Can the consumer immediately terminate the sales contract if goods sold to him have a defect affecting safety without first giving the seller an opportunity to repair them? Does it make a difference if the defect can be repaired easily and at relatively low cost? In a recent judgment, the Court of Justice of the European Union (“CJEU”) clarified how serious a lack of conformity must be under the EU Sale of Goods Directive to justify immediate termination of the contract.
ILF’s Hungarian member, Smartlegal Schmidt&Partners summarizes this issue in the article.
1. Facts
In March 2023, a consumer (“Consumer”) purchased a second-hand vehicle from a car dealer (“Seller”). The vehicle had first been registered in January 2015 and was described in the sales contract as fit for use, operation and registration.
A few days after the purchase, the Consumer had the vehicle inspected by the Austrian automobile club ÖAMTC which revealed an engine oil leak caused by inadequate sealing of the engine. According to ÖAMTC, the oil leak constituted a serious defect affecting both operational and road safety which existed before the vehicle was handed over to the Consumer and could be rectified inexpensively.
The Seller informed the Consumer that it was prepared to repair the vehicle. The Consumer nevertheless brought proceedings before the Austrian courts seeking termination of the sales contract, reimbursement of the purchase price against return of the vehicle and reimbursement of certain additional costs.
2. Procedure in Austria
The first-instance court dismissed the claim based on the Austrian law transposing the EU Sale of Goods Directive[i], essentially because the defect could easily be repaired and the Seller was willing to carry out the repair.
The appellate court took a different view. It considered that a defect which severely affects the normal use of the goods and has a significant negative impact on safety may be sufficiently serious to justify immediate price reduction or termination of the contract. In its view, whether the defect could be remedied easily and inexpensively was of little importance.
The Seller brought an appeal on a point of law against the unfavourable second instance judgement before the Austrian Supreme Court (Oberster Gerichtshof).
3. Question before the CJEU
The Supreme Court was uncertain in relation to the interpretation of the Sale of Goods Directive, specifically it was uncertain whether a safety-related defect may, by itself, be of such a serious nature as to justify an immediate price reduction or termination of the contract, even if the defect can be remedied at relatively low cost.
Therefore, the Supreme Court decided to stay the proceedings and referred its questions to the CJEU. The Luxembourg Court thus had to answer the question if, in relation to Article 13(4)(c) of the Sale of Goods Directive, the lack of conformity relating to the safety of goods and which can be rectified relatively inexpensively must necessarily be classified as a lack of conformity that is so serious as to justify an immediate reduction in the sales price or the immediate termination of the sales contract.
4. The CJEU’s decision
4.1. Principles
The CJEU first approached Article 13 (4) (c) of the Sale of Goods Directive through its wording. It noted that the provision allows an immediate price reduction or termination only where the lack of conformity is “of such a serious nature” as to justify those remedies. In the Court’s view, the expression indicates a defect of very significant gravity, clearly distinguishable from less serious forms of non-conformity.
From a contextual perspective, it is clear form Article 13 (5) of the Sale of Goods Directive, that termination is excluded where the lack of conformity is merely minor. According to the Court, only a lack of conformity reaching a certain threshold of seriousness capable of altering the fitness of the goods to be used in accordance with their customary use and, consequently, the consumer’s confidence, is capable of justifying the immediate termination of the contract.
A purposive interpretation led to the same conclusion. While the Sale of Goods Directive aims to ensure a high level of consumer protection, it also seeks to preserve a fair balance between the rights and obligations of consumers and sellers. Treating every safety-related defect as automatically sufficiently serious to justify immediate termination would deprive the seller of the possibility to cure the defect and would undermine the remedial structure established by Article 13. Accordingly, the mere fact that a defect affects safety is not decisive; all relevant circumstances must be assessed, including the nature of the defect, the type of goods, the conditions under which repair is possible and the extent of any risk to the consumer or third parties.
4.2. Specific circumstances of the case
Applying those principles to the case at hand, the CJEU noted that the defect consisted of an engine oil leak capable of causing engine damage and potentially affecting the normal use and safety of the vehicle. However, the Court stressed that the seriousness of the defect had to be assessed in light of the specific circumstances. In particular, the vehicle was a second-hand car more than eight years old, there was no indication of fraud or other misconduct by the seller, the seller expressly offered to repair the vehicle, and the repair costs were relatively low.
On that basis, and subject to the final assessment of the referring court, the CJEU considered that there did not appear to be sufficient grounds for concluding that the consumer could no longer objectively maintain confidence in the seller’s ability to bring the vehicle into conformity.
The CJEU thus held that a safety-related lack of conformity which can be remedied relatively inexpensively does not necessarily constitute a defect of such seriousness as to justify an immediate price reduction or termination under Article 13 (4) (c) of the Sale of Goods Directive.
5. Comment
The judgment confirms that a safety defect does not automatically give consumers a right to immediately terminate a sales contract under the Sale of Goods Directive.
What matters is the seriousness of the defect assessed in context. Courts must consider not only whether safety is affected, but also the type and age of the goods, the nature of the defect, the practical possibility and cost of repair, the seller’s conduct and, ultimately, whether the consumer can objectively be expected to retain confidence in the seller’s ability to bring the goods into conformity.
For sellers, the decision confirms the importance of promptly offering an effective repair where a defect can realistically be remedied. For consumers, it makes clear that the existence of a safety-related defect alone does not necessarily allow them to bypass repair or replacement and proceed directly to termination.
In this article we analysed the judgment of the CJEU in KFZ Kolak, C-307/25.
Written by Anita Vereb
SMARTLEGAL is a team of agile business & litigation lawyers in Budapest, Hungary, helping international corporate clients and individual entrepreneurs doing business in Hungary. For more information please visit our website at this link.
[i] Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC.