According to a recent decision by the Supreme Court, the fact that a sold building plot is located on a slope and that building on it is possible but may require special slope stabilization measures does not constitute a defect within the meaning of warranty law in the absence of a special agreement.
The risk of increased construction costs is generally borne by the buyer, but despite criticism in the literature, case law recognizes “common error” as a fourth ground for contesting errors that is not mentioned in the law and thus expands the contractual possibilities for contesting errors.
Facts of the case:
In its supreme court decision of 26.06.2014 (8 Ob 57/14m), the Supreme Court based its decision on the following case: The plaintiff acquired a building plot with an area of over 3,000 m² from the defendant, on which the plaintiff wanted to build apartment buildings. Numerous single-family homes were already located directly adjacent to this property. The building permit required for the implementation of the construction project was granted to the plaintiff one year later by the competent municipality.
In the purchase agreement, the plaintiff was also granted the right in advance to take the necessary measures to check the buildability of the property, and a geotechnical soil survey obtained by the plaintiff determined that the property could be built on and that the subsoil was stable.
In the course of the construction measures, however, it turned out that the property was located in the area of influence of the sliding surfaces of weather-related slope movements (creeping slope) and that creeping movements and landslides had already occurred repeatedly in recent years in the area of the property in question. This circumstance led to the plaintiff being confronted with enormous additional costs for the realization of its construction project, as appropriate safety measures were necessary due to the large excavation depths.
The plaintiff therefore sought a price reduction under the warranty, and possibly an adjustment of the contract on the grounds of fraudulent misrepresentation or error, because the defendant had breached its duty of disclosure by failing to inform her about the geological problems of the object of purchase. She also sought a declaratory judgment. The defendant objected that he had not been aware of the creep movements on the property when the contract was concluded and that the agreed building land dedication existed anyway; the defendant was not responsible for the plaintiff’s miscalculations during the construction work.
The Supreme Court assessed the legal situation to the effect that a defect in the sense of a qualitative or quantitative deviation of the performance from what is contractually owed must always be examined on a case-by-case basis. The contractually owed characteristics are those that are usually assumed (as measured by market perception) or those expressly or implicitly stipulated, whereby the object of purchase must also be able to be used in accordance with the nature of the transaction or the specific contract concluded.
It follows from this that when purchasing a building plot, unless a special soil condition has been guaranteed, a naturally grown subsoil and thus the objective buildability can generally be expected (see also OGH 9 Ob 50/10h). At the same time, however, the seller is not obliged to guarantee the buyer the possibility of building according to a certain plan or at a certain time, nor does the buyer generally bear the risk of increased construction costs, i.e. also the additional costs resulting from unexpected soil conditions in the course of construction, unless otherwise contractually agreed or the construction would now prove to be economically unreasonable on objective assessment.
In the case in question, there was no doubt as to the objective buildability of the property, as the plaintiff had been granted a building permit and the property was designated as building land according to the zoning plan. Nor did the geotechnical reports prove anything to the contrary. The Supreme Court considered the breach of disclosure obligations by the seller to mean that a breach is to be affirmed if a disclosure that was legitimately expected in good faith was omitted.
However, the seller cannot be obliged to fully disclose all possible characteristics of the subject matter of the contract – in this case, any known soil characteristics or obvious inclination of the property – if the buyer does not request any information or instructions about them. Failure to provide such information may not be assumed to be a conclusive commitment on the part of the seller, unless the seller is aware of the importance of the actually missing property for the buyer or should have recognized it. In the latter case, the failure to provide information could give rise to a warranty obligation.
Even if the defendant in the present case was not aware of the existing landslides in connection with the property and could therefore not be accused of cunning misrepresentation, the Supreme Court recognized in this decision that a common business error can also entitle the contracting parties to rescind or adjust a contract. However, a common mistake presupposes that both parties are subject to the same mistake. It is not sufficient for a legal transaction to be rescinded on the grounds of a common mistake merely to invoke fraudulent misrepresentation, as the plaintiff did in the case, since a common mistake is already conceptually incompatible with the claim to have been fraudulently misled (5Ob 144/98g).
Even if the assertion of the “common mistake” of the plaintiff was not successful due to the lack of submission in the first instance in the case in question, the subsequent assessment of this legal question by the Supreme Court in the area of Section 871ff ABGB offers the person who is subject to a (business) error when making a declaration of intent a further opportunity to withdraw from the declaration made. Furthermore, the error must in any case have been causal for the conclusion of the specific transaction.
However, this case law continues to be criticized by scholars on the grounds that the party in error must be more worthy of protection than their contractual partner, as rescission means an encroachment on their legal position and therefore the “loss” of the contract. However, the contractual partner’s own error does not justify his lesser worthiness of protection. It should also be noted that the possibility of asserting an error can be effectively waived in advance, except in the case of consumer transactions (Section 6 (1) no. 14 KSchG) and fraudulent inducement of error.