References without law book default to BGB.

Case - Lame Horse

Facts

Andrea (A) likes to ride sports horses as a hobby. One day, she buys the racing horse “Lou” (L) from Gabriel (G), a private person. A few days later, after L has been delivered to A’s stable, A recognizes L has a limp. The vet’s diagnosis: L’s leg had been broken and only poorly healed. A full recovery is not possible.

A could only have noticed that after hours of riding L or after a specialized medical examination (which is highly unusual for such transactions).

What are A’s rights against G?

Solution

Slides Solution

Issue I: Cure

• Issue: Can A demand cure from G in line with §§ 437 No. 1, 439 I BGB?
• Application:
  • 1. Sale of goods contract: Are the rules for things applicable to a horse? → (+), § 90a BGB. Sale of goods contract exists.
  • 2. Material defect (§ 434 BGB): Subjective requirements? → (+), A and G agreed that a racing horse is sold, but a horse with a badly healed fracture and a limp is not of the quality of a racing horse. Objective requirements? → (+), not suitable for normal use = racing.
  • 3. Existence when risk passed (§ 446 BGB): → (+), the horse already had a limp when handed over.
  • 4. No exclusion: § 442 BGB (Knowledge of buyer) → (-), A did not know. § 444 BGB (Exclusion agreement) → (-), no agreement.
• Interim conclusion: In principle, A could demand cure. But cure is impossible (§ 275 I BGB) since a full recovery of the poorly healed fracture is impossible!
• Conclusion: A cannot demand cure from G in line with §§ 437 No. 1, 439 I BGB due to the exclusion of performance according to § 275 BGB.

Issue II: Revocation

• Issue: Can A revoke the sale of goods contract in line with §§ 437 No. 2, 326 V BGB?
• Application:
  • I. Prerequisites of § 437 BGB: → (+), see above.
  • II. Right of revocation: Cure is impossible → § 326 V BGB applicable.
    • 1. Cure is impossible (§ 326 V Hs. 1 BGB): → (+), § 275 I BGB.
    • 2. No triviality (§ 323 V 2 BGB): → (+), the limp is not trivial for a racing horse.
    • 3. No exclusion (§ 323 VI BGB): → (+), A was not responsible or in default of acceptance.
    • (No deadline must be set according to § 326 V Hs. 2 BGB!)
  • III. Declaration of revocation (§ 349 BGB): → (-), not yet.
• Conclusion: A has a right to revoke the contract. She has to declare the revocation to G (§ 349 BGB). Then, the contract will be transformed into a restitution obligation (§ 346 I BGB).

Issue III: Reduction of Price

• Issue: Can A reduce the price in line with §§ 437 No. 2, 441 BGB?
• Application:
  • I. Prerequisites of § 437 BGB: → (+).
  • II. Right of revocation: → (+), all requirements met (without non-triviality requirement according to § 441 I 2 BGB).
  • III. Declaration of reduction of price (§ 441 I 1 BGB): → (-), not yet.
• Conclusion: A has a right to reduce the price. She has to declare the reduction to G.

Issue IV: Damages instead of performance

• Issue: Can A claim damages instead of performance in line with §§ 437 No. 3, 311a II BGB?
• Application:
  • I. Prerequisites of § 437 BGB: → (+).
  • II. Requirements of § 311a II BGB:
    • 1. Contractual Obligation: → (+), sale of goods contract.
    • 2. Inability to perform under § 275 BGB: → (+), obstacle (= cure impossible) occurred before the contract was formed (ex-ante obstacle).
    • 3. Element of fault (§ 311a II 2 BGB): → (+), G should have known that there was an uncurable fracture (negligent ignorance of obstacle).
    • 4. Damages: → (+), A has a horse that is not able to race.
• Conclusion: A can demand damages in lieu of performance in line with §§ 437 No. 3, 311a II BGB.

Write-Up

Issue: What claims does A have against G under the sale of goods law (§ 437 BGB) regarding the lame horse?

1. Prerequisites of § 437 BGB
Issue: Are the general prerequisites of § 437 BGB met?
Rule: The sale of goods law applies to animals (§ 90a BGB). A claim requires a valid sales contract (§ 433 BGB) and a material defect (§ 434 BGB) present at the passing of risk (§ 446 BGB) that is not excluded by the buyer’s knowledge (§ 442 BGB).
Application: A and G concluded a valid sales contract. The horse has a material defect subjectively (parties agreed on a “racing horse”, but it has a poorly healed broken leg) and objectively (unfit for its normal intended use). This defect existed at the passing of risk. Since A could not have reasonably known about the defect without an unusual specialized exam, her rights are not excluded.
Conclusion: The prerequisites of § 437 BGB are met.

2. Claim for Cure (§§ 437 No. 1, 439 BGB)
Issue: Can A demand cure from G?
Rule: The primary remedy is cure, but a claim for cure is excluded if performance is objectively impossible (§ 275 I BGB).
Application: The vet diagnosed that full recovery is impossible. Because the defect cannot be repaired and a unique, specific living animal cannot simply be replaced by another identical one, cure is objectively impossible.
Conclusion: A’s claim for cure is excluded.

3. Right to Revoke (§§ 437 No. 2, 326 V BGB) or Reduce Price (§§ 437 No. 2, 441 BGB)
Issue: Can A revoke the contract or reduce the price?
Rule: If cure is impossible under § 275 I BGB, the buyer does not need to set a deadline for cure (§ 326 V BGB). The buyer can revoke the contract (§ 349 BGB) if the defect is not trivial (§ 323 V 2 BGB), forcing an unwinding of the contract (§ 346 I BGB), or instead declare a reduction of the purchase price (§ 441 BGB).
Application: Cure is impossible, so no deadline is required. The defect (an uncurable limp) is severe and certainly not trivial for a racing horse.
Conclusion: A can immediately revoke the contract by declaring it to G, or alternatively choose to keep the horse and declare a reduction of the purchase price.

4. Damages in Lieu of Performance (§§ 437 No. 3, 311a II BGB)
Issue: Can A demand damages in lieu of performance?
Rule: Since the impossibility of cure already existed before the contract was formed (initial impossibility), damages are assessed under § 311a II BGB. The claim requires a valid contract, impossibility of performance, fault (knowledge or negligent ignorance of the defect by the seller), and financial loss.
Application: A has a valid contract, and performance (cure) is impossible under § 275 I BGB. As the owner of a racing horse, G should have noticed or checked the horse’s physical condition before selling it; failing to do so constitutes negligent ignorance (fault). A has suffered a financial loss because she paid the price of a healthy racing horse but received a disabled one.
Conclusion: A is entitled to demand damages instead of performance under §§ 437 No. 3, 311a II BGB.