Buyer's Claim for a Defective New Vehicle to Replacement Delivery in the Event of a Model Change - First Reference to BGH Jurisdiction in the "Volkswagen Case"

Causa Volkswagen: According to a ruling of the Federal Court of Justice (Bundesgerichtshof - "BGH"), the "cheating software" of a diesel passenger car can constitute a material defect which gives a claim for replacement by a new model. This decision also affects other sectors.

Background

In the first case pending before the BGH concerning the Volkswagen Group regarding a cut-off device, the hearing scheduled for February 27, 2019 was cancelled after the plaintiff withdrew the appeal because the parties had reached an agreement. The settlement before the BGH was preceded by a reference order of the court dated January 8, 2019.

Contents of the reference order

In this decision, the court had drawn the parties' attention to its "preliminary legal opinion" that a vehicle which when handed over to the buyer is equipped with an illegal cut-off device reducing nitrogen oxide emissions on the test bench compared to normal driving, could be assumed to have a so-called "material defect". The reason: There would be a danger of an operating ban by the authorities responsible for admission to road traffic. Thus the purchased good lacks suitability for normal use, namely for use in road traffic. This will certainly point the way for many other decisions in the "Volkswagen case".

But more decisive - and of general importance - is the second part of the reference order according to the press release of the BGH dated February 22, 2019: The court pointed out to the parties its preliminary assessment that the Higher Regional Court (Oberlandesgericht - "OLG") - i.e. the court of appeal as the previous instance - could have misinterpreted the law insofar as it had assumed that the replacement delivery of a defect-free new vehicle demanded by the buyer had been impossible. The plaintiff had purchased a vehicle of the first generation of the model in question (in the specific case a Volkswagen Tiguan 2.0 TDI), which, however, is no longer manufactured. Furthermore, such a model could no longer be procured. In this respect, the previous instance had considered the replacement of a defect-free new vehicle to be impossible (Section 275 para. 1 BGB - German Civil Code).

The BGH did not allow this to stand in this generality. With regard to the content of the procurement obligation contractually assumed by the seller, a more or less large scope of change associated with a subsequent model change according to the BGH would - contrary to what the court of appeal had assumed - generally be irrelevant for the interests of the seller. As a rule, it should therefore depend essentially on the amount of the procurement costs for the replacement - no different from a case where the model in question is still available. However, this does not yet lead to a claim for subsequent delivery. Rather, the seller may refuse a replacement delivery under the conditions of Section 439 para. 4 BGB - albeit to be established in the individual case - if and insofar as the replacement delivery would only be possible with disproportionate costs.

Conclusion

In the reference order the court has passed on its preliminary view of the law. It was not without reason, however, that the BGH went so far as to publish its decision, a step that is rather uncommon.

Consumer protection - this has also been the echo in the general media - is being consolidated and further developed by this decision. This may sound very positive for individual consumers and may possibly lead to a heavy burden for the car industry in the first instance, provided that this decision is taken into account by the public, but - in this general context - it is also important for many other manufacturers. As a result, it will often be possible in future - albeit only according to the conditions to be established in each individual case - that a buyer - within the framework of the warranty - assuming that a defect exists, is entitled to a replacement delivery even though the respective model has already been discontinued and a new model is available. As a result, the buyer may be entitled to the new model. This brings German case law closer to already stronger consumer protection laws abroad, for example in Australia. However, consumer protection is not a one-way street. The additional costs will (have to) be borne by the general public.