Case law

  • Case Details
    • National ID: VIII ZR 72/06
    • Member State: Germany
    • Common Name:link
    • Decision type: Other
    • Decision date: 22/11/2006
    • Court: BGH (Supreme court)
    • Subject:
    • Plaintiff:
    • Defendant:
    • Keywords:
  • Directive Articles
    Consumer Sales and Guarantees Directive, Article 2, 2. Consumer Sales and Guarantees Directive, Article 7, 1.
  • Headnote
    A second-hand car which is fit for use and roadworthy at the time the risk passes to the buyer does not lack the agreed quality “in running condition” because the engine has to be replaced after additional 2.000 km due to an progressing damage.
    By stating that a car is “in running condition” in a contract of sale on a second-hand car, the seller generally does not give a guarantee of durability (§ 443 BGB) to the extent that the vehicle will remain in running condition for a longer period of time or over a considerable distance after the risk has passed to the buyer.
    If an entrepreneur uses a consumer as a straw man to sell movable goods to a consumer while using a caveat emptor clause, the consumer can invoke § 475(1)(2) BGB due to the circumvention of the provisions on consumer sales and thus is able to assert his rights arising from a defect against the entrepreneur and not against the other consumer, who has been designated as the seller in the contract.
  • Facts
    On 31 October 2003, the plaintiff bought a second-hand, more than 9-year-old car from the defendant. The car was registered in the name of the E. GmbH (in the following: GmbH). The defendant was the GmbH’s managing director. Upon the conclusion of the contract, the witness F. acted as an agent of the defendant. F is a professional second-hand car dealer. In the pre-printed contract form used for the sale the box “yes” next to the pre-printed sentence “Vehicle is in running condition” was checked off. In addition, the pre-printed text of the contract stated that the buyer ordered the car “under the overleaf terms and conditions and under exclusion of all liability for defects”; the according terms and conditions stated under no. VII:

    “The purchased good is sold under exclusion of all liability for defects. If the good is lacking a guaranteed quality this exclusion is not withstanding a claim for damages in lieu of performance.”

    In the beginning of November 2003 the vehicle was delivered to the plaintiff. By solicitor’s letter dating from 27 February 2004 the plaintiff claimed that the car suffered from a defect making the replacement of the engine necessary and requested the defendant to agree to the unwinding of the contract.

    With his claim the plaintiff demanded the repayment of the purchase price amounting to EUR 4.400 together with interest versus the return of the vehicle; in addition, he claimed damages amounting to EUR 1.984,22 together with interest and applied for the judicial declaration that the defendant was in default of acceptance with respect to the car.

    The Regional Court has dismissed the claim. The Higher Regional Court has rejected the plaintiff’s appeal.
  • Legal issue
    The Federal Court of Justice has rejected the plaintiff’s appeal on a point of law. The plaintiff was neither entitled to a right to rescind the contract under § 437 no. 2, §§ 323, 346 et seqq. BGB) nor to damages in lieu of performance (§ 437 no. 3, § 280(1) and (3), § 281(1) BGB on the grounds of the alleged defect. The contract parties have validly excluded potential claims of the buyer arising from a defect (§ 437 BGB). Neither could the plaintiff invoke a guarantee of durability (§§ 443, 444 BGB) given by the defendant.

    The clause excluding the seller’s liability for defects in the pre-printed text of the contract form as well as the general terms and conditions printed on the rear page of the contract form are – as the appellate court has correctly pointed out – void under § 309 no. 7 lit. a (and b) BGB, since they do not comply with the restrictive conditions under which a liability for damage can be excluded in standard terms (cf. the judgement of the senate of 15 November 2006 – VIII ZR 3/06). However, this does not affect the validity of the exclusion of the seller’s liability for defects which the plaintiff and the defendant’s agent, the witness F., have verbally agreed on as the appellate court has established with out any legal flaw.

    The defendant is not barred from invoking this individually agreed contract term by § 475(1)(1) BGB. The provisions on consumer sales (§§ 474 et seqq. BGB) do not apply because the plaintiff has not bought the car from an entrepreneur. Even if – as the plaintiff claims in his appeal on a point of law – this transaction had to be qualified as a circumvention in the terms of § 475(1)(2) BGB, this would not lead to an application of the provisions on consumer sales in the relation between plaintiff and defendant.

    The applicability of the provisions on consumer sales is barred by the fact that the defendant had not sold the car – as required by § 474(1)(1) BGB – as an entrepreneur in the terms of § 14 BGB. Upon the conclusion of the contract, the defendant did not act in the course of a business. Being the managing director of a GmbH, he did not perform a self-employed, but an employed professional activity. Managing his share in the GmbH was not business activity, but the administration of his assets.

    The defendant is not barred from invoking the agreed exclusion of his liability for defects due an alleged circumvention of the provisions on consumer sales (§ 475(1)(2) BGB). There is no need to decide whether the fact that the vehicle sold by the defendant was – from an economic point of view – a company car of the GmbH (it had been registered in the name of the GmbH and had predominantly been used for business purposes) qualified as an circumvention. Even if the GmbH was – under application of economic criteria - to be viewed as the “actual” seller of the car, an application of § 475(1)(2) BGB would only have the consequence that the GmbH – the entrepreneur in the terms of § 475(1)(2) BGB – could be held liable in court for defects of the car. It would, however, not mean that that the provisions on consumer sales would apply in the relation between defendant and plaintiff (i. e. between two consumers). Thus, potential rights arising from a defect would have had to be asserted against the GmbH, but not against the defendant.

    Thus, the situation is equivalent to that of the so-called “agency transaction” which is common in second-hand car sale (cf. the judgement of the senate of 26 January 2005 – VIII ZR 175/04). If an economic analysis shows that an agency transaction is used mala fide to obfuscate a transaction which is actually one of the car dealer, this has the consequence that the dealer can be held liable in court as if he had personally sold the second-hand car to the plaintiff. At the same time, the contract formally concluded with the owner of the car via agency cannot be held valid under § 475(1)(2) BGB. Accordingly and in coherence with the correct and almost unanimous opinion in legal literature, a sale of an entrepreneur camouflaged by a an agency transaction on behalf of another consumer has the consequence that the buyer of a second-hand car can assert claims arising from a defect due to the invalid exclusion of liability against the dealer (and not against the consumer in whose name the dealer had acted).

    The abovementioned principles governing the application of § 475(1)(2) BGB to agency transactions are to be transferred to other contractual arrangements obscuring transactions of an entrepreneur and thus circumventing the provisions on consumer sales. If the fact that the car in dispute had been (from an economic point of view) a company car was such a circumvention, the GmbH would be liable under § 475(1)(2) BGB as if it had sold the car to the plaintiff. This had the consequence that the plaintiff would be able to assert claims arising from defects against the GmbH and the GmbH could not invoke the agreed exclusion of liability due to § 475(1)(1) BGB. On the other hand, the plaintiff would not be entitled to claims against the defendant who had been used as a straw man by the GmbH, since the defendant is not an entrepreneur but a consumer himself.
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