Auto­no­mous dri­ving sys­tems: sepa­ra­te con­tracts of sale for hard­ware and software?

Deve­lo­p­ments in the field of auto­ma­ted and auto­no­mous dri­ving are pro­gres­sing rapidly, which is having an impact on legal clas­si­fi­ca­ti­ons as well. The­se deve­lo­p­ments are beco­ming incre­asing­ly rele­vant in civil law espe­ci­al­ly, and par­ti­cu­lar­ly for the rela­ti­onship bet­ween sel­ler and buy­er. In this con­text, ques­ti­ons are being rai­sed with regard to the soft­ware used, the requi­re­ments for an object to be con­side­red free from (mate­ri­al) defects and the struc­tu­ring of the indi­vi­du­al con­trac­tu­al rela­ti­onships in each case.

The­se ques­ti­ons were recent­ly addres­sed by the Dis­trict Court of Darm­stadt in its Judgment (only in Ger­man) of 21 Febru­ary 2022 (Case No. 26o 490/20). The case befo­re the court invol­ved the rescis­si­on of a con­tract of sale for a vehic­le which the buy­er con­side­red to be defec­ti­ve due to pro­blems with the vehicle’s dri­ver assis­tance sys­tem. The under­ly­ing facts of the case were as fol­lows: in March 2019, the buy­er purcha­sed a Tes­la “Model 3” and two soft­ware packa­ges fea­turing auto­no­mous dri­ving func­tions were offe­red to the buy­er: the “auto­pi­lot” packa­ge was acqui­red at the time the con­tract of sale was con­cluded, while the “full poten­ti­al for auto­no­mous dri­ving” packa­ge was not acqui­red until Decem­ber 2019.

Indi­vi­du­al con­tracts or sin­gle con­tract of sale?

Con­tra­ry to the view advan­ced by the defen­dant, the manu­fac­tu­rer and dis­tri­bu­tor of the vehic­les, that the con­tract of sale and the two soft­ware agree­ments are sepa­ra­te and inde­pen­dent con­tracts, the Dis­trict Court ruled in the abo­ve case that all of them are part of a sin­gle con­tract of sale. It found that the pas­sa­ge of time bet­ween the date the car was purcha­sed and the date the second soft­ware packa­ge was acqui­red does not refu­te this assump­ti­on, par­ti­cu­lar­ly sin­ce the second purcha­se invol­ved “embedded soft­ware” which can only be ope­ra­ted on the hard­ware for which it was pro­grammed. Accor­din­gly, the court found that the con­tract of sale includes purcha­se of the soft­ware packa­ges as well.

Are miss­ing func­tions a mate­ri­al defect?

The buy­er in this case was entit­led to expect that he would be able to ful­ly uti­li­ze the ser­vices offe­red through the soft­ware packa­ges. But this was not the case for seve­ral func­tions, such as e.g. the “traf­fic light and stop sign detec­tion with auto­ma­ted stop/start” func­tion. This func­tion could not be used due to incom­pa­ti­bi­li­ty with the “HW 2.5 com­pu­ter” which had been instal­led in the vehicle.

The Dis­trict Court ruled that this was a mate­ri­al defect in terms of § 434(1) Sen­tence 2 No. 2 of the Civil Code, fin­ding that a vehic­le equip­ped with a dri­ver assis­tance sys­tem is not sui­ta­ble for cus­to­ma­ry use and does not have the typi­cal­ly expec­ted qua­li­ty if the addi­tio­nal dri­ver assis­tance func­tions acqui­red can­not be used due to the fact that the vehicle’s hard­ware and soft­ware are incompatible.

The fact that the vehic­le can be re-equipped with a com­pa­ti­ble “HW 3 com­pu­ter” does not alter this con­clu­si­on, in the court’s view: it does not chan­ge the fact that the func­tion does not work with the curr­ent­ly instal­led computer.

Legal clas­si­fi­ca­ti­on of soft­ware under new law

This Judgment is based on the “old” law gover­ning the sale of goods, which has been sub­stan­ti­al­ly alte­red by the “Act regu­la­ting the sale of objects with digi­tal ele­ments and other aspects of con­tracts of sale” (only in Ger­man) (as reusch­law repor­ted). The­se chan­ges app­ly for con­tracts which are ente­red into as of 1 Janu­ary 2022.

The­se new pro­vi­si­ons may result in a dif­fe­rent legal assess­ment of the under­ly­ing facts.

The new­ly adopted pro­vi­si­ons, begin­ning with § 327 of the Civil Code, crea­te spe­ci­fic rules for con­tracts invol­ving objects which incor­po­ra­te or are inter­con­nec­ted with digi­tal pro­ducts. This cate­go­ry should include vehic­les which fea­ture soft­ware which is not abso­lut­e­ly neces­sa­ry for ope­ra­ti­on of the vehic­le, such as soft­ware for auto­no­mous dri­ving func­tions. In this case, war­ran­ty rights would no lon­ger be gover­ned in all cases by § 434 of the Civil Code and the sub­se­quent Artic­les, but rather by § 434 of the Civil Code and the sub­se­quent Artic­les (for defects in the vehic­le) and by § 327 of the Civil Code and the sub­se­quent Artic­les (for defects in the software).

Sin­ce the afo­re­men­tio­ned sta­tu­tes dif­fer in both the spe­ci­fic requi­re­ments for affir­ming that an object is free from (mate­ri­al) defects and the legal con­se­quen­ces of such defects, a dif­fe­ren­tia­ted ana­ly­sis is indis­pensable in each indi­vi­du­al case. 

Sum­ma­ry and outlook

This Judgment by the Dis­trict Court of Darm­stadt demons­tra­tes that it is essen­ti­al for manu­fac­tu­r­ers and sup­pli­ers to ensu­re that their vehic­les and com­pon­ents are com­pa­ti­ble with any soft­ware opti­ons they may be offe­ring.

An appeal chal­len­ging the Dis­trict Court’s Judgment was lodged on 31 March 2022 and it remains to be seen how the appel­la­te court will rule in this case. Nevert­hel­ess, com­pa­nies would still be well-advised to keep in mind which war­ran­ty rules will app­ly for their vehic­les and other pro­ducts in the future and to veri­fy the com­pa­ti­bi­li­ty of the hard­ware and soft­ware included. Both the under­ly­ing con­tracts and tech­ni­cal inci­dents must be moni­to­red at all time and che­cked for consistency.