Supplier Sent Faulty Goods: Demand Refund or Replacement

You ordered stock for your business. The supplier delivered defective, damaged, or non-conforming goods. Now they’re stalling, offering partial credit, or claiming it’s your problem.

Australian Consumer Law applies to business-to-business transactions. If the goods fail to meet the consumer guarantees, you can reject them, demand a full refund, or require replacement — and enforce that right with a formal letter of demand.

Your Rights When a Supplier Sends Faulty Goods

Under Australian Consumer Law, goods supplied to a business must meet the consumer guarantees:

• Acceptable quality — free from defects, safe, durable, fit for all common purposes
• Fit for disclosed purpose — suitable for the specific use you told the supplier about
• Match description — correspond to any sample, description, or specification provided
• Match sample or demonstration model — if you ordered based on a sample
• Title and undisturbed possession — the supplier must have the right to sell

These guarantees apply even if the supplier’s terms and conditions say otherwise. Contract terms that exclude or limit consumer guarantees are void.

Exception: The guarantees do not apply if you examined the goods before purchase and the defect was obvious, or if the supplier specifically drew your attention to the defect.

What Counts as a Major Failure

A major failure occurs when:

• The goods would not have been purchased by a reasonable business if the failure had been known
• The goods are significantly different from the description, sample, or demonstration model
• The goods are substantially unfit for their common purpose and cannot easily be remedied
• The goods are substantially unfit for a disclosed purpose and cannot easily be remedied
• The goods are unsafe

With a major failure, you can reject the goods and demand a full refund, or accept them and claim compensation for the reduction in value.

If the failure is not major (a minor defect that can be repaired), the supplier can choose to repair, replace, or refund. You cannot demand a refund for a minor failure unless repair or replacement is impossible or would take an unreasonable time.

The Formal Rejection and Demand Process

Step 1: Inspect and document immediately

Inspect goods as soon as they arrive. Take photos of:

• The packaging (if damaged)
• The goods themselves
• Serial numbers, batch codes, or labels
• Any visible defects or non-conformity

Record the date received, quantity, and nature of the defect in writing.

Step 2: Stop using the goods

Do not integrate defective goods into your production, sell them on, or modify them. Continued use can be taken as acceptance, limiting your right to reject.

Step 3: Notify the supplier in writing

Send an email or letter within a reasonable time (typically within days of delivery) stating:

• You reject the goods
• The specific defect or non-conformity
• The consumer guarantee that has been breached
• Your demand (refund, replacement, or compensation)

Keep the goods available for collection or inspection. You are not required to return them at your own cost unless the contract specifically requires it and that term is not unfair.

Step 4: Send a formal letter of demand

If the supplier does not respond, disputes your claim, or offers an inadequate remedy, escalate to a letter of demand. This formal document:

• Sets out the facts and the breach
• Cites the applicable consumer guarantees
• States your legal entitlement (refund, replacement, or damages)
• Gives the supplier a deadline to comply (typically 7-14 days)
• States the consequence of non-compliance (tribunal claim, court action, or debt recovery)

A properly drafted letter of demand often resolves the dispute without further action. Suppliers know that ignoring a formal demand exposes them to tribunal costs and legal fees.

What You Can Claim

Depending on the nature of the failure, you can claim:

Refund — full purchase price if you reject the goods for major failure

Replacement — equivalent goods that conform to the contract

Repair — if the failure is minor and repair is possible

Compensation for loss — if you accepted defective goods and suffered consequential loss (lost sales, production downtime, cost of alternative supply)

Delivery and return costs — reasonable costs of returning rejected goods or receiving replacement goods

Interest — if the supplier has held your money unreasonably

You cannot claim for loss that was unforeseeable, caused by your own actions, or could have been avoided by reasonable mitigation.

Common Supplier Defences (and Why They Fail)

“Our terms say no refunds”

Consumer guarantees cannot be excluded by contract. Any term that purports to do so is void.

“You should have inspected before accepting delivery”

You are entitled to a reasonable opportunity to inspect. Defects that are not apparent on visual inspection (internal faults, performance issues) can still be rejected after use or testing.

“You used the goods, so you accepted them”

Acceptance requires a clear, informed act. Briefly testing goods to identify a defect is not acceptance. Continued use after discovering a major failure may be acceptance, but you can still claim damages.

“We’ll give you credit for future orders”

You are entitled to a refund if you reject for major failure. The supplier cannot force you to accept credit, replacement, or repair if you have validly rejected the goods.

“It’s the manufacturer’s problem, not ours”

The supplier is liable under the consumer guarantees. The supplier’s relationship with the manufacturer is irrelevant to your claim. You deal with the party you contracted with.

When to Escalate to a Tribunal or Court

If the supplier does not comply with your demand, you can file a claim in:

• Small claims tribunal (VCAT, NCAT, QCAT, etc.) — for claims up to $10,000-$25,000 depending on the state
• Magistrates Court — for larger claims or where the tribunal does not have jurisdiction

You will need:

• Copy of the purchase order, invoice, or contract
• Evidence of the defect (photos, expert report, test results)
• Correspondence with the supplier
• Copy of your letter of demand
• Proof of delivery of the demand

Final Checklist: Demanding a Refund for Faulty Goods

• [ ] Inspect goods immediately on delivery
• [ ] Document defects with photos and written description
• [ ] Stop using the goods
• [ ] Notify the supplier in writing within a reasonable time
• [ ] State whether you are rejecting for major failure or seeking repair/replacement
• [ ] Send a formal letter of demand if the supplier does not comply
• [ ] Keep all goods available for inspection or collection
• [ ] Escalate to tribunal if the supplier ignores the demand

How Claim Done Helps

Claim Done’s Programmatic Algorithms generate a formal letter of demand tailored to your supplier dispute. You complete a 5-minute intake form describing the goods, the defect, and the supplier’s response. The system drafts a professionally formatted letter citing Australian Consumer Law, calculates your entitlement, and delivers it to the supplier by email.

What you get:

• Formal demand letter citing the relevant consumer guarantees
• Calculation of refund, replacement cost, or damages
• 7-14 day deadline for compliance
• Email delivery by email
• Follow-up final demand if the supplier does not respond

No subscription. Done in about 5 minutes.

If the supplier ignores the demand, Claim Done can prepare your small claims tribunal application to escalate the claim formally.

Ready to demand a refund or replacement? Get your formal demand letter prepared and sent by email — citing the law, calculating your entitlement, and giving the supplier a clear deadline to pay or replace.

Frequently Asked Questions

Can I demand a refund if the supplier says the goods are non-returnable?

Yes. If the goods fail to meet the consumer guarantees, you have a statutory right to reject them and demand a refund. A contract term that excludes or limits this right is void under Australian Consumer Law.

How long do I have to reject faulty goods?

You must reject within a reasonable time after delivery. What is reasonable depends on the nature of the goods and the defect. For obvious defects, reject within days. For latent defects that only appear after use, reject as soon as the defect is discovered.

What if I've already paid the supplier?

You are entitled to a full refund if you validly reject the goods for major failure. If the supplier does not refund voluntarily, you can recover the amount through a letter of demand, tribunal claim, or court action.

Can I claim compensation for lost sales or production downtime?

Yes, if the loss was reasonably foreseeable and you took reasonable steps to mitigate it. You can claim consequential loss under Australian Consumer Law, in addition to the refund or replacement cost.

Do I have to return the faulty goods at my own cost?

No, unless your contract specifically requires it and that term is not unfair. The supplier is typically responsible for collecting rejected goods or reimbursing your reasonable return costs.