove the protections offered by the Sale of Goods Act. You may see phrases like “all warranties, express or implied, are hereby excluded” or clauses that limit liability to a simple refund or the cost of the vehicle.
However, a seller cannot simply exclude all their responsibilities. The Unfair Contract Terms Act 1977 (“UCTA”) provides a critical check on these clauses. UCTA states that where a seller is acting in the course of business, they cannot exclude the implied terms as to quality and fitness for purpose against another business unless the exclusion clause is reasonable.
The ‘reasonableness test’ is the central question in many commercial disputes. To determine if an exclusion clause is fair and reasonable, a court will scrutinize several key factors. It will assess the relative bargaining power of the parties to see if you were able to negotiate the terms, or if you were presented with a standard, non-negotiable contract from a much larger company. The court will also consider whether the seller offered any inducement, such as a lower price, in return for you accepting the limited liability clause. Furthermore, it will look at whether you knew, or ought reasonably to have known, about the existence and extent of the term and whether it was clearly highlighted or buried in small print. Your previous course of dealing with the seller and whether the vehicle was a specialist order, custom-built for your business, are also highly relevant considerations in the court’s assessment.
Challenging an unfair exclusion clause is a complex legal task, but it is often the key to unlocking your right to a meaningful remedy. It is essential to have any sales contract professionally reviewed to understand the extent of the liability the seller has attempted to exclude.
Your Commercial Remedies: Securing a Resolution
When a vehicle is defective, your primary goal is to minimise disruption and financial loss. The remedies available to a business are different from those available to a consumer and are heavily dependent on the contract and the nature of the breach.
The Right to Reject the Vehicle
Your right to reject a commercial vehicle and claim a full refund is much more fragile than a consumer’s. This right exists if the seller has breached a ‘condition’ of the contract. The implied terms of satisfactory quality and fitness for purpose are considered conditions. However, you can lose the right to reject very easily if you are deemed to have ‘accepted’ the goods.
Acceptance can occur by expressly telling the seller you have accepted the vehicle, by acting in a way that is inconsistent with the seller’s ownership (for instance, by extensively modifying the vehicle), or simply by retaining the vehicle for a reasonable length of time without raising a rejection. What constitutes a ‘reasonable time’ is a question of fact, but it can be surprisingly short. Therefore, if you discover a serious fault, you must act immediately and notify the seller in writing that you are rejecting the vehicle and on what grounds.
Claiming Damages for Your Losses
In many B2B disputes, the most practical remedy is a claim for damages. This aims to put your business back in the financial position it would have been in had the vehicle not been defective. You have a legal duty to ‘mitigate your loss’, meaning you must take reasonable steps to keep your financial losses to a minimum.
Damages can be claimed for a wide range of losses. The most obvious direct loss is the cost of repairing the vehicle to a satisfactory standard. You may also be able to claim for consequential losses, which are the further losses your business has suffered as a direct result of the breach. This can include the loss of profits from contracts you could not fulfil, the necessary cost of hiring a replacement vehicle to maintain your operations, and other wasted overheads such as staff time.
To successfully claim for consequential losses, you must be able to prove that they were a foreseeable consequence of the vehicle being defective. Meticulous record-keeping is essential. You must log every hour of downtime, every cancelled job, and every pound spent on hiring alternatives.
The Dispute Resolution Process
The path to resolving a commercial dispute requires a professional and strategic approach. It begins with a formal written notification to the seller, clearly detailing the vehicle’s faults and specifying the breach of the Sale of Goods Act, and stating the remedy you are seeking. If this does not yield a satisfactory response, the next stage is to issue a formal Letter Before Action.
This is a requirement of the court’s Pre-Action Protocols and sets out the full basis of your claim, enclosing evidence like an independent expert’s report, and warning that court proceedings will follow if the matter is not resolved.
Further, settlement discussions should be approached commercially. Consider not only the cost of legal action, but also the impact of downtime, reputational harm, and the time required from senior management. In many cases, an early negotiated outcome can preserve key trading relationships.
Following this, many commercial disputes are settled through direct negotiation or Alternative Dispute Resolution (ADR), such as mediation, which can be quicker and more cost-effective than formal litigation. Should all else fail, your final option is to issue a claim in court, the venue for which will depend on the value and complexity of your claim.
Keep all communications civil and professional. Emails and letters may later be scrutinised by a judge or mediator.
Conclusion & How We Can Help
The law surrounding the Sale of Goods Act 1979 is complex, and the decision to enter a commercial dispute can be a significant drain on management time and resources. A defective vehicle can cause severe operational disruption, and resolving the matter requires a clear legal strategy. Whether you are a business owner who has been sold a faulty asset, or a commercial dealer responding to a claim, legal clarity is essential. We’re here to help.
If you require help, we offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT to £350 plus VAT* depending on the complexity of the issues and seniority of the fee earner).
Please email wewillhelp@jonathanlea.net providing us with any relevant information ensuring that any call we have is as productive as possible or call us on 01444 708 640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.
*VAT is charged at 20%
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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.