Studio Legale Andreello – Padova

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In all purchase and sale contracts (both domestic or international), the seller’s first obligation is to deliver the goods to the buyer in compliance with the contract. The remedies granted to the buyer in case of lack of conformity or defects of the purchased good is an essential part of the national and international rules applied to the sales’ contracts.

The seller’s liability for material defects in the Civil law countries is based on the Roman law tradition even though the possibilities granted to the buyer in such system has evolved over the years: during the archaic Roman law system the buyer should have been really careful and inspects the object of contract of sale before the conclusion of the agreement. If he would later find some defects, he could not ask the seller anything and he could not refuse to take the object of the contract after the agreement was concluded. The Roman system changed with the as called “aedilis curules”, edicts issued by the magistrates who supervised the markets in the Roman Empire Capital. Aedilis Curules grated the buyers the possibility to file two legal actions against the seller in case of defects of the object of the sale contracts:  with the first the buyer could claim from the seller to refund the price (action redhibitoria), while with the second the buyer could claim a price reduction (action quanti minoris)

In the Common law system for material defects of the object of the sale agreement gradually evolved from remedies similar to the Roman law to remedies where the seller’s liability was gradually extended to the implied warranties of the thing. Nowadays common law system still provides that the seller is liable for the qualities of the object of the contract whether or not expressly provided in the contract.

All the modern legal European legal systems just as in USA provide that the buyer must notify the seller about the defects: in most of the legal systems upon received the goods the buyer has the obligation to check if there are some visible defects, while for the not visible (hidden) defects the buyer must notify the seller as soon as discovered. For example in Germany, USA, Italy there is a specific obligation to notify the seller as soon as the deficiencies have been discovered but while in Germany the buyer have to notify the seller  immediately,  according to the Italian Civil Code such obligation must be performed within 8 days from the discovering while must be performed within reasonable period of time  according to USA’s UCC (Uniform Commercial Code) and  Dutch law (article 157 of the Chinese Contract Law provides that “Upon receipt of the subject matter, the buyer shall examine it within the agreed period of time for examination. If there is no agreed period for examination, the buyer shall examine the subject matter in a timely manner”. According to the following article 158 of the Chinese contract law, when the buyer fails to notify within a reasonable period of time, or in any case within two years, the subject matter shall be deemed to conform to the agreement but, if a period of warranty for the quality has been granted, such period of warranty shall apply and the two years period of limitation in not applicable), which is also the solution of the Vienna Convention for contracts for international sale of goods. According to the Convention and also in many other jurisdictions, the notice may be given by the deadline of two years from the delivery of the goods to the buyer (German law provides the same deadline while Chinese laws provide four years for international sales of goods and technology transfer and two years for the domestic contracts); while in Italian and Swiss law is a year.

As to the content of a notice of non-conformity, under the Vienna Convention and many national laws and jurisprudence, such notice must be sufficiently specific regarding the nature of the lack of conformity in order for the buyer to meet its burden. Sufficiency should be determined with the purpose of the notice in mind. As it has been suggested by jurisprudence “questions as to what the notice must say should be answered with regard for the functions served by the notice and the principal functions are to give the seller an opportunity to obtain and preserve evidence of the condition of the goods and to cure the deficiency".

As soon as notify the seller of the defective goods, buyer has to decide which legal remedies he wants to use, legal remedies that depend on the legal system that has been chosen by the parties as law of the contract. For example the Italian law provides (article 1492 ICC) that the buyer can either ask for the resolution of the contract (action redhibitoria) or the reduction of the price (quanti minoris): two potestative rights that the buyer can exercise but that become irrevocable with the document instituting the proceedings. The rule of redhibition provides also the seller must refund the price and expenses born the buyer due to the sale contract.

In Austrian law the possibilities granted to the buyer depends on the fact whether the defects are “unrecoverable”  or “recoverable” because defects that cannot be removed and that can interfere with the regular use of the goods lead only to the termination of the contract entitling the buyer to claim a compensation of the damaged suffered, while the recoverable defects allow the buyer to claim a price reduction or to enforce specific performance provided in the contract.   

In Chinese Contract law, in case of delivery of defective goods article 111 of the Chinese Contract Law, provides several remedial measures, which facilitate the actual performance of contractual obligations, when defective performance is rendered. The five remedial measures are, repair, replacement, redoing, return of goods and price/remuneration reduction. If the delivered goods fail to meet the specified quality under the contract, the buyer is entitled to either demand that the seller bears the cost of curing the defect, or replace the goods. The buyer may also return the goods for a full refund or ask for a reduction in price.

In Common law tradition the remedies granted to the buyer are essentially two: acceptance and rejection of the entire delivery, or part thereof if only a part of subject matter have been delivered with defects. The main difference between English and USA contract law is that while in the first one the right to reject the goods is limited by the seriousness of the defects in US contract law the buyer is free to decide to reject the goods even for small defects and for even small defects he can revoke the acceptance and claim for a total price refund.

Talking about Common law countries very interesting are the provision of the Singapore SGA (Sale of Goods Act), based on the well-known English statute, the Sale of Goods Act of 1893 (amended in 1979). The Singaporean Law provides that the right to rejection is enforceable by the buyer for any of the implied conditions but if the breach is “so slight that it would be unreasonable for the buyer to reject” the goods, then the breach is to be treated as a breach of a warranty and the buyer can claim only for the damages.

In Vienna Convention the approach that has been adopted looks (apparently) similar to the Civil law countries rules: according the article 45 (that refers to  articles 46-52) the buyer can ask the Seller to perform the contractual obligations, claim for damages, claim for reduction of the price or (as provided in article 49) terminate the contract.

The possibility to terminate the contract granted to the buyer is limited by the fact that the violation of the contract must be a “fundamental” breach of the obligations that should have been performed by the seller according to the contract or when the seller does not deliver the subject matter of the contract.

 Avv. Alberto Andreello