X Lege is publishing platformConcluding a purchase contract in 2014
If you conclude a purchase contract in 2014, it will no longer be subject to the “old” Civil Code and Commercial Code but to the “new Civil Code (“NCC”). Although the new legislation does not bring about a revolution for purchase contracts, there are several changes worth noting.
For one thing, it is no longer necessary to consider whether the contract will be governed by the Civil Code or the Commercial Code. As the NCC combines the two former regulations, purchase contracts will be governed instead by a single regulation. It also regulates contracts concluded for business activities as well as the specifics of sales where the customer is the end user. Purchases arising from special regulations, for example participating securities, investment securities on capital markets, etc. are regulated as before.
The entire regulation of purchase contracts is in principle not mandatory (except for consumer agreements), which means that parties, within the framework of good morals and the public order, may stipulate their rights and obligations in deviation from the provisions of law. Many arrangements which the former legislation required to be in writing may now be agreed orally, including contractual penalties and agreements on a future real estate purchase contract. This more liberalized approach of course has its drawbacks, for example with regard to written confirmations.
As concerns commercial purchase contracts, the NCC proceeds according to the Commercial Code. Thus, the NCC has assumed a number of institutions that used to be stipulated only in purchase contracts between businessmen. What is fundamental is the fact that a purchase contract may now be concluded even if it does not include a purchase price, which was previously reserved only for commercial contracts for the purchase of goods. Now this new feature applies to any purchase, although it must be clear from the contents of the contract that the parties intended to conclude a purchase contract without any arrangement on the purchase price.
It is also still possible to stipulate various proviso clauses in purchase contracts, but there is a new feature in the form of a reservation of a reverse purchase (similar to repurchase) and a reservation of a better buyer. This allows the seller to choose a better buyer provided it contacts the original buyer within a determined deadline. Unless the parties agree otherwise, the seller may exercise this right with respect to movable items within three days and with respect to immovable items within one year following conclusion of the contract. It is interesting that the law does not stipulate what qualities constitute a better buyer. The seller may prefer a buyer that offers a higher price but may also base its decision on other aspects. In practical terms, there is an important possibility to make a public list that includes selected ancillary arrangements, whereby the agreement between the parties would apply to everybody.
Defective supplies
Unfortunately, not even the best contract can prevent a seller from breaching its obligations or ensure that it provides the goods to the buyer duly and on time. The buyer, to be able to seek claims arising from defects, is obliged to check the goods as soon as possible after the risk of damage has passed over (typically upon handover). The buyer is also obliged to notify the seller of any defects without undue delay, but unlike the former regulations, the NCC is more buyer-friendly. Late notice does not fully terminate one’s rights arising from defective performance, but the court will deny such rights if the seller objects, which however the seller moreover do if the defect results from a fact which the seller knew or must have known about when delivering the item.
Defects are not the same
Legal liability for defects only applies to those that existed when the risk of damage passed to the buyer, even though the defect appeared later. The seller is only liable for later defects where it has breached its duties. With respect to sales of goods in shops, the NCC assumes that if a defect occurred within six months following takeover of the goods, the defect already existed at the time of takeover. This means that claiming defects is relatively easy for the buyer during the first six months, since the seller would have to prove that the goods were not defective.
Later, within two years, the buyer may also seek rights arising from defects but it would have to prove that the defects existed at the time of takeover.
The buyer may choose either to have the defect removed (via delivery of new goods or repair of the defective goods) or to be given a reasonable discount on the purchase price. In the event of a significant breach of the agreement, the buyer may rescind it. For goods sold in a shop, regardless whether it is a brick-and-mortar store or an e-shop, it is irrelevant whether or not the breach is significant. If an item sold in a shop is defective, the buyer may in principle choose a new non-defective item, repair of the defective item or a reasonable discount on the purchase price. Unlike the previous regulations, having several options is more advantageous for buyers, since they may directly request a discounted price without having to seek replacement or repair of the goods.
Nevertheless, it is necessary to distinguish contractual warranty liability (so-called quality warranty), which may be provided at the seller’s discretion and typically takes the form of a warranty certificate or declaration in the purchase contract or is stated on the packaging. The seller thus undertakes that the item will be fit for use for a certain period of time or that it will retain the standard qualities. In such cases, it is irrelevant when the defect occurred, since it is sufficient if the item does not correspond with the seller’s declaration within the warranty period.