- In principle, the law on the sale of goods does not make a distinction between B2B contracts or sales contracts vis-à-vis consumers. However, statutory law provides for special provisions to protect the consumer. These provisions state that consumers’ claims for defects may not be restricted or ruled out.
- There is a great degree of freedom, however, in drafting B2B contracts so that claims for defects may usually be considerably extended, restricted or completely ruled out.
- Under consumer protection law, the content of GTCs is subject to strict scrutiny so that extending, restricting or completely ruling out consumers’ claims for defects in GTCs or contracts may be invalid. This does not apply to B2B contracts. In B2B contracts it is possible to restrict or completely rule out claims for defects.
A material defect (Sachmangel) prevails when the goods do not have the agreed quality at the time of hand-over. If the parties have not agreed that the goods should meet a specific quality or specification, the goods must be fit for the purpose specified in the contract. If the purpose has not been specified either, the goods must be fit for the usual purpose and meet the quality which the purchaser can expect from goods of this type.
A legal defect (Rechtsmangel) prevails when third parties can assert rights with respect to the goods against the purchaser and the seller does not provide the purchaser with the agreed legal position.
Rights and Remedies of Purchaser
- Remedy of defect (repair/replacement)
- Withdrawal from contract/Reduction of price
- Claim for damages
- In the event of a defect the purchaser may first claim for repair or replacement. The right to subsequent performance is irrespective of the seller's fault.
- Restriction to one of the two types of subsequent performance is generally deemed permissible in contracts and in GTCs between companies.
Right to Choose Subsequent Performance
- The purchaser is entitled to choose between repair and replacement. It is widely recognized that replacement is possible in case of generic obligation(Gattungsschuld) only.
- Transferring the right to choose between repair and replacement to the seller is generally deemed permissible in contracts and in GTCs between companies. In contracts vis-à-vis consumers transferring the exclusion of any type of subsequent performance is invalid.
Costs of Subsequent Performance
- The seller must bear the necessary costs incurred for subsequent performance, in particular transport, travel, labour and material costs.
- As a rule, the costs incurred when removing the defective goods and installing the replacement are part of the subsequent performance costs in contracts vis-à-vis the consumer. Only the costs necessary for the replacement or the repair shall be borne. However, this is not the case in B2B contracts b.
- In contracts vis-à-vis consumers and as a rule in consumer GTCs, restrictions concerning cost compensation are invalid.
Conditions for Claims for Damages
- Claims for damages are subject to the following preconditions:
- Breach of contractual obligation, e.g. default, material defect or legal defect
- Fault, i.e. negligent or intentional breach of contractual obligation, whereby each party is liable for the behaviour of legal representatives and subcontractors.
- Root cause of damage
- Consumer rights may not be restricted in contracts vis-à-vis consumers.
- The scope for limiting liability is significantly restricted in GTCs or contracts vis-à-vis consumers. In B2B contracts, however, broad restrictions on liability are permitted. In any case, liability for acting with intent cannot be limited in advance.
Extent of Claims for Damages/Limitation of Liability
- The injuring party must provide compensation for all direct loss and lost profits it has caused owing to its breach of obligation.
- The injuring party must provide compensation for lost profits in case of gross negligence only. In B2B contracts the injuring party must compensate the lost profits even in case of slight negligence.
- The extent of liability may only be restricted to the detriment of the consumer in the event of slight negligence.
Withdrawal from Sales Contract
- Before withdrawing from the sales contract, the purchaser must first grant the seller the opportunity to render subsequent performance.
- If subsequent performance fails, is refused or subsequent performance is considered unreasonable, the purchaser may withdraw from the sales contract or claim price reduction.
- In the event of minor defects the purchaser may only claim a reduction of price.
- 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.
- As a rule, the withdrawal right may not be restricted in contracts vis-à-vis consumers and in general in GTCs.
Limitation Period for Claims for Defects
- In sales contracts regarding movable goods, the limitation period for warranty claims is two years starting with delivery of the goods. Regarding immovable goods, the limitation period for warranty claims is three years starting with handover. In the event of legal defects the limitation period for warranty claims is two or three years starting with knowledge of the legal defect.
- Reducing the limitation period for warranty claims in consumer contracts is not permitted vis-à-vis consumers.
- The above mentioned rules don’t apply for Claims for damages. The statute of limitations is three years beginning with the point in time where the injured party has knowledge about the damage and the damager.
Purchaser’s Obligation to Inspect Goods and Report Defects in B2B Contracts
- Companies must inspect the goods without undue delay and report any detected defects to the seller without undue delay. The purchaser must also report hidden defects without undue delay after detection. This provision also applies to service contracts and exchange contracts regarding movable goods.
- If the purchaser breaches its obligation to inspect the goods or to report any defects, the goods will be deemed to have been accepted. In this case the purchaser may not assert any claims for defects it has not reported. Presumed acceptance does not apply if the seller has maliciously concealed the defect.
- In B2B contracts, the obligation to inspect the goods and report any defects may be extended, limited, or completely excluded.
A clause excluding the obligation to inspect goods and report defects is invalid