Defect and com­pen­sa­ti­on – right of choice for purchasers

The­re can­not be an enti­t­le­ment to both aba­te­ment and major com­pen­sa­ti­on on account of the same defect

Recent jud­ge­ment of the Federal High Court of Jus­ti­ce (BGH)

If a thing is defec­ti­ve, the purcha­ser has a choice if sup­ple­men­ta­ry per­for­mance is unsuc­cess­ful. He can keep the thing and call for aba­te­ment of the purcha­se pri­ce, or he can rescind the con­tract. If he deci­des in favour of aba­te­ment, howe­ver, he can­not claim major com­pen­sa­ti­on on account of the same defect.

Facts of the case

The plain­tiff acqui­red a new vehi­cle from the defen­dant. After the vehi­cle had been han­ded over, he com­p­lai­ned about various defects. Each of the­se was rec­ti­fied by the defen­dant. In the view of the plain­tiff all the defects were attri­bu­ta­ble to the same cau­se. The pro­neness of the vehi­cle to defects was cau­sed by defi­ci­en­ci­es in manu­fac­tu­ring qua­li­ty. The plain­tiff cal­led for 20% aba­te­ment under Sec­tions 437 2. and 441 of the Ger­man Civil Code (BGB) and duly reques­ted the defen­dant to repay part of the purcha­se pri­ce. After having insti­tu­ted legal pro­cee­dings, he com­p­lai­ned about fur­ther defects, only some of which were rec­ti­fied by the defen­dant. This led the plain­tiff to chan­ge his demand from repay­ment of the aba­ted sum to major com­pen­sa­ti­on (com­pen­sa­ti­on in lieu of com­ple­te per­for­mance as in Sec­tions 437 3. and 281 1. Sen­tence 3 and 281 5. of the BGB). Tho­se para­graphs pro­vi­de for com­pen­sa­ti­on by the ven­dor for the loss or dama­ge incur­red by the non-performance of the con­tract as a whole.

Legal back­ground and decisi­on of the BGH

In the view of the BGH, a request for aba­te­ment can­not be chan­ged to a request for pay­ment of major com­pen­sa­ti­on. This fol­lows from the wor­d­ing and sys­te­ma­ti­sa­ti­on of the law. If the thing is defec­ti­ve, the purcha­ser can, in accordance with Sec­tion 437 2 of the BGB, call for aba­te­ment of the purcha­se pri­ce or rescind the con­tract. He can choo­se whe­ther to stay with the con­tract and redu­ce the purcha­se pri­ce or break away from the con­tract and tran­sact the per­for­mance ren­de­red in rever­se. In making this decisi­on, the purcha­ser can alter the con­trac­tu­al rela­ti­ons­hip uni­la­te­ral­ly. He has a so-called gestal­tungs­recht (right to alter a legal rela­ti­ons­hip). To safe­guard the inte­rests of the ven­dor, howe­ver, the purcha­ser can only exer­cise this right once. The decisi­on can­not be revo­ked or atta­ched to any con­di­ti­ons. The ven­dor may, and should, be enti­t­led to place his trust in what the purcha­ser says. For this rea­son the purcha­ser can­not claim – eit­her in addi­ti­on or sub­se­quent­ly – major com­pen­sa­ti­on citing the same defect. Other­wi­se he would be able to break away from the con­tract after aba­te­ment. The fact is that com­pen­sa­ti­on in lieu of com­ple­te per­for­mance has far-reaching con­se­quen­ces. The purcha­ser recei­ves com­pen­sa­ti­on for the loss or dama­ge he has incur­red as a result of the non-performance of the con­tract as a who­le. That also covers, for examp­le, lost pro­fit, if the purcha­ser would have been able to resell the purcha­se object at a hig­her pri­ce. And any incre­a­ses in pri­ce, for examp­le if the purcha­se pri­ce for the pro­cu­re­ment of a repla­ce­ment has gone up. At the same time, the purcha­ser must return the per­for­mance that has alrea­dy been ren­de­red to the ven­dor. The legal con­se­quen­ces are simi­lar to tho­se of rescis­si­on. By selec­ting aba­te­ment, howe­ver, the purcha­ser has irrever­si­b­ly aban­do­ned the pos­si­bi­li­ty of having the con­tract annulled.

Sum­ma­ry and recom­men­da­ti­on for action

This jud­ge­ment streng­t­hens the posi­ti­on of ven­dors. In this way, their cus­to­mers must now abi­de by their choice bet­ween aba­te­ment and rescis­si­on once they have made it. Howe­ver, heed should be paid to the fact that this jud­ge­ment rela­tes to the case of iden­ti­cal defects. If other defects come to light, the purcha­ser is once again enti­t­led to war­ran­ty rights. And this, again, is accom­pa­nied by the right to choo­se bet­ween aba­te­ment and rescis­si­on. And it should not be for­got­ten that as well as aba­te­ment, so-called minor com­pen­sa­ti­on can be cal­led for. This covers loss or dama­ge of the kind that may for examp­le be incur­red by loss of use during the rec­ti­fi­ca­ti­on of a defect. 

to the judgement

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