References without law book default to BGB.

Case - Defective Mountain Bike

Facts

Daniela (D) buys a second-hand mountain bike in Walter’s (W) store. W tells her that he has just purchased the bike and has not yet checked it thoroughly for defects (although he thinks it is okay). However, D is in urgent need of a mountain bike and wants to go ahead with the transaction.

So, W sells her the bike for a 20 percent discount. He tells her he can give “no guarantee that it is 100 percent okay and does not want to be liable if anything happens”. D is fine with this.

She takes the bike for a short test ride and buys it at the discounted price. However, one of the brakes is defective. The defect cannot easily be spotted and only shows after using the brake a few times in a row.

D rides the bike home, but because of the defective brake, she crashes into a tree, destroying the bike completely. D is injured and has to see a doctor. Due to the destruction of the bike, it is unclear whether the bike was fully functioning or not.

Base Case: What can D demand from W?

Variation: Can D get the fees for the doctor from W?

Solution

Slides Solution

Issue I: Cure

• Issue: Can D demand cure from W in line with §§ 437 No. 1, 439 I BGB?
• Application:
  • 1. Contract: → (+), sale of goods contract (§ 433 BGB).
  • 2. Material defect (§ 434 BGB): → (+), objective requirements (§ 434 III BGB). A faulty brake is unusual for bikes (No. 1). The buyer may expect the brake to be working (No. 2).
  • 3. Existence when risk passed (§ 446 BGB): The defect cannot be proven due to the destruction. However, § 477 BGB provides a shifting of proof in case of a Purchase of Consumer Goods (PoCG, § 474 BGB). D is a consumer, W is a trader, and it is a movable thing. Thus, PoCG applies, leading to the assumption that the material defect was present at the passing of risk → (+).
  • 4. No exclusion: § 442 BGB (Knowledge of buyer) is not applicable in PoCG (§ 475 III 2 BGB). § 444 BGB (Exclusion of liability): W said “no guarantee…” which is interpreted as an exclusion of buyer’s rights. However, under § 476 I BGB, such an exclusion is invalid for a PoCG unless the seller refers to a very specific deviation. A general reference that it might not be “100% okay” is insufficient. → (+).
• Interim conclusion: In principle, D could demand cure. But the bike is destroyed, making repair and delivery of this specific second-hand bike impossible (§ 275 I BGB).
• Conclusion: D cannot demand cure from W (§§ 437 No. 1, 439 I BGB).

Issue II: Revocation

• Issue: Can D revoke the contract in line with §§ 437 No. 2, 326 V BGB?
• Application: Cure is impossible → § 326 V BGB. No triviality of material defect (§ 323 V 2 BGB). No exclusion (§ 323 VI BGB) since D was not responsible for the brake defect that caused the crash. No deadline must be set (§ 326 V Hs. 2 BGB). Declaration of revocation not yet made.
• Conclusion: D has a right to revoke the contract.

Issue III: Reduction of Price

• Conclusion: D has a right to reduce the price (§§ 437 No. 2, 441 BGB). (But this makes no sense in this case since the bike is destroyed!)

Issue IV: Damages instead of performance

• Issue: Can D claim damages instead of performance (§§ 437 No. 3, 280 I, III, 283 BGB)?
• Application: Ex-post obstacle (cure became impossible after conclusion of contract). W should have checked the bike before selling it, so fault (§ 276 BGB) is assumed.
• Plot Twist: Under § 476 III BGB, despite § 476 I BGB, liability for damages CAN be excluded! By interpreting “W does not want to be liable if anything happens”, we can conclude the liability regarding all damages was successfully excluded. (Under § 139 BGB, the rest of the contract is not void).
• Conclusion: D cannot demand damages instead of performance.

Variation: Doctor’s Fees

• Issue: Can D demand damages for her injuries (§§ 437 No. 3, 280 I BGB)?
• Conclusion: Although the requirements of a breach of duty leading to physical injury are met, D cannot demand the doctor’s fee because liability for damages was successfully excluded by the parties’ agreement.

Write-Up

Issue: What rights can D assert against W arising from the defective mountain bike and resulting injuries under § 437 BGB?

Base Case

Issue: What are D’s rights against W under the sale of goods law (§ 437 BGB)?

Rule: Under § 437 BGB, the buyer has rights to cure, revocation, price reduction, or damages if there is a valid sales contract, a material defect existing at the time of passing of risk, and no valid exclusion of liability.

Application:
1. Prerequisites of § 437 BGB
D and W concluded a valid sales contract (§ 433 BGB). The defective brake constitutes an objective material defect (§ 434 III BGB). Because D is a consumer (§ 13 BGB) and W is a commercial trader (§ 14 BGB), this is a purchase of consumer goods (PoCG, § 474 BGB). Since the bike was destroyed, D cannot prove the defect existed at the time of purchase. However, § 477 I BGB establishes a presumption that defects appearing within one year were present at the passing of risk.

W attempted to exclude his liability. However, a blanket exclusion of liability for defects is invalid in a PoCG under § 476 I BGB, as it is a negative deviation from statutory consumer rights. The seller must inform the consumer of a very specific deviation (e.g., “the brake is defective”), not just a general “no guarantee”. Thus, the buyer’s rights to cure, revocation, and price reduction are not excluded.

2. Buyer’s Remedies

• Cure: D cannot demand cure (§§ 437 No. 1, 439 BGB) because the specific second-hand bike is destroyed. Repair and replacement are objectively impossible (§ 275 I BGB).
• Revocation: Because cure is impossible, D has an immediate right to revoke the contract under §§ 437 No. 2, 326 V BGB without setting a deadline. The defect is severe (§ 323 V 2 BGB). She simply needs to declare revocation (§ 349 BGB) to demand her purchase price back in exchange for the destroyed bike (§ 346 BGB).
• Damages instead of performance: D cannot demand the value of an equivalent bike (§§ 437 No. 3, 280 I, III, 283 BGB). Although W acted negligently by not inspecting the bike, § 476 III BGB allows parties to validly exclude claims for damages even in a PoCG. W’s statement that he “does not want to be liable if anything happens” successfully excluded his liability for damages.

Conclusion: D cannot demand cure or damages, but has an immediate right to revoke the contract and demand her purchase price back.

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Variation: Doctor’s Fees

Issue: Can D demand compensation for her medical bills under §§ 437 No. 3, 280 I BGB?

Rule: The buyer can claim compensation for damages in addition to performance resulting from the breach of a secondary duty, provided liability for damages is not validly excluded.

Application: The doctor’s fees are a damage in addition to performance, resulting from the breach of W’s secondary duty to protect D’s health and property. However, as established above, the contractual clause validly excluded W’s liability for damages (§ 476 III BGB).

Conclusion: D cannot claim compensation for her doctor’s fees from W based on the contract.