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through amendment of the Sale of Goods Act, B now also has the right to require repair or replacement of the goods.122

Where A made no statement, B may have a claim by way of the term implied into the contract under Sale of Goods Act 1979, section 14(3), on the basis that the goods purchased were not fit for a particular purpose of the buyer made known to the seller, expressly or by implication, in circumstances showing that the buyer is relying, or it is reasonable for him to rely, on the skill or judgment of the seller. In general, if the seller knows the buyer’s purpose, the latter’s reliance will be presumed.123 Breach of this implied term will give the buyer a claim for damages based on the expectation interest124 and the right to reject the goods if the breach is material,125 provided that the buyer has not accepted the goods.126 There is some authority in Scotland allowing a party, whose uninduced error about the subject matter of the contract has been known to and taken advantage of by the other party, to reduce that contract, making it void. The error must, however, be an error in transaction rather than an error of motive, which must be induced by the other party to be relevant. This appears to be an error in motive and so irrelevant, being uninduced.127

Spain

In Spanish law there is liability on several grounds. On the one hand, B can obtain annulment of the contract on the basis of mistake, on the other hand, he can use the remedies contained in the law of sales (actio redhibitoria/quanti minoris).

By telling B that the machine would be able to harvest double the quantity it was actually fit for, A acted fraudulently, since (as A knew) it was mainly this false information which made B conclude the contract.128 Therefore, B can bring the claim for nullity under article 1265 CC.129

122 Section 48B. 123 Atiyah, Adams and MacQueen, Sale of Goods, pp. 199–200.

124Sale of Goods Act 1979, s. 53A(1), as added by Sale and Supply of Goods Act 1994: ‘The measure of damages for the seller’s breach of contract is the estimated loss directly and naturally arising, in the ordinary course of events, from the breach.’ See also s. 53A(2): ‘Where the seller’s breach consists of the delivery of goods which are not of the quality required by the contract and the buyer retains the goods, such loss as aforesaid [i.e. under s. 53A(1)] is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had fulfilled the contract.’

125Section 15B. 126 Sections 34–35A.

127See further on error, MacQueen and Thomson, Contract Law in Scotland, paras. 4.45–4.66.

128Article 1269 CC. 129 STS, 23 July 1998, no. 734/1998, RJ 1998\6199.

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the contract, he must give notice within a reasonable time after he ought to have discovered the defect or within a reasonable time after the time required for substitute delivery or repair. According to article 66 of the SGA, the buyer loses his right to avoid the contract if it is impossible to make restitution of the good substantially in the condition in which he received it.141 This requirement could cause some problems for B, as he has already used the machine. However, dependent upon the circumstances, B could argue in two different ways in order not to lose his right to avoid the contract. The first argument could be that the machine was put into normal use before he discovered the non-conformity and that he therefore still has a right to avoidance. The second argument could be that, according to article 66(3) (which does not have any corresponding rule in CISG), he has a right to avoid the contract even if he could not make restitution according to the main rule, as long as he compensates the seller for the loss in value caused by the use of the machine.

As A has specifically promised the capacity of the machine, this would probably be regarded as a guarantee according to article 40 of the SGA. This question is of importance as the SGA, contrary to CISG, make a distinction between direct and indirect losses. The direct losses are recoverable when the party in breach could not show that the breach was due to an impediment beyond his control. Indirect losses are recoverable, when the breach is non-conformity, if the party in breach has acted with fault or if the object of sale at the time of contracting did not conform with what the seller specifically had promised (more or less guaranteed). As A specifically promised the capacity, B is entitled to damages according to the expectation interest.142 A is therefore liable to compensate B for the ruined harvest.

B has a duty to mitigate the loss.143 B could mitigate his losses by avoiding the contract and making a cover purchase or hiring a harvesting machine to take care of next year’s harvest. Thus, he is not entitled to damages for half of next year’s harvest. Instead, he is entitled to damages for the difference between the contract price and the price of the substitute transaction.144

As a general rule, B could not use rules based on precontractual liability in this case, as the parties have entered into a binding agreement of sale. However, if B, contrary to the facts of the case, had suffered no

141 Cf. art. 82 CISG. 142 Articles 40 and 67 SGA. 143 Article 70 SGA. 144 Article 68 SGA; cf. art. 75 CISG.

losses according to the rules on the expectation interest, or if he could not prove such losses, there is some support in academic writing for the view that B could have a right to compensation for the reliance interest.

In the case where A does not make a statement about the harvester’s capacity, the statement by B about the quality of the machine is part of the contract and therefore the discrepancy in the capacity constitutes a non-conformity.145 The possible remedies for breach are as discussed above, except that A’s failure to inform B about his mistaken assumption might not be held to constitute fault. In that case, B would not be entitled to damages for the ruined harvest, as it is regarded to be an indirect loss.

Switzerland

Specific performance and damages in contract: A is liable under the sale contract. The object sold is defective according to OR 197 if the quality of the object delivered does not correspond to the (express) representations made by the seller. Under Swiss law, the demands for an (express) representation are not very high. Each statement that concerns the qualities of the object of the purchase and that has, in a recognisable way, an influence on the decision of the other party to buy is a representation.146

The seller is liable according to the special provisions on the warranty against defects in the object of the purchase.147 These provisions determine in detail the claims of the buyer in case of defects, including specific replacement of the defective object. If the buyer has sued for rescission (see below), he is entitled to claim for damages.148 It is accepted by courts and academic writers that the seller is obliged to pay compensatory damages also in other cases according to the general provisions on non-performance.149 The extent of the compensation depends on whether fault is attributable to the seller.

A is at fault if he knew that the express representation is not correct. Under certain circumstances the seller is at fault even if he had no knowledge of the defect but has violated his duty to examine the object of the purchase, for example, if the seller has acted as a professional.150 If fault is attributable to A he has to compensate B’s positive interest in the contract (expectation interest) according to OR 208 III. B can

145 Article 17 SGA. 146 BGE 102 II 100. 147 OR 197ff. 148 OR 208.

149OR 97; BGE 108 II 104. Cf. BernerKommentar-Giger, OR vor 197–210 n. 24ff.; BaslerKommentar-Honsell, OR vor 197–210 n. 6.

150BernerKommentar-Giger, OR 208 n. 49ff.; BaslerKommentar-Honsell, OR vor 197–210 n. 6.

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therefore claim the difference from the profit he would have made if the machine had harvested one acre a day.

According to OR 208 II, the seller has to compensate the damage directly caused to the buyer even in case of no fault at all. Traditionally, writers and courts apply this no-fault liability if the defect causes damage to goods of the buyer other than the object of the purchase;151 this opinion is criticised by a growing number of authors.152 In the present case, however, it is doubtful whether the ruin of half of the crop is damage of that category. The value of the crop is rather a lost profit that B could have achieved with another machine. Lost profits are never compensated if no fault is attributable to the seller.153

B can only recover damages and demand specific replacement if he notified A of the defect154 and sued him155 in due time. If the buyer fails

so to notify, the object purchased is deemed to have been accepted to the extent that there are no defects involved which were not recognisable in the course of a customary examination. If defects are discovered at a later date, notification must be given immediately upon their discovery. Otherwise the object of the purchase is deemed to have been accepted with respect to such defects. The time periods are quite short.156 The duty to notify in time and the statute of limitations are applicable even if the seller is not a professional and even if the liability is based on the general provisions of non-performance.157 But the short time periods do not apply if A has wilfully misled B about the qualities of the machine.158

Culpa in contrahendo: most authors reject a concurrent liability on the ground of culpa in contrahendo.159

Tort: the seller of an object with defects is liable in tort only if he has violated a duty in favour of others in general and not only a duty based on the contract. But a claim on tortious grounds is also restricted by the short period for the notification mentioned above.160 In the present

151‘Mangelfolgeschaden’; cf. BernerKommentar-Giger, OR 208 n. 36ff. Recently the Federal Court has confirmed this approach: BGE 133 III 257.

152See BaslerKommentar-Honsell, OR 208 n. 9.

153BernerKommentar-Giger, OR 208 n. 35. 154 OR 201. 155 OR 210.

156OR 210 I: ‘Actions based on a warranty for defects in the object of the purchase shall be barred at the end of one year after delivery to the buyer of the object sold, even if the defect was only discovered by the buyer at a later date, unless the seller has assumed the liability for a longer period.’

157BernerKommentar-Giger, OR vor 197–210 n. 24ff. 158 OR 203, OR 210 I.

159Cf. BernerKommentar-Kramer, OR 22 n. 48.

16067 II 137; not decided in BGE 90 II 89. The courts’ decisions are contrary to the views of academic opinion: cf. BaslerKommentar-Honsell, OR vor 197–210 n. 7.

case, the machine is not useful for B’s purposes but it has no objective defect. A, hence, is generally not liable in tort. A might only be liable in tort if he wilfully misled B about the qualities of the machine and if he obviously could have foreseen the loss that would be caused. In that case A must compensate B for the lost profits he would have achieved with another machine.

Rescission of the contract: B can rescind the contract. In the case of warranty against defects in the object of the purchase the buyer can sue for rescission of the purchase according to OR 205 (Wandlung). The claim for rescission is restricted by the short time periods of OR 201 and 210 mentioned above. After the expiration of the period, the buyer can still annul the contract (so-called Anfechtung) because of a defect of the contract’s conclusion (error) according to OR 24 I section 4;161 this opinion of the Swiss Federal Court is, however, criticised by the majority of legal writers.162

In the variant situation, where A makes no statement, the result is the same. Based on B’s expressly communicated expectation it must be assumed that A has made a representation (Zusicherung) for the capacity of the harvesting machine according to OR 197. Representations can also be implied.163 According to academic writers there is a representation if the buyer demands a special quality of the object sold and the seller after that concludes the contract without protest.164 If there is no representation, the capacity of the machine is at least an assumed quality according to OR 197. Like the representation, the lack of an

assumed quality is a defect of the object sold and in general gives rise to the same claims of the buyer.165

Editors’ comparative observations

This case is different from the other cases in this study in one significant respect: it raises questions of liability in respect of the precontractual negotiations where the negotiating parties have in fact concluded the contract. The case was included to test whether and (if so) how the conclusion of the contract affected each jurisdiction’s analysis of the precontractual stage. Within the facts there is also a variant, to test the difference in this context between a misrepresentation and silence during the negotiations.

161 BGE 114 II 131. 162 Cf. BaslerKommentar-Honsell, OR vor art. 197–210 n. 9. 163 BaslerKommentar-Honsell, OR 197 n. 14.

164 BernerKommentar-Giger, OR 197 n. 27. 165 BernerKommentar-Giger, OR 197 n. 80.

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All jurisdictions give a remedy to B in the case of A’s precontractual misrepresentation; and all except Germany give a remedy for A’s silence. There is, therefore, apparently a greater unanimity of result in this case, although there are still some significant differences between the jurisdictions, both on the basis of the liability and on the scope of the remedy.

In the case of A’s misrepresentation, almost all jurisdictions identify his primary liability as being under the contract of sale: the existence of the concluded contract has therefore changed substantially the focus of the analysis. The basis of the contractual liability is generally a warranty as to the quality of the harvester or as to its fitness to fulfil the purposes for which B made clear he required it – the nature of the warranty varying according to the respective jurisdictions’ theory of contractual obligation (and so, for example, England, Ireland and Scotland look to terms implied into the contract; other jurisdictions look to the obligations inherent in the special contract of sale). However, some reporters analyse the facts, in the alternative, in similar terms to the cases in which no contract was ultimately concluded, basing the liability on B’s mistake as to the harvester’s capacity (France, Spain) or A’s misrepresentation (Denmark, England, Ireland, Scotland; and, if A was fraudulent, France), or culpa in contrahendo (Germany) or tort (Germany, Switzerland) if A wilfully misled B. Some reporters make clear that the existence here of the contractual liability will override some or all of the claims based on precontractual liability.

The remedy also varies. All jurisdictions that identify a contractual claim give B a remedy in contract to protect his failed expectation in relation to the harvester’s capacity. Austria, England, France, Germany, Portugal, Scotland and Switzerland give B the right to specific replacement of the defective harvester with one that meets the contractual standard; others allow only damages to cover B’s additional costs of obtaining a replacement harvester. The right to claim replacement has a different source in different systems: in many it results from the implementation of the Directive on Consumer Sales 99/44/EC; in France, however, it flows from general principles of contract law. Those jurisdictions that allow B’s mistake or A’s fraud to nullify the contract will allow B in consequence to recover the price paid.

There is also some variation in the scope of damages that A might be required to pay to cover B’s consequential losses, and in particular the lost crop. Most jurisdictions again focus on the liability in contract, and the result therefore depends upon the general rules of each jurisdiction

for the scope of damages recoverable in contract. Some impose liability on A, or liability in respect of all the losses suffered, only if he was at fault or, sometimes, gave a specific warranty about the qualities of the goods (Austria, Germany, Italy, Norway, Portugal, Spain, Sweden, Switzerland); others have a general rule allowing for recovery by B of all his losses on the expectation measure (including therefore the lost crop) once the contractual liability is established (England, Finland, France, Greece, Ireland, Italy, Scotland). Again, those jurisdictions which allow B a claim based not (or not only) on the contract but on precontractual liability will allow an award of reliance damages, which can include the lost crop, if they fall within the principles of the relevant ground of liability (such as the jurisdictions’ varying rules for liability in culpa in contrahendo or in tort).

In the variant situation, where A made no misrepresentation about the harvester’s capacity but remained silent in response to B’s statement about it, the German reporters take the view that A had no duty in such circumstances to disclose that B had misunderstood the harvester’s capacity, and therefore B has no remedy. All other jurisdictions, however, would give a remedy. Some reporters simply see no difference between the cases of misrepresentation and silence here. For others, the basis of claim changes in the case of silence, but the substantive result may not. Any remedy which hinged upon a false statement (such as the misrepresentation claim in English, Irish and Scots law; although Ireland considers that there might be representation by silence) now falls away; and in Portugal the contractual liability itself no longer covers the case but is replaced by precontractual liability based B’s mistake. But in other jurisdictions the contractual liability still arises. It is particularly interesting to note the response of the common law jurisdictions to this case. Throughout the cases in this study, it is the English, Irish and Scots reporters who have most often emphasised that there is no liability for failure to disclose: misrepresentations and breaches of contractual promises give rise to liability, but silence generally does not. However, in this case, the fact that there is a contract between A and B makes all the difference, because it is now possible to imply terms into the contract based on A’s silence in response to B’s statement. There is no general duty of disclosure between negotiating parties, and the starting point of the common law is the principle caveat emptor. However, statute reverses this position in the case of contracts for the sale of goods, where the business seller is required to make implied promises as to the quality of the goods sold and their fitness for purpose.