Invalid clauses in supply contracts

Category: contract law Industry: mobility Author: Year:

In its indicative judgement of 22 November 2017 – File no.: 3 U 19/16 – the Higher Regional Court of Appeal (OLG) in Frankfurt am Main has gone some way toward inhibiting a practice that is widespread, above all in the automotive supply industry. Automotive manufacturers (OEMs) place their suppliers under an obligation to comprehensive quality control. In some cases, the suppliers then attempt to offload the costs incurred in that control on to their subcontractors. In its decision, the court expressed the view that there is no obligation on the latter to bear these costs in the absence of an appropriate contractual clause. Furthermore, the judgement also has some relevance to the assessment of the defectiveness of bought-in parts.

The defendant (subcontractor) manufactured adapter sleeves for the illumination of ashtrays, which the plaintiff (supplier) installed in his ashtray systems and supplied to an OEM. Prior to that, the defendant had already delivered these adapter sleeves to other suppliers of the same OEM, those suppliers having meanwhile become insolvent. When problems arose with the illumination of the ashtrays, the OEM called on his supplier to conduct two illumination tests. The plaintiff invoiced the defendant with the costs incurred. After some time the defendant filed an objection to this, whereupon the plaintiff attempted to assert the bearing of the costs by court action.

The court first ascertained that there was no contractual basis for an obligation on the part of the defendant to bear these costs. Such a basis only existed between the OEM and the plaintiff. It was true that the OEM had specified the subcontractor. But this had no influence on the contractual obligations between the plaintiff and the defendant, which were only geared to the contract that had been concluded between them. The circumstance that the defendant at first accepted responsibility for meeting the costs of the quality control and did not object to it until after some time did not constitute an implicit agreement with regard to bearing the costs. The only way such an obligation could come about would therefore be from a claim for damages, and that would have required the adapter sleeves to be defective. The plaintiff had complained about 10 of the sleeves being defective, whilst a total of 200,000 had been delivered.

First of all the court made it clear that the defectiveness of 10 adapter sleeves did not provide any kind of basis for such major suspicion of defectiveness relating to the remaining sleeves as would justify contemplating all the sleeves supplied as defective. Moreover, said the court, the costs of quality control did not constitute loss or damage based causally on a defect, as they had not been incurred in the rectification or mitigation of the original loss or damage, but rather in the prevention of loss or damage that might occur in the future.

Summary

From a juridical point of view, this decision does not bring any innovations to bear, but it does clarify the conditions for dealing with the costs of quality assurance. It is only possible to pass these on if there has been an express contractual agreement to that effect. Under no circumstances can they be recovered via legal action in the form of a claim for damages. So once again, the main focus should be on the design of the contract.

[November 2018]