General Remarks

  1. The regulation on warranties applies for contracts under which the parties owe mutual services to each other, irrespective whether it is a B2B contract or a sales contract vis-à-vis consumers.
  2. However, in the event of B2B contracts the parties may deviate from these provisions upon mutual consent so that claims for defects may be considerably extended, restricted or completely ruled out. Whereas, in the event of contracts vis-à-vis consumers no deviation is allowed to the detriment of the consumer. Furthermore, there are some special provisions which apply only to consumer contracts.
  3. In Hungarian law there are no specific provisions on warranty rights in GTCs. As a general rule, terms in GTCs shall be considered unfair if, contrary to the requirement of good faith and fair dealing, they cause a significant and unjustified imbalance in contractual rights and obligations to the detriment of the party entering into a contract with the person using GTCs. Such unfair GTC terms may be contested by the injured party in B2B contracts, while in the event of contracts vis-à-vis consumers such terms shall be null and void; however, nullity may be invoked only in favour of the consumer. These general rules also apply to terms in GTCs regarding warranty rights.

Material Defects

A material defect exists when the goods do not meet the quality requirements set out in the contract or prescribed by law at the time of performance. There is no defective performance in the event the purchaser knew or should have known at the time of entering into the contract that the good is defective. If the parties have not agreed that the goods should meet a specific quality or specification, the goods must   

  1. be fit for the purpose specified by the purchaser in the event the purchaser informed the seller of such purpose prior to conclusion of the contract;
  2. be fit for the purposes that goods of the same type are usually used for;
  3. be of a quality and provide the performance that is normal for goods of the same type and that the purchaser can reasonably expect;
  4. comply with the description given by the seller and possess the qualities of the goods the seller presented to the purchaser as a sample; and
  5. comply with quality requirements prescribed by law.

Legal Defects

A legal defect exists when the acquisition of ownership, other right or claim is hindered by a right of a third party. 

Rights and Remedies of Purchaser

Material defects:  

  1. Repair or replacement
  2. Reduction of price/repair of the defect by the purchaser or a third party at the cost of the seller/withdrawal from the contract
  3. Claim for damages

Legal defects:  

  1. Disencumbrance
  2. Reduction of price/withdrawal from the contract
  3. Claim for damages

Subsequent Performance

  1. In the event of a defect the purchaser may first claim for repair or replacement, unless repair or replacement is impossible or would result in disproportionate expenses on the part of the seller as compared to the alternative remedy. The right to subsequent performance is irrespective of the seller’s fault.
  2. Restriction to one of the two types of subsequent performance is generally deemed permissible in B2B contracts.

Right to Choose Subsequent Performance

  1. The purchaser is entitled to choose between repair and replacement, unless repair or replacement is impossible or would result in disproportionate expenses on the part of the seller as compared to the alternative remedy.
  2. Transferring the right to choose between repair and replacement to the seller is generally deemed permissible in B2B contracts.

Costs of Subsequent Performance

  1. The seller must bear all the necessary costs incurred for subsequent performance. In the event the defect is attributable in part to the purchaser’s failure to fulfil maintenance obligations, the costs incurred for subsequent performance shall be borne by the purchaser to the extent such costs are attributable to the purchaser, if it had sufficient information relating to the maintenance or if the seller provided the required information.
  2. In the event of B2B contracts where a good is replaced after the majority of the warranty period has lapsed as a result of suspension of the period of limitation, and this results in a considerable increase in value to the benefit of the purchaser, the seller is entitled to demand compensation for such enrichment. For the avoidance of doubt we note that this provision does not apply to contracts vis-à-vis consumers.
  3. In the event of replacement (or withdrawal), the purchaser is not obliged to compensate for the loss in value of the good as a consequence of proper use.
  4. In contracts vis-à-vis consumers restrictions are generally invalid.

Conditions for Damage Claims

  1. Claims for damages are subject to the following preconditions:
    1. Breach of contractual obligation, e.g. default, material defect or legal defect
    2. Damages occurred
    3. Causal relation between the breach of obligation and the damages occurred
    4. The breaching party cannot prove that the breach was a consequence of circumstances beyond its control that could not be foreseen at the time the contract was concluded and it was not expectable that such circumstances could be prevented or damage could be eliminated.
  2. Claims for damages may be restricted even in contracts vis-à-vis consumers.
  3. Broad restrictions on liability are permitted, however liability for acting with intent and breaches resulting in loss of life, limb or health cannot be limited or excluded.

Extent of Claims for Damages/Limitation of Liability

  1. The injuring party must compensate:
    1. the damage occurring in the good of the services;
    2. any other damages occurring in the purchaser’s property and lost income, to the extent the purchaser is able to prove that the loss, as the possible consequence of the breach, was foreseeable at the time the contract was concluded.

In the event of intentional breach, the purchaser shall be compensated for all direct and indirect losses.   

  1. Claims for damages may be restricted even in contracts vis-à-vis consumers.
  2. Broad restrictions on liability are permitted, however liability for acting with intent and breaches resulting in loss of life, harm to physical integrity or health cannot be limited or excluded.

Withdrawal from Sales Contract

  1. Before withdrawing from the sales contract, the purchaser must first grant the seller the possibility of rendering subsequent performance.
  2. If (i) the seller refuses subsequent performance; or (ii) the seller is unable to fulfil such obligation within a reasonable time and without any significant inconvenience to the purchaser; or (iii) subsequent performance no longer serves the purchaser’s interest, the purchaser may withdraw from the sales contract.
  3. If it is not possible to render the performance (e.g. if the goods have been destroyed), the purchaser is also entitled to withdraw from the contract.
  4. The withdrawal right may not be restricted in contracts vis-à-vis consumers.

Limitation Period for Claims for Defects

  1. The limitation period for claims for defects in B2B contracts regarding movable goods is one year starting from the date of the performance. The limitation period in the event of contracts vis-à-vis consumers regarding movable goods is two years from the date of performance.
  2. In the event the subject of the contract is a real property, the limitation period is five years from the date of performance (both in B2B contracts and in contracts vis-à-vis consumers).
  3. The limitation period shall be suspended for the time of repairing during which the good cannot be used by the purchaser. As regards any part of the good that has been repaired or replaced, the limitation period shall recommence. The provision shall also be applied in the event a new defect arises as a result of the repair.
  4. Reducing the limitation period is generally not permitted vis-à-vis consumers. The only case when the limitation period may be reduced by the parties in contracts vis-à-vis consumers is if the subject of the contract is a second-hand good. The limitation period may not be less than one year in such cases either.
  5. The purchaser is entitled to enforce its warranty rights by challenging a claim originating from the same contract even after the expiry of the limitation period.

Purchaser’s Obligation to Inspect Goods and Report Defects in B2B Contracts

  1. In B2B contracts the purchaser must inspect the quality and quantity of the goods or services without undue delay, the costs of such inspection shall be borne by the purchaser. Characteristics the quality of which has been certified or which are covered by guarantee shall not be inspected. The purchaser must report any detected defects (including hidden defects) to the seller without undue delay after detection.
  2. If the purchaser breaches its above obligations, the costs and damages arising from such breach shall be borne by the purchaser. However, the purchaser will still be entitled to exercise its warranty rights within the above limitation period (unless the purchaser expressly waived its warranty rights in view of the detected/known defects).
  3. In B2B contracts, the obligation to inspect the goods and report any defects may be extended, limited, or completely excluded.