Buyers Lose their Warranty Rights if they Report Defects too Late

In order to retain his or her warranty rights, the buyer in a sale of goods must immediately inspect the delivered goods and notify the seller of any defects (sec. 377 HGB). If both the seller and the buyer are merchants, this obligation of the buyer, shall enable the seller to take all necessary measures as quickly as possible, such as relaying the damage claim to his own supplier or ordering replacement goods through an alternative supplier in order to exchange the defective goods.

However, the extent of the after-sales inspection and the time period within which the buyer has to perform this inspection are not further defined by the law. Therefore, it depends on the individual circumstances of each particular case (the complexity of the goods, the quantity, etc.). In cases of technically complex goods, German commercial case law has accepted an inspection period of two weeks; for perishable goods, on the other hand, the period is considerably shorter (from a few hours to a day). If the buyer discovers a defect the time limit for notification of the defect is approximately one or two days, or, in the case of perishable goods only a few hours.

The ruling of the OLG Munich, dated 24/09/2015, case reference: 23 U 417/15

The Higher Regional Court of Munich (Oberlandesgericht – “OLG”) has decided in a recent ruling that with respect to deliveries of wood panels, it is incumbent on the buyer to carry out a trial installation and inspection of the wooden panels. If the buyer discovers a defect at a later point in time which was not apparent during the initial inspection, he must still notify the seller immediately. Generally the complaint does not require a certain form. It may, however, require the written form due to commercial custom, regardless of any agreement between the parties.

Comment

The obligation to inspect goods and report defects plays an important role in everyday commercial business. Should the buyer fail to uphold this obligation, he loses all warranty rights. This far reaching loss of rights should suffice for buyers to be advised to review their companies’ incoming goods inspection.
Contractual provisions regarding inspection and complaint obligations can help reduce the risk of inadequate inspections or untimely complaints. These provisions can e.g. define the time limit for inspections and/or complaints. They can also provide both parties with further details regarding the extent of the inspection. Such provisions are particularly recommended if the contract is governed by German law and therefore subject to the very strict requirements of sec. 377 HGB (immediate reproval). This short time limit is often not observed, which results in the buyer’s loss of all claims for defects.

A more lenient, buyer-friendly notice period, on the other hand, is provided by the corresponding provision in the UN Sales Convention. In contrast to (domestic) German commercial law, the UN Sales Convention stipulates that a complaint can be considered on time, if it is registered within the first month after the discovery of the defect. In addition, the UN Sales Convention offers another advantage to the buyer: The seller is liable for damages regardless of fault, in the event of a breach of contract. Therefore, in cases of cross-border contracts, it should be considered whether the UN Sales Convention should be applied rather than the HGB.