Defects: agreed-upon quality vs. required use

Requirements for agreements as to quality and required uses.

The ruling was based on the following case: a bird feed manufacturer purchased a bird feed packing machine which was supposed to be capable of packing up to 40 bags of feed per minute ("up to 40 pcs/min"). But in fact, the machine was only capable of packing 9 bags per minute. The buyer of the machine understandably raised the question as to whether warranty rights could be asserted against the seller on the grounds that the machine was defective.

Among the seller's principal contractual duties is delivering the object to the buyer free of material defects and defects in title. In accordance with statutory interpretations of § 434 of the Civil Code, a defect exists if the object does not have the agreed-upon quality, is unsuitable for the contractually required use or does not have the quality which is customary for such objects or is unsuitable for their habitual use. In accordance with the court's established case law, an agreement as to quality exists whenever the seller makes clear that it intends to assume a binding guarantee for the presence of a specific characteristic which is important to the buyer. The Federal Supreme Court did not recognize such an intent in the statement that the machine can pack "up to 40 pcs/min" because the formulation "up to" does not guarantee a minimum quantity, so that a machine packing a smaller number of feed bags could also adhere to the terms of the contract according to this phrasing.

The Federal Supreme Court also ruled that a use is contractually required whenever the contracting parties agree upon a specific type of use whose importance to the buyer is evident. In this respect as well, the Federal Supreme Court found that the machine was not defective, since it was suitable for packing bird feed.

No other defect was found in the machine either, after expert review, since the machine was suitable for the habitual use of a packing machine and possessed the quality which is typical of packing machines.

Practical tip

The crucial element in warranty claims is the presence of a defect of relevance for the contractual agreement. Accordingly, particular attention should be paid to the contractual agreement relating to the quality or use of the object, which does not necessarily require verbal communication. Instead, agreements as to the contractually owed quality or the contractually required intended use may come into being based on the buyer's expectations, if those expectations are evident to the seller. Sellers should therefore check to ensure that their products meet the advertised specifications, as well as drafting precise contractual provisions and setting them down in writing, if only for evidentiary purposes.

[October 2019]