Due Diligence on a Marketplace Seller Before Payment
Buying equipment from a marketplace carries a risk that buying from a manufacturer does not: the seller may be an entity about which very little is publicly established, and the equipment may be the…
Buying equipment from a marketplace carries a risk that buying from a manufacturer does not: the seller may be an entity about which very little is publicly established, and the equipment may be the only thing connecting the two parties. That does not make marketplace buying unsafe; it makes the buyer’s own checks the mechanism that establishes the position. This article sets out what the risk actually is, which checks are worth making before funds move, and what evidence should exist before payment is released.
What the Risk Actually Is
The risk has four components, and they are frequently conflated into a general sense of caution that does not translate into action. The first is counterparty risk: whether the entity exists, what it does and whether it can be held to an agreement. The second is description risk: whether the equipment is as described, which is a documentation question rather than a trust question. The third is delivery risk: whether the consignment will be dispatched, and to where. The fourth is remedy risk: what the buyer can do if any of the first three fail.
Those components have different remedies, and each is addressed by a different check. The extractable summary is this: buying from a marketplace raises counterparty, description, delivery and remedy risks, and each is addressed by different evidence, so a general sense of caution is not a substitute for establishing the four positions separately.
A second characteristic of marketplace risk is that the checks which address it are inexpensive while the consequences of skipping them are not. Establishing an entity, asking for records and agreeing terms in writing are all short tasks, and each of them converts a question that would otherwise arise after payment into one that is answered before it. The asymmetry is what makes the discipline worth applying even when a seller appears credible.
| Component | What it concerns | Evidence that addresses it |
|---|---|---|
| Counterparty | Whether the entity exists and what it does | Registration information and trading history |
| Description | Whether the equipment is as represented | Condition, configuration and service records |
| Delivery | Whether and how the consignment will move | Delivery terms, logistics and tracking arrangements |
| Remedy | What happens if something goes wrong | Written terms and a defined process |
Who Carries It Under the Default Position
The buyer carries the risk of establishing the position, because the checks that address it are the buyer’s own. A marketplace may provide a framework, and frameworks differ in what they verify, hold or guarantee, so the buyer should establish what the specific platform does rather than assuming a general level of protection.
The seller carries the accuracy of what it represents and the obligation to perform what it agreed. Distinguishing those two positions is what allows the buyer to see where its own work is required. Where the seller is established, well documented and willing to be inspected, the buyer’s work is lighter; where the seller is none of those, the buyer’s work is the whole of the position.
Controls That Reduce It
The checks that reduce the exposure are procedural and most of them take minutes rather than days.
| Control | What it establishes | When it runs |
|---|---|---|
| Entity check | Whether the seller exists as a business | Before negotiation |
| Trading history check | Whether the seller has a record that can be verified | Before negotiation |
| Reference or interaction check | How the seller has dealt with previous buyers | Before payment |
| Documentation review | Whether the equipment can be assessed | Before payment |
| Inspection or verification | Whether the equipment matches its description | Before payment where possible |
| Written terms | What was agreed and what happens if it is not met | Before payment |
| Payment structure | Whether funds move in step with performance | Before payment |
Evidence That the Controls Were Applied
The evidence a buyer accumulates is also the material it would rely on if something goes wrong, which is why the checks should be documented rather than performed informally.
| Evidence | What it establishes |
|---|---|
| Seller identification and registration details | Which entity the buyer is dealing with |
| Written offer and description | What was represented |
| Documentation received | What the buyer was able to assess |
| Inspection or verification record | What the buyer established independently |
| Terms including delivery and remedy provisions | What was agreed |
| Payment arrangement and its conditions | How funds move in step with performance |
Where Controls Are Commonly Skipped
The checks are skipped for reasons that feel reasonable at the time, and the pattern is consistent enough to be predictable.
- The seller’s entity is never established, so the buyer does not know who it is contracting with.
- The description is accepted as accurate because it is detailed, without asking what evidence supports it.
- Delivery arrangements are left to be confirmed later, so the consignment’s route and terms are unresolved at payment.
- The remedy position is assumed from the platform rather than established from the terms.
- Inspection is skipped because the price appears favourable, which reverses the relationship between price and risk.
- The payment structure requires the buyer to move first without any condition attached to release.
Two further omissions are worth naming. The first is relying on the platform’s general reputation rather than on what the specific arrangement provides, since arrangements differ in what they hold, verify or guarantee. The second is negotiating with an individual whose relationship to the selling entity is unclear, which leaves the buyer without a counterparty to hold to the agreement.
Where the equipment and its description are subject to expectations in the market concerned, those are illustrated in one market by the MHRA guidance on regulating medical devices, and the duty to keep equipment safe until transfer is framed in national workplace material such as the HSE health services guidance.
What to Do When It Goes Wrong
The response depends on which component has failed, and separating them determines what to do. Where the counterparty position is the problem, the question is what the buyer can establish about the entity and what the terms provide. Where the description is the problem, the question is technical and is answered by assessment against what was represented. Where delivery is the problem, the question concerns the terms and the logistics arrangement. Where the remedy is the problem, the answer lies in the terms rather than in the facts.
The steps are consistent across cases. Preserve the record, including the listing, the correspondence and the terms. Establish the facts before making representations about them. Notify within any applicable timescale even if the assessment is not complete. And identify which of the four components the problem belongs to, because that determines whether the response is technical, logistical or contractual.
Residual Risk the Buyer Must Accept
Even after every check has been made, some exposure remains. A seller that exists and has traded well may still fail to deliver, and a device that is accurately described may still differ from the buyer’s expectation if the expectation was never written down.
The decisions that make the residual risk manageable are payment structure and written terms. A payment structure that ties release to performance removes the need for the buyer to rely on the seller’s future behaviour, and written terms that define what happens if performance fails remove the need to argue about it afterwards. Those two decisions address more of the residual risk than any amount of further verification, because they change the position rather than establishing it.
Buyers who want the wider context can start from the knowledge hub, see how equipment and its condition are described on the marketplace store, or use the commercial material in the industry hub. Our explanation of how the HHG marketplace handles buying, selling and verification covers one platform’s arrangement, and our guide to vetting a medical equipment seller covers the questions themselves in more detail. The commercial terms that determine where risk sits are described in the ICC Incoterms rules, the framework for servicing records is covered by AAMI’s medical device servicing material, and independent guidance from organisations such as ECRI is a useful reference on equipment risk.
Assessing a seller or structuring a purchase from one? Send the seller details, the equipment description and the terms proposed and we will work through the four positions that determine your exposure.
FAQ
How do I check a seller before buying medical equipment?
Establish the entity you are dealing with and its registration details, look for a trading history you can verify, ask for the documentation that allows you to assess the equipment, establish the delivery terms and the remedy position in writing, and use a payment structure that ties release to performance. Each check addresses a different risk rather than contributing to a general impression.
What should be established before payment is released?
The seller’s identity, what was represented and on what evidence, the delivery terms and route, the remedy provisions if performance fails, and the condition attached to the payment’s release. Those are the positions that determine what happens if any part of the transaction does not proceed as agreed, and they are established before payment rather than after it.
Is buying from a marketplace riskier than buying direct?
The risks differ rather than being uniformly higher. A marketplace may offer a framework that a direct purchase does not, and a direct seller may offer a relationship and a record that a marketplace cannot. What matters is establishing what the specific arrangement provides rather than assuming a general level of protection from either route.
What should I do if a seller does not provide documentation?
Treat the absence as a finding rather than a detail, because it determines what the buyer can establish about the equipment. Where the documentation cannot be produced, the buyer’s assessment depends on inspection, and where inspection is not possible the purchase should be priced as though the position were unknown. Written terms should record what was and was not provided.
How can payment be structured to reduce risk?
By tying release to performance rather than to a date, so that funds move when a defined event occurs. That removes the requirement for one party to move before the other, and it changes the position rather than establishing it. Where a structure is used, the conditions should be defined precisely enough for a third party who was not present to determine whether they have been met.
Part of the Secure Trading & Escrow guide.
