Defects in the Vehicle – Options for Refund of the Purchase Price

1. Correct identification of the legal relationship from which the respective claims and the procedure for their application will derive

Depending on the nature of the subjects entering into a civil law relationship established by a purchase agreement, the subject of which is the transfer of ownership rights to a vehicle, we distinguish between the following relationships:

a) Non-consumer – the contract was not concluded between a consumer and a trader, while this relationship may be:

• Civil law – subject to the regulation of Act No. 40/1964 Coll., Civil Code (hereinafter “CC”) – the general provisions of the CC on liability for defects (Sections 499 – 510 CC) shall apply.

• Commercial law – subject to the regulation of Act No. 513/1991 Coll., Commercial Code (hereinafter “CommC”) – the provisions of the CommC on liability for defects (Sections 618 – 626 CommC [Note: likely a typo in original text referencing consumer sections]) shall apply.

  In the sense of Section 261, Paragraph 1 of the CommC, it applies that it is a commercial law relationship if its participants are entrepreneurs and if, at the commencement of this relationship, it is clear that, taking into account all circumstances, it relates to their business activity.

  Furthermore, according to Section 262, Paragraph 1 of the CommC: “The parties may agree that their contractual relationship (and thus also a civil law relationship) which does not fall under the relationships listed in Section 261 shall be governed by this Act.” However, this agreement must be in writing.

b) Consumer – the contract was concluded between a consumer and a trader – special provisions of the CC on liability for defects in a consumer purchase agreement (Sections 618 – 626 CC) shall apply, wherein:

• According to Section 52, Paragraph 3 of the CC: “A trader is a person who, in connection with a consumer contract, an obligation arising from it, or a commercial practice, acts within the scope of their business activity or profession, including through another person acting in their name or on their account.” In this case, the trader will most often be an authorized car dealer, a used car lot, or another entrepreneur.

• According to Section 52, Paragraph 3 [sic] of the CC: “A consumer is a natural person who, in connection with a consumer contract, an obligation arising from it, or a commercial practice, does not act within the scope of their business activity or profession.” A consumer is a person who may indeed conduct business, but in order to acquire the status of a consumer, they must act as an “ordinary” natural person during the purchase/sale of the car, i.e., they must not carry out the purchase/sale within their business activity.

• At the same time, it is necessary to keep in mind that in the sense of the third sentence of Section 52, Paragraph 2 of the CC, “For all legal relationships in which a consumer is a participant, the provisions of the Civil Code shall always be used preferentially, even if commercial law norms would otherwise be used.”

2. How did the purchase/sale of the motor vehicle take place?

It is necessary to determine what preceded the conclusion of the purchase agreement, what information the contracting parties exchanged, etc. This is important especially from the perspective of Section 501, Paragraph 1 of the CC, according to which: “If a thing has defects of which the transferor knows, they shall warn the acquirer of them before the conclusion of the contract.” This is a general obligation of every transferor, which applies even in a consumer relationship. Various claims arise for the buyer from defects of which they were not warned (and thus could not accept). For the sake of the burden of proof, it is better if existing defects are recorded directly in the contract, whereby the buyer expresses consent by their signature that they were familiarized with the defects. Defects need to be specified in the contract as best as possible so that the buyer knows exactly which part of the car they relate to, how they manifest, and how often.

Furthermore, it is necessary to know whether the parties also agreed on a warranty period for claims (and within what timeframe), or eventually whether the buyer purchased warranty insurance and for what duration.

Last but not least, it is essential to know the actual content of the contract, the type of contract it was, under which law it was concluded, and in what form.

3. When did the defects first begin to manifest?

This information is important especially for assessing the passing of the limitation period for exercising some of the claims from liability for defects.

According to Section 499, Paragraph 2 of the CC: “If a defect manifests within six months from performance, it is considered a defect that already existed at the time of performance. This does not apply if the contrary is proven or if this presumption is incompatible with the nature of the thing or the defect.”

The so-called statutory warranty period is substantially stricter in the case of consumer contracts – according to Section 619, Paragraph 3 of the CC: “The seller is liable for any defect which the sold thing has at the time of its delivery and which manifests within two years from the delivery of the thing.”

In a consumer contract, it is further necessary to determine whether the contracting parties agreed on a shortening of this warranty period in accordance with the provision of Section 619, Paragraph 3 of the CC. Even in such a case, however, the agreed warranty period must not be shorter than one year from the delivery of the thing.

If a defect manifests before the expiration of the statutory or agreed shortened warranty period, the presumption applies that this defect already existed at the time of the delivery of the thing (Section 620, Paragraph 2 of the CC). Just as in the case of general liability for defects, this does not apply if the contrary is proven or if this presumption is incompatible with the nature of the thing or the defect.

4. What claims do I have from the seller’s liability for defects?

General liability for defects

Special liability for defects in a consumer relationship

5. What is the next step if the seller refuses to accept responsibility for a defect in the sold item?

To be successful with your claim in such a case, it is necessary to exercise it in court by a lawsuit filed according to Act No. 160/2015 Coll., Civil Dispute Procedure. In accordance with Section 508, Paragraph 1 of the CC, it is essential to file the lawsuit within the general 3-year limitation period, which runs from the day the buyer pointed out (claimed) the defect to the seller (not from the moment the seller refused to recognize the claim!). After the limitation period expires, your claim is significantly weakened – it is sufficient for the other party (the seller) to raise a statute of limitations objection, and the court will not grant your claim. If you successfully manage to exercise your rights from liability for defects in court, the court may, upon your motion, also grant you financial satisfaction (Section 509, Paragraph 3 of the CC).

Hello, in the event that you are not an entrepreneur, the contract you concluded with the buyer will be a non-consumer contract and the general provisions of a purchase agreement according to the Civil Code will apply to it.

In a non-consumer contract, the law does not define any statutory warranty during which the buyer can claim defects that have arisen.

However, the law imposes an obligation on the seller to familiarize the buyer with all defects that the sold item has and of which they are aware.

If the item exhibited a defect at the time the contract was concluded, regardless of whether the seller knew about it or not, they will be objectively liable for the defect. In the event that a defect comes to light subsequently, the buyer has the right to:

• a discount from the agreed price corresponding to the scope and nature of the item,

• if the defect makes the item unusable, the buyer may withdraw from the purchase contract,

• reimbursement of necessary costs incurred in connection with exercising rights from liability for defects.

It is, however, necessary to prove this fact.

We draw attention to the fact that even a non-consumer contract is subject to the general provision of Section 508, Paragraph 2 of the Civil Code: “A defect that manifests within six months from the day of taking over the performance is considered a defect that already existed on the day of takeover, unless it contradicts the nature of the thing or if the transferor proves the opposite.” We can speak of a defect that was not obvious, a so-called “latent defect.” In this case, it will be necessary for the seller to prove that the defect did not exist at the time the vehicle was taken over by the buyer.

The above-mentioned liability of the seller shall not apply if, in the purchase agreement together with the buyer, they declared that “the item is handed over as it stands and lies.”

If you did not agree with the buyer in the contract that you would be liable for defects that manifest after taking over the vehicle, you do not bear liability for them. Liability applies only to defects that existed at the time of takeover, and the item was not handed over in the sense of Section 501 of the Civil Code: “If an item is handed over as it stands and lies, the transferor is not liable for its defects, unless the item lacks a property which the transferor declared it has, or which the acquirer explicitly stipulated.”