- 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 does have 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 individual B2B contracts so that claims for defects may usually be considerably extended, restricted or completely ruled out.
- Under statutory law, the content of GTCs is subject to strict scrutiny so that extending, restricting or completely ruling out claims for defects in GTCs may be invalid. This also applies – to a lesser extent – to sales contracts to be considered as GTCs between companies.
A material defect exists when the goods do not have the qualities which the purchaser, given the nature of the good and the statements the seller has made about it, could have expected on the basis of the agreement.
- The seller must transfer the ownership of the sold good free from any encumbrances and restrictions, with the exception of those explicitly accepted by the purchaser.
- Irrespective of any other contractual provision, the seller guarantees the absence of encumbrances and restrictions which result from facts that can be registered in the public registers, but which were not registered there when the sale agreement was concluded.
Rights and Remedies of Purchaser
- Supply the missing good; repair the supplied good, provided that the seller is reasonably able to comply with this demand;
- Replace the supplied good
- The right to repair or replacement does not affect the right to compensation in the event the purchaser has suffered damages due to encumbrances or restrictions of the sold goods that will not be compensated by repair or replacement.
Subsequent performance is the removal of defects (repair, provision of missing goods and provision of new goods). These claims are not cumulative (i.e. one option excludes the other).
Right to Choose Subsequent Performance
In principle the purchaser has the right to choose between repair and replacement. Exceptions to this are:
- if such repair or replacement is impossible or cannot be expected from the seller.
- if repair or replacement of the supplied good cannot be expected from the seller because it entails disproportional costs.
- if the seller has not performed its obligation to repair the supplied good within a reasonable time after it has been urged to do so.
Costs of Subsequent Performance
- If the good does not comply with the sales contract, then the costs of compliance with the obligations cannot be charged to the purchaser.
- In the event of a consumer sales contract, repair or replacement of the supplied good cannot be expected from the seller if it imposes costs on it which are disproportional in comparison to the costs of exercising an alternative legal right (action) or legal remedy at the disposal of the purchaser, taking into account the value of the good if it did comply with the contract, the significance of the lack of conformity and whether the alternative legal right (action) or legal remedy could be completed without significant inconvenience to the purchaser.
- In contracts vis-à-vis consumers and as a rule in GTCs, restrictions are generally invalid.
Conditions for Claims for Damages
Claims for damages are subject to the following preconditions:
- Every imperfection in the compliance with an obligation is a non-performance of the debtor and makes it liable for the damage which the creditor suffers as a result, unless the non-performance is not attributable to the debtor. A non-performance cannot be attributed to the debtor if it is not to blame for it nor accountable for it by virtue of law, a juridical act or generally accepted principles.
- With regard to a consumer sale agreement it is not possible to derogate to the disadvantage of the purchaser and it is not possible to limit or exclude the rights and remedies that the purchaser has pursuant to law in the event of a non-performance of the seller.
- In individually negotiated B2B contracts liability can be restricted; however liability for acting with intent cannot be limited in advance.
Extent of Claims for Damages/Limitation of Liability
- The damage that has to be compensated by virtue of a statutory obligation to repair damage, consists of material loss and other disadvantages.
- The court estimates the extent of the damage in the way which is most consistent with the nature of the damage caused. Where the extent of the damage cannot be assessed exactly, it shall be estimated.
- The extent of liability may not be restricted to the detriment of the consumer in contracts vis-à-vis consumers.
- It is possible to limit liability for damage in a contract or GTCs concluded between companies. However, even in B2B relations it is not possible to limit liability for damage caused intentionally or by gross negligence.
Withdrawal from Sales Contract
- Every failure of a party in the performance of one of its obligations gives the opposite party the right to withdraw from the sales contract, unless the failure, given its specific nature or minor importance, does not justify this rescission and its legal effects.
- The right referred to in paragraph (1.) only arises when a repair or replacement of the supplied good is impossible or cannot be expected from the seller.
- As a rule, the withdrawal right may not be restricted in contracts vis-à-vis consumers in general GTCs
Limitation Period for Claims for Defects
- Rights of action (legal claims) and defense, grounded on facts which would justify the conception that the supplied good is not in conformity with the agreement, become prescribed on the expiry of two years after the report has been made in accordance with statutory law. Reducing the limitation period is not permitted vis-à-vis consumers.
- Yet, the purchaser preserves, as a defense against a right of action (legal claim) to obtain payment, the right to appeal for a price reduction or compensation for damage. In the event of fraudulent misrepresentation, the limitation period may be extended to up to 30 years from the breach of obligation.
Purchaser’s Obligation to Inspect Goods and Report Defects in B2B Contracts
- In B2B contracts the purchaser 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.
- 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 seller has maliciously concealed the defect.
- In individually negotiated contracts, the obligation to inspect the goods and report any defects may be extended, limited, or completely excluded.
- In GTCs a clause excluding the obligation to inspect goods and report defects is in most cases invalid.