OGH: Warranty Claim despite Common Mistake

Aug 30, 2024 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) had to clarify whether sellers are entitled to raise the objection of common mistake if buyers make use of their right pursuant to Section 932(4) of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch, hereinafter ABGB) by claiming a price reduction.

For a purchase price of EUR 46,500, the plaintiff had purchased a car from the defendant second-hand car dealer. The car was described as being in good working order and roadworthy in the written contract of sale. Neither the plaintiff nor the defendant were aware at the time of the conclusion of the contract that the vehicle was already unsafe to drive due to a defective transmission. Eventually, the defendant was asked by the plaintiff to repair the car. However, the defendant did not do so.

The plaintiff’s claim was for an objective reduction in the price of the vehicle in the amount of EUR 17,355. As both parties had made a material mistake, the defendant sought to rescind the purchase agreement.

The court of first instance dismissed his claim, but the court of appeal allowed the claimant to appeal.

The OGH now ruled as follows:

If Section 932(4) of the ABGB applies, a purchaser can choose between a price reduction or, if the defect is significant, the rescission of the contract.

According to OGH case law, a common substantial mistake does not bind the contract if both parties made the same mistake.

However, since in material defect cases there is usually a common defect, the seller could circumvent the buyer’s right to choose by means of the common mistake defence. This would have the result, contrary to the system, that the seller could decide how to respond to his lack of performance in relation to the buyer.

In the end, the plaintiff will retain their right to choose, and the seller will be unsuccessful in objecting.

OGH 9 Ob 67/23b (26 June 2024)