Defects in goods and deficiency in services

In one minute

A defect is a fault in goods. A deficiency is a fault in a service. Both are grounds for a consumer complaint. Deficiency includes negligence and the deliberate withholding of relevant information.

In exams, this topic is asked as "distinguish defect from deficiency and explain the remedies", and as a problem on a faulty product or a bad service. The trap is to forget that goods are tested in a laboratory and services are judged on the evidence.

Legal provision

• Section 2(10): defines "defect".
• Section 2(11): defines "deficiency".
• Section 2(42): defines "service". It excludes services rendered free of charge or under a contract of personal service.
• Section 2(6): a complaint may allege that goods suffer from defects, that services suffer from deficiency, that a price above the fixed or displayed price was charged, or that hazardous goods or services are offered.
• Section 38(2): procedure when goods are alleged to be defective, including laboratory testing.
• Section 39: findings and reliefs of the District Commission.

Meaning and definition

A defect is any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard in relation to the goods. The standard is one required to be maintained by or under any law or under any contract, express or implied. It also covers a standard claimed by the trader in any manner.

A deficiency is any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance of a service. The performance is one required to be maintained by or under any law, or one that a person has undertaken to perform under a contract or otherwise. It includes any act of negligence or omission or commission by that person that causes loss or injury to the consumer, and deliberate withholding of relevant information from the consumer.

Detailed explanation

Step 1: Sources of the standard for a defect

• A standard fixed by law, such as safety or quality standards.
• A standard under the contract, express or implied.
• A standard claimed by the trader, such as on the label or in the advertisement.
• Defect covers quality, quantity, potency, purity and standard. Short weight is therefore a defect.

Step 2: Proof of a defect: laboratory testing

• If the defect cannot be found without analysis or test, the District Commission takes a sample from the complainant, seals it and sends it to an appropriate laboratory (section 38(2)(c)).
• The laboratory must report within 45 days, or such extended time as the Commission allows.
• The complainant deposits the fee for the test. A copy of the report goes to the opposite party.
• If a party disputes the report or the method, he files objections in writing, and both parties are heard on them.

Step 3: Deficiency in service

• It covers any shortfall in the quality, nature or manner of performance of a service.
• Negligence, whether by act or omission, is a deficiency if it causes loss or injury.
• Deliberate withholding of relevant information is a deficiency, such as hiding a charge or a risk.
• Services include banking, financing, insurance, transport, electricity supply, telecom, lodging, housing construction and entertainment.

Step 4: Deficiency examples from cases

• In Lucknow Development Authority v. M.K. Gupta, the Supreme Court held that a housing authority giving delayed or defective flats provides a service, and failure to deliver is a deficiency.
• In Indian Medical Association v. V.P. Shantha, the Supreme Court held that medical service for a fee is a service, so careless treatment is a deficiency.
• In Spring Meadows Hospital v. Harjot Ahluwalia, a nurse injected a minor without a sensitivity test, and he was left in a vegetative state. The Supreme Court upheld compensation to the child and to his parents.
• In SpiceJet Ltd. v. Ranju Aery, an airline cancelled a connecting flight, refused a refund and offered no alternative. The consumer fora up to the National Commission held that this was a deficiency in service.
• In Om Prakash v. Reliance General Insurance Co. Ltd., an insurer rejected a genuine theft claim because the owner gave notice eight days late. The Supreme Court held that a satisfactorily explained delay is not a ground to reject a genuine claim verified by the investigator.

Step 5: Reliefs

Section 39 lets the Commission order the opposite party to do the following: remove the defect, replace the goods, return the price, and pay compensation for loss or injury. It can also order removal of deficiencies in services, an end to unfair or restrictive trade practices, withdrawal of hazardous goods, and payment of costs. See the note on remedies.

Step 6: Defences

• The goods or service met the legal, contractual and claimed standard.
• The fault arose from the consumer's own misuse or from his own fault.
• The service was free or under a contract of personal service, so outside the Act.
• The goods were bought for resale or a commercial purpose, so the complainant is not a consumer.

1. 1. Complaint alleges a defectThe District Commission sends a copy to the opposite party within 21 days of admission.
2. 2. Is testing needed?If the defect cannot be found without analysis, a sealed sample goes to an appropriate laboratory.
3. 3. Laboratory reportThe report is due in 45 days. A copy goes to the opposite party.
4. 4. Objections and hearingIf a party disputes the report, both are heard.
5. 5. OrderThe Commission issues an order under section 39.

Don't confuse: defect and deficiency

Point	Defect	Deficiency
Applies to	Goods	Services
Section	2(10)	2(11)
Standard	Law, contract or the trader's claim	Law or the performance undertaken
Proof	Often by laboratory test	By evidence, affidavits and documents

Common mistakes

• Using "defect" for services and "deficiency" for goods.
• Forgetting that the trader's own claim sets a standard.
• Forgetting that withholding information can be a deficiency.
• Treating free services as deficient. They are outside the Act.
• Forgetting that the laboratory report is due within 45 days.

Apply it

Leading case laws

• Lucknow Development Authority v. M.K. Gupta (1994)

  Facts. A housing authority argued that building and allotting flats was a sovereign function.

  Principle. Housing construction is a service, and a failure to deliver is a deficiency.

  Significance. Wide reading of deficiency in service.

• Indian Medical Association v. V.P. Shantha (1995)

  Facts. Conflicting rulings on medical service under the Act.

  Principle. Medical service for a fee is a service.

  Significance. Medical negligence is a deficiency.

• Spring Meadows Hospital v. Harjot Ahluwalia (1998)

  Facts. A nurse injected a minor without a sensitivity test, leaving him in a vegetative state.

  Principle. Child and parents are consumers; each can be compensated on a different head.

  Significance. Compensation for medical deficiency.

• SpiceJet Ltd. v. Ranju Aery (2017)

  Facts. An airline cancelled a connecting flight and refused a refund.

  Principle. Deficiency in service by an airline.

  Significance. Transport services are covered.

• Om Prakash v. Reliance General Insurance Co. Ltd. (2017)

  Facts. An insurer rejected a genuine theft claim for notice given eight days late.

  Principle. An explained delay is not a ground to reject a genuine claim.

  Significance. Insurance is a service; unfair rejection is a deficiency.

How to write this answer in the exam

Key points to remember

• Defect: goods. Deficiency: services.
• Standard comes from law, contract or the trader's own claim.
• Deficiency includes negligence and withholding of relevant information.
• Laboratory report within 45 days.
• Free services and personal service contracts are outside the Act.

Quick self-test

Related topics

• Definition of Consumer
• Liability of the Service Providers, Manufacturers and Traders under the Act- Product Liability
• Remedies