OGH on Serious Defects under Consumer Guarantees Act

Dec 15, 2023 Benn-Ibler Rechtsanwälte

For the first time, the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has ruled on when a defect under the new Consumer Guarantees Act (Verbrauchergewährleistungsgesetz, hereinafter VGG) directly entitles consumers to rescission of the contract or reduction of the purchase price.

The plaintiff (consumer) was the purchaser of a second-hand car from the defendant car dealer. In the contract of sale, the condition of the car was classified as 3 (‘sufficiently roadworthy’) when in reality the rim of the right rear wheel was damaged and scraped. Therefore, the vehicle was only in class 4 condition. In other words, the vehicle was neither roadworthy nor safe to drive. The defect would not have been readily apparent to a lay person. Replacement and repair would have only cost around EUR 320.

The plaintiff withdrew from the contract. At the same time, he demanded a refund of the purchase price as well as the return of the vehicle. The defendant argued that the plaintiff had not been given the opportunity to have the defective wheel rim repaired. Furthermore, the defect was only minor. In view of the low repair costs, cancellation of the contract did not seem justified.

The lower courts, however, held that the damaged rim was such a serious defect under Section 12(1) VGG that immediate rescission was justified.

This was also the view of the OGH:

According to Section 12(4)(1) VGG, a right to a price reduction or cancellation of the contract exists only if the defect is so serious that an immediate price reduction or cancellation of the contract is justified.

According to the OGH, a serious defect exists in any case where it seriously affects the consumer’s ability to use the goods in a normal fashion, and if the defect is also critical to safety. Whether the defect is easily remedied is not decisive, as consumers cannot be expected to believe, due to the loss of trust, that any improvement would remedy the situation.

OGH 9 Ob 41/23d (27 September 2023)