In its ruling of March 20, 2019 (case no. VIII ZR 213/18), the Federal Court of Justice provided practical clarification on the understanding of “use assumed under the contract” in the area of warranty law for material defects.

This concerns the frequently encountered case that the contracting parties have not agreed on a certain property of the purchased item (or the work performance) via a quality agreement subject to strict requirements, but have nevertheless contractually assumed it according to the circumstances.

The BGH has clarified that merely “contractually presupposed” properties may not be confused with a “use presupposed under the contract” within the meaning of Section 434 (2) no. 1 BGB. “Use” refers solely to the intended purpose of an item, which is generally to be assessed independently of certain properties.

The core statements on “use assumed under the contract”

The main statements of the BGH can be summarized as follows:

• The absence of certain properties almost exclusively constitutes a material defect if a quality agreement has been made with regard to the missing property in question, and very strict requirements must be applied to the assumption of such a quality agreement. On the basis of the new law of obligations, according to the Federal Court of Justice, a quality agreement can no longer be considered in cases of doubt, but only in clear cases (note: you can read more about the requirements for the assumption of a quality agreement here ).
• In the absence of a quality agreement, the question of whether an item is free of defects depends on whether it is suitable for the contractually stipulated use and otherwise suitable for the usual use. With regard to the contractually stipulated use, the BGH has now clarified that this is determined solely by the intended use of the item. In contrast, when determining the contractually stipulated use, properties that may have been the basis of the transaction according to the parties’ ideas must be disregarded. Otherwise – according to the BGH – the requirements for a quality agreement would be circumvented via the detour of the “contractually assumed use” criterion.

The ruling of the Federal Court of Justice from March 20, 2019, case no. VIII ZR 213/18

The BGH ruling of March 20, 2019 (case no. VIII ZR 213/18) and the facts on which it is based are outlined below.

The facts: The purpose of a packaging machine is “packaging”, not a specific “packaging speed”

The ruling by the Federal Court of Justice on March 20, 2019 was based on the following facts:

The plaintiff, a producer and trader of bird food, acquired an additional packaging machine from the defendant in order to expand its production capacity, with which the bird food it produces is mechanically packed in plastic bags, sealed and then sold.

During the contract negotiations, the plaintiff’s desire for a certain production speed was expressed several times, although there was no specific agreement on a certain production speed in the purchase contract that was finally concluded. “Only the order confirmation contained the reference “up to 40 pcs/min”.

According to the findings of fact made by the court of first instance, the machine only achieved a processing speed of nine bags per minute in practice. The plaintiff sought to rescind the purchase contract on the basis of this defect, among other things.

Both the court of first instance and the court of appeal followed the plaintiff’s opinion and considered the reduced production speed to be a defect because a higher production speed was in line with the contractually stipulated intended use.

Reasons for judgment on the delimitation of “use assumed under the contract”

The Federal Court of Justice has clearly rejected this view and pointed out that the “use assumed under the contract” is determined solely by the intended use of the purchased item.

Contrary to the law (see in fact: BT-Drucksache 14/6040, p.213 ), the Court of Appeal defined the term “use presupposed under the contract” too broadly by referring to certain properties of the object of sale. The Court of Appeal thus defined the “use assumed under the contract” too broadly. The Federal Court of Justice has stated (BGH ruling of 20.03-2019, VIII ZR 213/18, para. 26/27/28):

Tz. 26:

“Section 434 para. 1 sentence 2 no. 1 of the German Civil Code (BGB) is not aimed at specific characteristics of the purchased item that the buyer imagines, but rather at whether the item is suitable for the use (type of use) by the buyer that is recognizable to the seller (see Palandt/Weidenkaff, BGB, 78th edition, Section 434 para. 21). The use assumed under the contract may differ from the usual use of the purchased item (see BGH, judgments of April 26, 2017 – VIII ZR 80/16, ibid. with further references; of March 16, 2012 – V ZR 18/11, NJW-RR 2012, 1078, para. 16). Ultimately, the lack of suitability for use pursuant to Section 434 (1) sentence 2 no. 1 BGB will generally only have an independent significance compared to that pursuant to Section 434 (1) sentence 2 no. 2 BGB if the parties have assumed a use other than normal use under the contract.

Tz. 27:

(1) Although the Court of Appeal initially assumed the factual criterion of “use assumed under the contract”, it did not adequately cover this legal concept and instead referred to certain properties of the packaging machine – in particular a specific production speed – which were desirable from the plaintiff’s point of view, but which, as stated above, it had not made the subject of a quality agreement. It thus defined the “use assumed under the contract” too broadly. This is because it did not take into account – as required in view of the distinction made in § 434 para. 1 sentence 1 and sentence 2 no. 1 BGB between the agreement on quality and suitability for the purpose assumed under the contract – that the “use assumed under the contract” is to be determined solely according to the intended use (here: packaging of bird food in plastic bags to be sealed) (cf. BT-Drucks. 14/6040 p. 213). Instead, the court also included an individual characteristic of the machine (achieving a certain production speed) in the use assumed under the contract.

Tz. 28:

(2) Whether the lack of a certain characteristic that is not the subject of a quality agreement constitutes a material defect pursuant to Section 434 (1) sentence 2 no. 1 BGB does not depend on whether this has become the “basis of the transaction” of the contract. If the Court of Appeal had meant by the term “basis of the contract” that the parties had jointly assumed a certain production speed or the number of units desired by the plaintiff as a specific use, this would have the practical result that the requirements for a quality agreement pursuant to Section 434 (1) sentence 1 BGB would have to be met. (strict) requirements contrary to the law.”