386 precontractual liability in european private law

third party because he concluded the contract with A, then part of his damage may be recoverable as part of the negative interest.

Where A makes no statement about the capacity of the harvester the answer is the same. It does not make a difference whether A’s violation of precontractual good faith consists in making a false statement or in a violation of his duty to inform.

Obviously, in either case there is also a breach of contract, more specifically a non-conformity with the sales contract.97 Therefore, in principle, B has the specific remedies for non-conformity (repair and replacement)98 and the general remedies for breach of contract (termination and damages).99

Norway

If an agreement has been entered into, statements and actions of the parties during the precontractual period would as a rule be considered from a contractual point of view.

The present case is regulated by the Sale of Goods Act of 13 May 1988, no. 27. If the object for sale does not correspond to the information given during negotiations, a defect is present.100 This is an objective regulation. Hence, the seller has the responsibility to ensure that the information being provided with respect to the object for sale is correct. The statement regarding the capacity of the harvesting machine is false, and consequently a defect is present. Because the defect must be considered a fundamental breach, B can choose to terminate the agreement.101 While B can terminate the agreement, he can also claim compensation for losses incurred as a result of the defect.102

On the adoption of the Sale of Goods Act in Norwegian and Swedish law, a distinction between direct and indirect losses was made. With respect to direct losses, the basis of liability for compensatory damages is objective, with the exception of ‘an impediment beyond his control’.103 On the other hand, compensation for indirect losses presupposes either that a guarantee has been given or that the seller is at fault.104 The distinction between direct and indirect losses is defined in Sale of Goods Act, section 67(2). The losses suffered by B by terminating the contract and having to purchase the machine elsewhere are direct

97 Article 7:17 BW. 98 Articles 7:21 and 7:24 BW. 99 Articles 6:265 and 6:74 BW.

100Sale of Goods Act, ss. 17(i) and 18.

101Sale of Goods Act, s. 39(1): termination is a retrospective remedy, see s. 64, second sentence.

102Sale of Goods Act, s. 40. 103 Cf. art. 79 CISG. 104 Sale of Goods Act, s. 40(3).

losses. In the preliminary draft to the Norwegian Sale of Goods Act, it was stated that misleading information with respect to the object for sale always results in liability, because such information is assumed to be within the control of the seller.105 In agreement with the Nordic tradition of interpretation, such statements in the draft legislation would be adhered to by the courts. The loss of half of B’s asparagus crop is, on the other hand, a direct loss, according to Sale of Goods Act, section 67(2)(a): ‘losses as a result of reduced or lost production or turnover’. Whether A’s statement with respect to the capacity of the machine is to be regarded as a guarantee is doubtful, although a precise statement about such a significant feature of the machine would perhaps be considered a guarantee. If not, negligence must be shown. This would depend on the facts. For example, if A is the producer of the machine, he would have to give a detailed account of the method he has used for determining that the machine in fact has the capacity to harvest one acre a day. It seems that particularly difficult and unknown operating conditions at B’s farm would have to be shown in order to relieve A of his liability. On the other hand, if A is a dealer only, the information from the manufacturer that the machine has the capacity ‘to harvest one acre a day’ would be sufficient to relieve A of liability. Nevertheless, it would be reasonable to assume that A makes inquiries of B with respect to the operating conditions at his farm.

In the variant situation, where A makes no statement about the harvester’s capacity, the remedies are the same, but the reasoning is different. If A knew or could not have been unaware of the fact that the machine did not possess the capacity that B expected, A is in breach of his duty to inform,106 and there is a defect in the object for sale. Sale of Goods Act, section 17(2)(b)107 provides that the object for sale must be ‘fit for any particular purpose that the seller knew or could not have been unaware of’. This regulation appears to apply on the facts given here.

Portugal

A is liable to B under the sale contract. According to article 913 of the Civil Code, if the thing sold does not have the qualities promised by the

seller, the buyer has the right to annul the contract for mistake or fraud and recover all the money paid.108 He can also ask for the reparation or

105Proposition to the Odelsting, no. 80 (1986–87), p. 92.

106Cf. Sale of Goods Act, s. 19(1)(b). 107 Cf. art. 35(2)b CISG.

108Articles 913 and 905 CC.

machine’s capacity, and breach of contract damages are available for its falsity.115

The contract would fall within the remit of the Sale of Goods Act 1979, as amended, in particular by the Sale and Supply of Goods Act 1994. This Act requires that goods sold by description must correspond with the description116 and that goods sold in the course of a business must be of satisfactory quality, that is, fit for their purpose,117 with failure in either regard being a breach of contract giving rise, inter alia, to a claim for damages.118 However, it seems unlikely that the representation about the capacity of the machine would be treated as part of its description – statements as to quality are not usually so considered.119 The comment about the capacity of the machine might be a ‘relevant circumstance’ to be taken into account in assessing whether the goods are of satisfactory quality,120 but this would only be necessary if the statement was not itself a contractual warranty (see above).

For the delictual claim, A must pay damages on the reliance interest, to put B in the position he would have been in if the statement had not been made (difference in value or cost of putting the incapacity right;121 if the misrepresentation was fraudulent, even losses not reasonably foreseeable are recoverable); for the contractual claim, on the expectation interest, to put B in the position he would have been in had the statement been true (and so he can recover for the lost harvest this year and possibly next, bearing in mind the possibilities of mitigating loss that may intervene). The costs of purchase of a replacement machine (or of repairs to the one already acquired), less the proceeds of any resale of the faulty tractor, would also be claimable in contractual damages.

B has the option of avoiding the contract (reduction) on the grounds of misrepresentation, leading to return of the machine to A and return of the price to B (restitutio in integrum).

If the Sale of Goods Act implied terms are relevant, B would have the right to reject the goods if the breach was considered material and to require the price to be returned to him (section 15B). Since implementation of the EC Consumer Sales Directive 99/44/EC in UK law

115MacQueen and Thomson, Contract Law in Scotland, paras. 3.14–3.19.

116Section 13(1). 117 Section 14(2), (6). 118 Section 53A.

119 Border Harvesters Ltd v. Edwards Engineering (Perth) Ltd 1985 SLT 128.

120 Sale of Goods Act 1979, s. 14(2A). 121 Thomson, Delictual Liability, pp. 270–1.