Facts of the case:

At the beginning of 2009, the plaintiff (an Austrian municipality) acquired a demonstration vehicle from a German manufacturer, which had been specially adapted for it and was around one year old, and which was to be used by the municipality to clear snow. From the outset, the vehicle exhibited extremely unusual driving behavior, which, due to bumps and vibrations, made it unacceptable for the municipality’s employees to drive it for long periods of time.

The defect was reported immediately and the Austrian seller attempted to rectify it by adapting the suspension. Within the contractually agreed warranty period of only 12 months, however, the improvement was not successful. By mutual agreement, the warranty was extended by a further three months under the express condition that the improvement was to be carried out quickly. Even within this period, the seller was unable to repair the vehicle due to the delivery of incorrect spare parts by the German manufacturer. The warranty period was again extended by a further three months, but a further attempt at improvement failed at the outset, as the wrong shock absorbers were again supplied.

The buyer therefore withdrew from the purchase contract after setting a 14-day grace period – which expired without result – and demanded a refund of the purchase price.

In the proceedings before the Vöcklabruck District Court agreed in the seller’s general terms and conditions, the seller argued that the secondary warranty remedies of price reduction and rescission were expressly excluded under the seller’s general terms and conditions. Alternatively, the defendant argued that there was no defect in the vehicle, that the defect had not been reported in good time and that, in any case, as a minor defect, it would not entitle the seller to rescind the contract.

The Vöcklabruck District Court conducted extensive proceedings in the first instance, in which the expert consulted confirmed that the driving behavior of the vehicle was unacceptable and that this defect already existed at the time of delivery. At the express request of the defendant and the German manufacturer intervening in the dispute as an intervening party, it was clarified in the course of a further expert examination whether the replacement of the correct shock absorbers ultimately delivered after withdrawal from the contract could remedy the defect. This revealed that the defect could actually be remedied by replacing the shock absorbers, which only cost € 358.00.

The District Court of Vöcklabruck then dismissed the claim and justified its dismissal by stating that the seller was always willing to make improvements, but was only prevented from doing so through no fault of its own due to the delivery of incorrect shock absorbers. Although the Vöcklabruck District Court came to the conclusion that the duration of the various unsuccessful attempts at improvement was unreasonably long overall, the claim for repayment of the purchase price of around € 111,000.00 was not justified due to the exclusion of the right of conversion in the general terms and conditions and due to the ease with which the defect could be remedied.

The plaintiff municipality appealed against this decision to the Regional Court of Wels and the Regional Court of Wels upheld the appeal. In particular, the Regional Court of Wels rightly ruled that the question of any fault on the part of the seller, who was obliged to make improvements, was completely irrelevant for the assessment of the facts of the case in the context of the no-fault warranty. Due to the unreasonably long duration of the failed attempts at improvement, the plaintiff was allowed to treat the technically improvable defect as a legally unimprovable defect and could therefore invoke the right of conversion. The exclusion of the right of conversion in general terms and conditions between entrepreneurs is immoral if a defect is no longer sanctioned or if the seller refuses to make improvements or fails to do so for an unreasonably long period of time.

The appeals of the defendant and the intervening party have now been deemed admissible by the Supreme Court, but not justified. The Supreme Court stated that there has been no case law on the question of whether an exclusion of conversion in business transactions can be immoral since the Warranty Law Amendment Act 2002. Therefore, the legal question raised would be a significant one within the meaning of Section 502 ZPO, which is why the appeals were admissible. However, the Supreme Court confirmed older case law (prior to the Warranty Law Amendment Act 2002), according to which the exclusion of the right of conversion can also be immoral in business transactions if this means that a defect is not improved permanently or for an unreasonably long time.

The Supreme Court also justified its decision – remarkably enough – by stating that a claim for the improvement to be enforced by legal action would not be an adequate remedy, as civil proceedings would ultimately take so long that the buyer would again have to wait an unreasonably long time for the improvement. This was particularly true in this specific case, as the snow clearing vehicle was one that was urgently needed during the winter season and the plaintiff had to purchase a replacement vehicle immediately after the purchase contract was rescinded.

In its decision, the Supreme Court also stated that the very low repair costs in relation to the purchase price cannot lead to the defect being classified as merely minor, which ex lege already excludes the right of conversion. In this regard, the Supreme Court stated that when assessing the severity of the defect, it is not primarily the repair costs that must be taken into account, but rather the specific impairment caused by the defect. In the case in question, the defect seriously impaired the roadworthiness and operational safety of the vehicle according to the expert in the proceedings at first instance. However, such a serious impairment can never be qualified as a minor defect, regardless of the repair costs. This solution seems appropriate. The person entitled to make improvements whose vehicle no longer runs at all, for example, is generally unable to assess the cause and the repair costs for this defect themselves. If the warranty claimant fails to remedy the defect and only finds out after the declaration of conversion that the defect could be remedied by replacing a relay for € 10.00, he would otherwise find himself in a completely unclear situation, as he would have to have the defect remedied by a third party (at his own expense) before the declaration of conversion in order to avoid the risk of the objection that it is merely a minor defect.

After almost 3 ½ years, the legal opinion of the plaintiff municipality and its representative, JMKS, has now been confirmed by the Supreme Court.

Dominik Konlechner