Data

Date:: 30-06-2026
Country:: Austria
Number:: 6 Ob 100/25m
Court:: Oberster Gerichtshof
Parties:: --

Keywords

IMPLIED EXCLUSION OF THE CISG (Art. 6 CISG)- REFERENCE TO DOMESTIC LEGAL TERMINOLOGY AND PUBLIC REGULATIONS NOT SUFFICIENT

RECOURSE TO NATIONAL DOCTRINE ON MISTAKE AS A GROUND FOR CONTRACT INVALIDITY - EXCLUDED

SELLER'S FUNDAMENTAL BREACH OF CONTRACT (ART. 25 CISG)- BUYER'S RIGHT TO TERMINATE THE CONTRACT

BUYER’S RIGHT TO AVOID (TERMINATE) CONTRACT – NOTICE OF AVOIDANCE WITHIN A REASONABLE TIME AFTER THE BUYER KNEW OR OUGHT HAVE TO KNOW OF THE FUNDAMENTAL BREACH (ART. 49(2)(b) CISG)

Abstract

On 15 October 2018, following an EU-wide public procurement procedure, an Austrian trade fair operator (buyer) and a Slovenian manufacturer (seller) concluded a contract for the manufacture, delivery, and installation of a mobile telescopic grandstand system consisting of twelve identical units, intended to replace the buyer's existing container-based system. Reducing set-up/dismantling times compared to the old system — while preserving the flexibility of arranging the grandstands in different configurations — was the buyer's primary reason for the purchase and was expressly stated as the objective of the procurement in the tender specifications.
During pre-contractual negotiations, the seller demonstrated the system's ability to extend and retract "at the push of a button." The buyer's representatives repeatedly and specifically pointed out to the seller significant unevenness in the floor of the venue, but the seller stated this would not pose a problem.
However, once the system was actually erected on-site, serious problems emerged: the grandstands could not extend automatically, guide rails and rollers malfunctioned due to the uneven floor, and workers had to intervene manually. On 19 November 2019, the buyer formally notified the seller of defects due to the floor's unevenness, and suspended further payments.
Several rounds of repair attempts followed between December 2019 and July 2020, culminating in a final attempt and general inspection in July 2020. While some unrelated defects were resolved, the core problem persisted. By letter of 24 August 2020, the buyer declared termination of the contract. The seller argued that the buyer had failed to inspect and notify defects in a timely manner and that continued use of the grandstands for multiple events demonstrated the absence of a fundamental breach.

Both the first and second instance Courts found that the contract was without effect under Austrian domestic law. The Supreme Court reserved the decision.

First, the Supreme Court confirmed that CISG applied to the contract (Art. 1(a)(a) CISG) and qualified it as a contract for the goods to be manufactured for the purposes of Art. 3(1) CISG.
The Court then rejected the argument that the parties had impliedly excluded the Convention under Art. 6. In so doing, it found that the fact that the tender documents referred to Austrian public-law regulations could not be considered as a choice of Austrian substantive sales law, since those references concerned technical specifications of the goods rather than the law governing the contract. Likewise, the use of terms found in (though not exclusive to) Austrian legal language, such as "Irrtum" (mistake) or "Gewährleistung" (warranty), was held insufficient to support an implied exclusion of the CISG.

The court held that the sequence of tender notice, bid, and contract award corresponded, under CISG, to an invitation to make offers (Art. 14(2)), an offer (Art. 14(1)), and an acceptance (Art. 18), respectively. The public tender notice itself, not being addressed to one or more specific persons and containing no clear indication of a binding intent, did not qualify as an offer; rather, it was the bidder's tender submission that constituted the offer capable of forming the contract, which was concluded upon the buyer's award of the contract to the successful bidder.

Moreover, based on the pre-contractual negotiations and the tender specifications, the Court found that the contractual obligations included the system's ability to operate automatically and achieve reduced set-up times notwithstanding the actual floor conditions at the installation site. As a result, the system's inability to extend/retract automatically because of the floor's unevenness was found to constitute a lack of conformity (Art. 35) and a fundamental breach of contract under Art. 25.

Additionally, the Court held that notice of the defects, given about one month after delivery, was timely. It reasoned that the examination period under Art. 38 could not have started running before the parties' agreed technical inspection report was delivered, and that, given the system's technical complexity, it was also reasonable to take into account the buyer's experience gained from a subsequent assembly of the grandstands for another event.

In the Court's holding, the buyer was also precluded from relying on mistake under national law as an alternative basis for withholding payment, because Arts. 35 et seq. and 45 et seq. CISG - which prevailed over domestic law - provides an exhaustive regime governing lack of conformity and the remedies available.

With national mistake doctrine excluded, the outcome turned on whether termination had been declared within a reasonable time under CISG (Art. 49 CISG). Recalling that this period begins once the buyer knew or ought to have known not simply of the non-conformity, but that it was incurable by repair, and as the lower Courts had made no findings on this point, in the light of the seller's attempts continuing until July 2020, the Supreme Court set aside their judgments and remanded the case to the first instance Court for further fact-finding.

Fulltext

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Source

Original in Austrian:
- available at www.cisg-online.org}}