Taking the seller to court

Rights under a warranty are conditional upon the buyer (employer) performing "actions of due care", meaning the timely notification of the seller (contractor) that a defect exists and - depending on the circumstances - timely submission of a demand for the removal of defects or a price reduction, or even withdrawal from the agreement. When building works are accepted or a building is sold, normally a protocol of delivery is drawn up in which all identified defects are described. If defects arise after delivery is taken, the purchaser is obliged to notify the seller (contractor) immediately. Notification is a pre-condition for the enforcement of claims under warranty, or provides the basis for a debtor's plea to be raised based on a warranty. If the buyer makes notification of a defect before the warranty period expires and the seller demands payment, then the buyer may argue that such demand is partially illegitimate and demand a price reduction. Such a debtor's plea can also be raised after the expiration of the warranty period if the buyer made notification before the warranty expired. But the mere notification of the defect - even if made prior to the expiration of the warranty period - does not give the purchaser the possibility to enforce his or her rights after the expiration.

Enforcement of rights under warranty

Rights under warranty will vary depending on whether we are dealing with a sale agreement or a construction contract. In a sale the purchaser may withdraw from the agreement or demand a price reduction. However, the purchaser will not be able to withdraw from the agreement if the seller promptly removes any defects. In the case of agreements covering construction/building works the employer also has these rights, but first is obliged to call upon the contractor to remove the defects within an appropriate period of time. If the contractor does not comply, the employer will be entitled to withdraw from the agreement. If the defects are immaterial, only a price reduction - not withdrawal from the contract - is allowed.

Position of the Supreme Court

The liberal interpretation of the warranty regulations could lead one to the conclusion that for a buyer to enforce his or her rights, it is enough to notify the seller of the existence of defects and demand the termination of the agreement or a price reduction, while the warranty is still valid. But the Supreme Court presents a different view, according to which "following expiration of the warranty period, any claims for a reduction in price shall expire and will not be subject to enforcement by the court." The Supreme Court concluded that rights under warranty vary in their nature and that warranty periods also vary. In cases where the buyer has the right to withdraw from an agreement - an act that qualifies as a "declaration of will" - the warranty period is the period up to the date of withdrawal from the agreement. This means that such a declaration - as long as it is made while the warranty is valid - will be effective and lead to the dissolution of the agreement. The deadline for demanding a price reduction is different, as it is a deadline for the submission of claims and not a declaration of will. To retain the rights granted by the warranty, the purchaser must notify the seller of defects during the warranty period, demand a price reduction and in addition take legal action against the seller. The mere notification of a claim by the seller during the warranty period is not sufficient for the purpose of exercising the purchaser's rights. The verdict of the Supreme Court was issued in connection with a warranty related to the sale of goods, but the views presented therein will be fully applicable to agreements covering construction work. I share the view adopted by legal doctrine, which is critical of the Supreme Court's position, as I can see no logical justification for the legal differentiation of rights under warranty. Both the right to withdraw from an agreement as well as the right to demand a price reduction should have the same status, whereas performing "actions of due care" within the warranty period as provided for in the Civil Code should be enough to exercise either right. Unfortunately, until the position of the Supreme Court changes it will have to be taken into account and buyers will have to submit claims for price reductions in court during the warranty period. Although courts considering other cases are not bound by the decisions of the Supreme Court, nevertheless its decisions set out the guidelines that are followed by the rest of the court system, so similar decisions can be expected in similar matters.

Małgorzata Pietrzak-Paciorek

The author is an attorney

with the law firm

Baker & McKenzie