About a year ago, the sales law in the Civil Code was modified, changing the relationships between the parties, while also providing several facilitations for the buyer to exercise their rights. Regarding contracts for digital elements, as these will require a thorough analysis to explain, they will be discussed in a subsequent text. Therefore, in this analysis, we will mainly see how each party (legally) is protected against the other.

1.What are the obligations of the seller?

Firstly, by the term ‘sales contract,’ we simply mean the contract where one party undertakes the obligation to transfer to the other party the ownership of an object and to transfer it to them, while conversely, the other party undertakes the obligation to pay the agreed price.

Based on this, we can see the obligations of the seller, who is obliged by law to:

• Deliver the item to the buyer (e.g., a car), and if it is real estate, to cooperate in the transfer of the contract.
• Not have the item with real defects = to be worthy of the expectations of the parties.
• Provide the buyer with any instructions for the use of the item, which must also be appropriate and correct.

A particular case arises when the seller agrees with the buyer to install the item themselves (e.g., a company selling air conditioners and also undertaking the installation for their customers). There, the provision of the seller should be considered as a single one = if there is an error in the installation, the seller will be liable, and the buyer will have the rights that we will see in question 6 as well.

2.What happens if the buyer does not take delivery of the item?

The basic obligation of the buyer towards the seller is to pay the agreed price between them. When to pay the price is a matter of agreement between the parties, if for example they have agreed on payment in installments/cash payment/payment upon delivery of the item, etc. As a result, the law does not establish an obligation for the buyer to take delivery of the item from the seller. Therefore, if the buyer refuses to take delivery, they will be considered an overdue debtor = the seller will not be liable to them if the item is damaged during the time the buyer refuses to take delivery.

On the other hand, it is possible that the parties have agreed that the buyer will be obliged to take delivery of the item, or they considered it as an extremely important element for their entire agreement (e.g., an old car that urgently needs servicing to avoid becoming unusable). In this case, it may be considered that the buyer has an obligation to take delivery of the item, and thus will be liable as an overdue debtor to the seller for as long as they refuse. Practically, this means that the buyer will owe compensation to the seller for the damage the seller suffered while waiting for the buyer to take delivery of the item (e.g., if the car indeed suffered serious damage).

3.What if the price is credited?

In practice, it is very common for there to be an agreement that the buyer will pay the price in installments, but with the condition that the item will belong primarily to the seller, and once the final installment is paid, the buyer will become the owner of the item. During the interim period, for transactional purposes, the parties agree that the buyer will have possession of the item but without being its owner. In the event that the buyer delays/refuses to pay the remaining price, the law provides the following rights to the seller:

• To demand from the buyer the price (with interest from the time it was due, i.e., a specific day).
• To withdraw from the contract (wherein the seller must take back the item from the buyer and return to them, with interest, the entire price received from them up to that moment).

4.Have you heard of the actual defect?

In general, in every sales contract, the buyer and the seller have a common interest: to deliver the item without defects so that the other party does not exercise their rights = withdrawal from the contract, compensation for the damage suffered, which could economically ‘devastate’ the seller. Therefore, the item must not have what we call an actual defect.

By this term, we mean some quality of the item (or possibly several), which could be so important to the buyer that, on the one hand, it renders the item useless to them, and on the other hand, if they knew about it with certainty, they would not enter into the contract. It is important, of course, to distinguish if the defect is so significant for the average buyer or for the specific buyer who may have different goals.

For example, it is one thing to request a freezer that is suitable for general use, and another thing to request a freezer that will definitely operate below -17.5 degrees Celsius because I want to preserve the products of my business. In the second case, it would be a subjective requirement I have (formerly known as an agreed-upon quality of the item), and the seller would be liable to me if the refrigerator does not have the said quality, under the implied condition that we agreed it would have the relevant quality.

5.What about the legal defect?

Although the term may sound a bit strange, it simply refers to something that burdens the item with the rights of a third party, thereby hindering its use by the buyer. For example, a legal defect constitutes a mortgage right burdening the property I want to buy, or if the car I purchased was given as collateral for someone else.

However, it is crucial to understand when this legal defect arises. And this is because:

• If the legal defect existed before the seller delivered the item to the buyer, then the latter can refuse to accept it since it is not suitable, and if accepted, they can demand compensation/withdraw from the contract/insist on contract performance and demand full compensation as if the item had no legal defect.
• If the legal defect appears after the delivery of the item to the buyer, then the latter must prove that the seller knew about the defect and still delivered the item in that condition.
• The case is different when the defect existed in the item before delivery but appeared after the buyer received it. In this case, the buyer does not need to prove that the seller was aware of the defect, and thus, they can directly exercise their rights against the seller.

6.What rights does the buyer have if the item is not suitable?

In the event that the buyer discovers that the item has a real/legal defect when it is delivered to them, and provided they prove that the seller is responsible for the defect, then they can exercise the following rights:

• To demand that the defect be rectified (at the seller’s expense, unless it is economically impractical for the latter).
• To request a price reduction (by comparing the value of the item without the defect to that of the defective item).
• To withdraw from the contract (in which case they would be required to return the item and receive the price they paid, as well as ‘minor’ compensation).
• To keep the item and demand full compensation for the damage suffered due to the defect (as well as any lost profits they would have had if the item were fully functional).

To enable the buyer to exercise the above rights, they must first prove that the seller was aware of the defect. The law at this point is particularly favorable to the buyer, as it is presumed that if the defect appears within 1 year from when the buyer received the item, then it is presumed to have existed before delivery = the buyer does not need to prove the seller’s liability.

Something similar is provided for any agreed-upon quality of the item, for any lack of which the seller is liable even without fault = the seller must prove that they are not liable for the lack of the quality of the item.

7.It’s a property. Does the size matter?

Especially in the case of real estate, the parties involved attach great importance to the size, as it can determine several factors (such as the suitability of the plot for building construction), so the regulation of the matter by the legislator is considered necessary. Specifically, the law provides that if the seller assures the buyer that the property has a certain size (e.g., a 4-acre plot), then they will be liable as if the specific quality had been agreed upon between the two parties.

Therefore, based on the above, the buyer will not need to prove the seller’s liability regarding the defect as it is presumed = deemed given by law. Conversely, the seller will be the one who must prove that they are not responsible for the reduced size of the property compared to what was originally agreed upon (e.g., if it is due to negligence of the notary/engineer in preparing the study if it is an apartment, the area of ​​which is not clearly depicted in the plans).

However, for the buyer to be able to withdraw from the contract = to receive back the price they paid and possibly reasonable compensation, the lack of size of the property must be significant so that the buyer has no interest in the performance of the contract. Lack is considered significant, for example, when a plot is presented to the buyer with an area of ​​4 acres and frontage on a public road, and in reality, it has an area of ​​3 acres, resulting in it not meeting the conditions of suitability and the buyer being unable to build anything there, especially if it is a property outside the plan.

8.I was provided with a “warranty” for the item. What does this mean legally?

Although in business life, there are various forms of warranty that the seller may provide to the buyer, the Civil Code focuses on a kind of warranty where the seller usually guarantees to the buyer the proper functioning of the item for a certain period of time/the existence of a specific quality in the item that the parties explicitly agreed upon, etc. For this reason, the law explicitly states that:

• If the seller/third party has provided a warranty to the buyer, then the buyer has the corresponding rights as those provided in the warranty statement.
• The buyer’s rights may not be more limited in the warranty contract, thus harming the buyer’s interests.
• At the same time, the buyer will have the rights provided by the Civil Code, which may potentially provide greater protection than those provided in the warranty.
• Therefore, since one sold the item to the buyer and another provided the warranty, the buyer can turn against both to the extent that their damage is not covered by the exercise of their rights against one of them.
• If the seller is also the one who provided the warranty, then the buyer can only turn against them but with 2 legal bases (i.e., the warranty statement and the provisions of the Civil Code). However, the buyer’s claim against the seller will be satisfied only once.

9.When do the buyer’s rights expire?

Given that the law on sales was amended about a year ago, changes have also been made to the statute of limitations for the buyer’s rights against the seller. Specifically, the buyer’s rights expire:

• After 2 years from the date the buyer received the item, in the case of a sale of a movable property.
• After 5 years from the date the buyer transferred the contract and acquired ownership of the property, provided it is real estate.
• If the buyer exercises any of the above rights, then the statute of limitations stops as to that right that was exercised.
• Therefore, it continues concerning the remaining rights that were not exercised against the buyer.
• On the other hand, for the claim for compensation that may arise if the sale is overturned, it is subject to a 20-year statute of limitations, as an exception to the above.

It is important to note that the buyer can exercise their rights against the seller even after the expiration of the statute of limitations, provided that they had notified the seller of the defect of the item within the time frame within which they could exercise the right = as long as this right had not yet expired. The seller, on the other hand, cannot claim that the buyer’s right has expired if they had intentionally concealed the defect from the buyer, aiming for the latter to ‘lose’ the ability to exercise the right within the statute of limitations.

10.I want to rent something and then buy it.How can I do it legally?

This is a very common case in practice, especially among traders who do not wish to tie up a large portion of their capital in something that may prove to be an unfortunate investment. For this reason, it is customary for a “lease-purchase agreement” to be drawn up between the parties, i.e., an agreement whereby the seller, in case the lessee (not yet a buyer here) of the item chooses later to purchase the item, then (the seller) must prefer them to draw up the relevant sales contract, in case they had an offer from someone else.

The disadvantage of this agreement is that it has contractual effect = it binds only the 2 parties who signed it and not third parties, so the seller validly can later sell the item to someone else, and the almost buyer may not be able to legally turn against the new buyer. The seller is simply liable for compensation against the original buyer, with whom they were supposed to draw up the relevant contract.

However, for the lease-purchase agreement to be valid, the contracting party must inform the seller that they wish to purchase the item (or any other change they have agreed to make to the legal relationship) so that the seller can consider their options. Furthermore, the lease-purchase agreement is generally informal = it can be made orally, unless the main contract concerns real estate where the lease-purchase agreement will also need to be made in a notarial document to be legally valid.

 

The above does not constitute legal advice, and no responsibility is assumed for it. For more information, please contact us.