Rescind the Contract or Price Reduction when Purchasing a Car?
The difference between reduction in price and rescinding the purchase will often be a consideration of what reaction will recover a financial loss of a breach of contract.
In a decision from the Norwegian Court of Appeal from December 2016 it was found that there were reasons for rescinding the contract of car purchase as a result of sufficient deficiencies. Among others, the seller had rebuilt the car. The Court of Appeal considered several questions in the judgment:
Had the buyer complained too late?
Were there deficiencies in the vehicle according to laws regulating the sale of goods?
Was there reason for rescinding the contract, or merely for a price reduction?
Had the right to rescind the contract expired?
The Car was Rebuilt
A car which had been used as an ambulance had been rebuilt by the seller. After being rebuilt the car had seven seats. There were a middle row of seats with two separate seats. And a rear row with three seats which was attached to a frame. The rebuilding was approved by the Norwegian road authority (Statens vegvesen) in Jessheim after the second attempt of having the car approved. The result from the first attempt was disallowed because of the arrangement of the way the middle row was attached. The seats could easily be moved from on attachment to the other. Without use of tools, as there were two alternative places of the seats in the middle row.
Two Private Parties – The Norwegian Sale of Goods Act (Kjøpsloven) Applied
There were two private parties to the contract. Therefore, the Norwegian sale of goods act applied for the issue of deficiencies and the legal consequences of this. A deficiency was that the seat attached in the middle row in its legal position made very little extra room. Among others leg room and the partition which was left against the front seat row. The Court of Appeal found it proven that the vehicle was shown to the buyer with the seats in illegal rear position. Approval was later warned changed by the car authority in Jessheim. Last attempt of showing the vehicle showed that vehicle was not according to regulation. And that earlier decision of this was made on wrong reasons.
Clear Benefit for the Seller
The difference between having the seats in legal and illegal position also got consequences for the relationship between the car belts and the seats. The Court of Appeal did not decide that the buyer was aware, or had to be aware that it was only the front attachment which made the seats legally placed. It was seen to be a benefit for the seller to sell the vehicle with the seats illegally attached which gave good leg room. The seller had a clear message to ensure that the buyer understood that the shown placement not was legal. That the car was not approved for use with the seats placed like they were shown, constituted a deficiency in terms of the good that was purchased. There was also a deficiency in relation to the place and reach of the seat belt if the seat was in its legal position.
The Seller had Agreed to the Deficiency Claim
In the Court of Appeal it was found that the seller had agreed to the deficiency claim by the buyer. The seller had also acted passively in relation to the expatriation of the complaint period. Accordingly, the seller was not heard about the complaint period having expired.
Rescinding the Contract Compared to Price Reduction
Considering to rescind the contract rather than a price reduction the Court of Appeal considered a judgment from the Norwegian Supreme Court regarding attached property/house;
«I den saken Høyesterett hadde til behandling, som gjaldt avhending av fast eiendom, ble det videre uttalt: «Utgangspunktet og det sentrale moment i vurderingen er det objektive avviket fra kontraktsmessig oppfyllelse – dvs den objektive mangelen ved eiendommen, og da både mangelens karakter og mangelens omfang». Tilsvarende må utgangspunktet for den vurdering lagmannsretten skal foreta være den objektive mangelen ved bilen, herunder mangelens karakter og omfang.
This means that it was the objective deficiency which had to be considered and its character and scope when considering the breach of contract.
The View of the Court of Appeal
Det er lagmannsrettens syn at de samlede manglene ved bilen som utgangspunkt ikke vil innebære et vesentlig kontraktsbrudd. Dette skyldes manglenes relativt beskjedne karakter, særlig manglende ved bilbeltene og strømtilførselen, som Linder også har erkjent og tilbudt seg å utbedre. Plasseringen av den midtre og bakre seterekken i forskriftsmessige setefester innebærer at bilen vil fremstå som en vanlig VW Caravelle, med ordinær benplass.
Dette fordrer riktignok at skilleveggen mellom fremste og midtre seterekke fjernes. I Domkes prisoverslag er de totale kostnadene til utbedring beregnet til 31 400 kroner inkl. mva. I tillegg kommer enkelte mindre arbeider knyttet til gulvlister og tepper som må tilpasses. Dette ble stipulert til mellom 5 000 og 10 000 kroner. Lagmannsretten legger til grunn at utbedringer kan skje til en kostnad på i underkant av 40 000 kroner. Jektvik har holdt tilbake 10 000 kroner av kjøpesummen, noe som må hensyntas ved vurderingen av manglenes omfang.»
The Court calculated the cost of improvement. They stated that the amount withheld from the purchasing price also had to be taken into consideration.
The Result was Rescinding the Contract
The result was however rescinding the contract
«Når lagmannsretten likevel har kommet frem til at det foreligger vesentlig kontraktsbrudd skyldes det at Linder må anses bevisst å ha unnlatt å gi opplysninger om at den midtre seterekken måtte stå i de fremre festepunktene for å være lovlig plassert. Lagmannsretten kan ikke se annen motivasjon for dette enn å oppnå en høyere pris for bilen enn han ellers ville oppnådd. Det måtte fremstå som en klar ulempe for kjøperen umiddelbart å måtte igangsette arbeider med å fjerne skilleveggen dersom den midtre seterekken skulle kunne brukes på ordinær måte i godkjent plassering.
The Court found that the only motivation for not providing the information of the legal placing of the seats could be to obtain a higher price for the car. And that because immediate work would be necessary to legally use the car, the contract could be rescinded.
About Price Reduction Compared to Rescinding the Contract
Et prisavslag, som alternativ til heving, ville som utgangspunkt langt på vei kunne gjenopprette de økonomiske konsekvensene av kontraktsbruddet. Når Linder er å bebreide i den grad som her er tilfellet, kan imidlertid ikke lagmannsretten anse prisavslag som en tilstrekkelig adekvat reaksjon mot kontraktsbruddet. I en slik situasjon må Linder være den nærmeste til å bære en eventuell økonomisk risiko ved å ta bilen tilbake. I en slik situasjon er det også rimelig å plassere risikoen for den generelle verdireduksjon som må antas å ha funnet sted på grunn av den tid som har gått siden kjøpet, hos Linder.»
The Court of Appeal could not find that the buyer had neglected to follow his loss calculation or duty of care after the sale of goods law.
Rescinding a contract or price reduction after a purchased car?
Related cases:
Carpurchase with engine issues? (Norwegian)
Corrosion – rescind the purchase (Norwegian)