“Defects” are not what they used to be

The impli­ca­ti­ons of the Sale of Goods Direc­ti­ve for the laws gover­ning con­tracts of sale

The Euro­pean Com­mis­si­on has con­sis­t­ent­ly aimed to crea­te a hig­her level of pro­tec­tion for con­su­mers, par­ti­cu­lar­ly in light of the incre­asing growth in elec­tro­nic retail, and the Com­mis­si­on took the view that the Con­su­mer Goods Direc­ti­ve which was pre­vious­ly in effect, Direc­ti­ve 1999/44/EC, no lon­ger ensu­red an ade­qua­te level of con­su­mer pro­tec­tion. This led to the adop­ti­on on 30 June 2021 of imple­men­ting acts for Direc­ti­ve (EU) 2019/771 on cer­tain aspects con­cer­ning con­tracts for the sale of goods (the Sale of Goods Direc­ti­ve) and Direc­ti­ve (EU) 2019/770 on cer­tain aspects con­cer­ning con­tracts for the sup­p­ly of digi­tal con­tent and digi­tal ser­vices (the Digi­tal Con­tent Direc­ti­ve) , which will imple­ment the­se Direc­ti­ves into natio­nal law. This will crea­te exten­si­ve chan­ges as of 1 Janu­ary 2022 in the gene­ral law of obli­ga­ti­ons and in the laws gover­ning con­tracts for the sale of goods. The most important chan­ges from imple­men­ta­ti­on of the Sale of Goods Direc­ti­ve will be explai­ned below, along with key prac­ti­cal notes.

Chan­ges as of 1 Janu­ary 2022

Among the most important chan­ges are the chan­ge in the defi­ni­ti­on of “mate­ri­al defects” (§ 434 of the Civil Code) and the expan­si­on of con­su­mer rights (§§ 474 et seq. of the Civil Code).

Until now, the pre­sence of mate­ri­al defects was lar­ge­ly deter­mi­ned by the agree­ments bet­ween the par­ties, as the agreed-upon spe­ci­fi­ca­ti­ons for the purcha­se object. Objec­ti­ve cri­te­ria, such as whe­ther the pro­ducts are sui­ta­ble for their cus­to­ma­ry use or whe­ther they are of nor­mal qua­li­ty, were of secon­da­ry importance and could be appli­ed to deter­mi­ne whe­ther a pro­duct is defec­ti­ve only in the absence of a con­trac­tu­al agree­ment. The new defi­ni­ti­on of “mate­ri­al defects” sta­tes that pro­ducts are only con­side­red to be defect-free if they con­form to the sub­jec­ti­ve requi­re­ments agreed upon by the par­ties as well as mee­ting objec­ti­ve cri­te­ria. As a result of this expan­ded defi­ni­ti­on of “mate­ri­al defects,” pro­ducts which con­form to the con­trac­tual­ly sti­pu­la­ted qua­li­ty are nevert­hel­ess con­side­red to be defec­ti­ve if they are unsui­ta­ble for the pur­po­se for which they are nor­mal­ly used or if they lack the nor­mal quality. 

Con­tra­ry to the situa­ti­on at the Euro­pean level, Ger­man law­ma­kers have fur­ther deci­ded to adopt a sin­gle defi­ni­ti­on of “mate­ri­al defects,” mea­ning that the new defi­ni­ti­on of “mate­ri­al defects” will app­ly wit­hout limi­ta­ti­on for both B2C and B2B transactions.

Under a new­ly enac­ted sta­tu­te, § 475b of the Civil Code, this defi­ni­ti­on of “mate­ri­al defects” will also app­ly for goods with digi­tal ele­ments. Sel­lers of goods with digi­tal con­tent will also be requi­red to update this con­tent in the future in order to ensu­re that their goods remain defect-free. The dura­ti­on and scope of the objec­ti­ve requi­re­ment to pro­vi­de updates can­not be arran­ged con­trac­tual­ly, but are rather deter­mi­ned by objec­ti­ve cri­te­ria. The decisi­ve con­side­ra­ti­on is what a con­su­mer may reason­ab­ly expect given the cir­cum­s­tances of the con­tract and the type and pur­po­se of the object. Addi­tio­nal update requi­re­ments may be agreed upon by the con­trac­ting par­ties on an indi­vi­du­al basis.

In addi­ti­on, the peri­od during which the bur­den of pro­of for defects is rever­sed in favor of the buy­er pur­su­ant to § 479 of the Civil Code will be exten­ded from six months to one year.

Prac­ti­cal notes

Imple­men­ta­ti­on of the Sale of Goods Direc­ti­ve into Ger­man con­tract law on 1 Janu­ary 2022 will affect not only B2C tran­sac­tions, but the B2B mar­ket as well. Accor­din­gly, manu­fac­tu­r­ers should find out in a time­ly man­ner which spe­ci­fi­ca­ti­ons will app­ly for their pro­ducts, inclu­ding objec­ti­ve cri­te­ria, so that they can be taken into account in deve­lo­p­ment and pro­duc­tion. On the con­trac­tu­al level, atten­ti­on should be paid to secu­ring recour­se opti­ons all along the sup­p­ly chain, which will pre­sent a chall­enge, par­ti­cu­lar­ly in view of the new objec­ti­ve defi­ni­ti­on of “defects.”

We will report sepa­ra­te­ly on the impli­ca­ti­ons of the act imple­men­ting the Digi­tal Con­tent Directive.

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