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LIABILITY OF A SELLER FOR MATERIAL DEFECTS

Croatian Civil Obligations Act (Official Gazette 35/05, 41/08, 125/11, 78/15) prescribes the rules for liability of the seller in the event when the object of a sale has material defects.

            GENERAL PROVISIONS ON MATERIAL DEFECTS

The seller will generally be liable for material defects of the object, regardless of his awareness of their existence, with the exception of the legally prescribed option to contractually exclude this liability. The seller is liable for defects that the object has at the moment of the transfer of risk to the buyer, as well as for any defects arising after the transfer of the risk to the buyer if they are the result of the cause that existed prior to it.

There are two types of material defects – visible defects and hidden defects. , The period and the extent of the seller’s responsibility for the material defects vary depending on the type of defect.

  1. VISIBLE DEFECTS

The seller is not responsible for the defects, if at the time of the conclusion of the contract the buyer was aware of them or could not have been unaware of them. It is deemed that the buyer could not have been unaware of defects which a diligent person, having the average knowledge and experience as a person of the same occupation and profession as the buyer, could easily have noticed during the usual examination of the object. However, the seller is also liable for these defects if he claimed that the object was free from any defects or had specific qualities or characteristics.

            With regard to visible defects – upon receiving the object, buyers must inspect it in the customary manner or have it inspected as soon as possible given the regular course of events. The buyer must notify the seller of any visible defects within 8 days upon handover, or immediately in the event of a commercial contract. In addition, if the inspection took place in the presence of both parties, the buyer must notify the seller of visible defects immediately.

If the buyer fails to notify the seller about material defects within the above mentioned deadlines, he will lose the rights he is entitled to on this legal basis.      

  1. HIDDEN DEFECTS

If it becomes apparent, after the buyer has received the object, that the object has a defect that could not have been discovered by usual inspection, the buyer is required to notify the seller about the hidden defect within the period of two months, not including the day when the defect was discovered, or immediately in the event of a commercial contract, under pain of losing the right,. The seller cannot be held accountable for defects that were discovered two years upon handover. Regardless of the buyer’s discovery of hidden defects, the objective deadline after which it is no longer possible to invoke the hidden defects of the object to the seller, is two years from the transfer of possession to the buyer.

The Croatian Civil Obligations Act stipulates that, when the seller knows that the object has hidden defects and does not inform the buyer about them, no deadlines apply, i.e. there is no statute of limitations and buyers do not lose their rights, regardless of the passage of time.

All buyers that inform the seller about the material defect (whether visible or hidden) in an orderly manner and in due time may choose to:

1) demand that the seller remove the defects,

2) demand to be handed over another object without defects,

3) demand a price reduction, or

4) declare the termination of the contract (except in case of negligible defects).


            EXCLUSION OF THE SELLER’S RESPONSIBILITY FOR

            MATERIAL DEFECTS


Article 408 of the Civil Obligations Act provides the possibility for the parties to exclude, by mutual agreement, the seller’s liability for material defects.

The liability can be excluded either completely or partially, by inserting an exoneration clause in the sales contract or preliminary contract, in which case, depending on the will of the parties, the seller will not be liable for specific or all material defects of the object.

However, the exoneration clause is null and void if the seller knew about the defect and he did not inform the buyer of it. The right to invoke the nullity of this clause does not expire.

Therefore, in order to be able to invoke the nullity of the exoneration clause, the following requirements must be cumulatively fulfilled:

  1. that the seller knew of the defect and
  2. that he did not inform the buyer of it.

If the parties have not expressly excluded the seller’s liability in the sales contract, the seller shall be liable according to the above mentioned general rules prescribed by the Civil Obligations Act.