The national implementation of Directive (EU) 2019/771 adopted on 20 May 2019 (hereinafter, the “Sale of Goods Directive”) leads to far-reaching changes for sales contracts concluded as of 1 January 2022.
Although one of the main objectives of the Sales of Goods Directive is to increase the level of consumer protection, its implementation in the German Civil Code also has implications for business transactions. Not only were the provisions on the sale of consumer goods (§§ 474 ff. of the Civil Code) amended, but the general law on the sale of goods was also amended. Two issues are particularly relevant for companies: the definition of defects and the seller’s recourse.
The definition of a defect under the law of sales
In implementation of Article 5 of the Sale of Goods Directive, the requirements for the purchased goods to be considered free of material defects have been newly regulated. Previously, the definition of a material defect primarily provided for subjective criteria (agreed quality, contractually required use) and subordinately for objective criteria (suitability for normal use) in a tiered relationship. Now these requirements are cumulative.
This poses the following problem for sellers, especially in business dealings: Although the quality of the purchased item is regularly defined in concrete terms between the buyer and the seller by means of specifications or other agreements and the seller complies with these, the warranty rights provided by law may be triggered because objective expectations are also applicable.
This dilemma must be addressed; otherwise, there is a threat of warranty risks. The way to achieve this can only be clear and conclusive agreements between the contracting parties, e.g. negative quality agreements. This has always been advisable, since subjective ideas are by their very nature a gray area open to interpretation in cases of doubt. Due to the new structure of the Civil Code, it is now unavoidable. In this regard, standard terms and conditions such as general terms and conditions and sample contracts should also be reviewed and adapted if necessary. This also applies to questions of recourse and limitation periods in the case of warranty claims:
Seller’s recourse pursuant to §§ 445 a/b of the Civil Code
It is true that Article 18 of the Sale of Goods Directive contains only a few provisions on the seller’s recourse against its supplier. However, the national lawmakers have also adapted §§ 445 a and b of the Civil Code. In this context, one change will have significant consequences for supply chains: the abolition of the maximum limit on the interruption of the running of claims limitation periods in § 445b(2), Sentence 2 of the Civil Code (old version).
§ 445b(2) of the Civil Code stipulates an interruption of the running of limitation periods both for recourse in accordance with § 445a(1) and for the general warranty claims in § 437. Accordingly, the seller’s recourse claims against (its) supplier are to expire at the earliest two months after the date on which the seller fulfills the warranty claims of its buyer.
§ 445b(2), Sentence 2 (old version) provided for a maximum time limit of five years from delivery from the supplier to its customer for the enforcement of recourse claims. This maximum period has now been deleted without replacement with the implementation of the Sale of Goods Directive. For actors in the supply chain, this goes hand in hand with legal uncertainty and the considerable risk of being exposed to warranty claims without this maximum limit. A risk that was already known to only a few has now been further exacerbated.
In the context of the implementation of the Sale of Goods Directive, German lawmakers have decided to apply buyer-friendly regulations also to contracts in business transactions strictly between enterprises. In this light and due to the adjustments to the law on sales shown, suppliers and manufacturers must check their own products for compatibility with the new definition of defects, (contractually) safeguard the possibilities of recourse along the supply chain, and adapt sample contracts and general terms and conditions to the new structures.back