Heat Treater – Defective Performance and General Terms and Conditions of Sale

(Valid for Czech Republic only)

Each commercial heat treater assumes certain obligations from defective performance, resulting from Civil Act No. 89/2012 Coll. How it intends to deal with them is partly clear from the General Terms and Conditions of Sale. Because I’m an inquisitive person, I did an analysis of how individual subjects in the commercial heat treatment CZ market interpret it. I won’t name these individual entities, but apart from one company that doesn’t have a GTC on its website at all, all the others have GTCs that can be found, even if it sometimes means almost detective work on the website.

At first glance, however, it is visible that not all entities have dealt with this issue in a comprehensible manner, and above all in such a way as not to limit the rights of the Customer. The goal of the General Terms and Conditions is not to establish other conditions than those imposed by law, but above all to establish the conditions for concluding a contract in a situation where we only work with a proposal for concluding a contract in the form of an order, or with reference to the quotation, and at the same time for the mutual expression of the will to conclude the contract.

A number of provisions in the General Terms and Conditions are completely correct, but I see the biggest problem in the provisions relating to defects. Although I am not legally qualified, I will still try to outline my perspective on this issue. After all, I have already completed several of those trainings at MUNI, so I can always refer to the point of view of legal experts…

The definition of defect is as follows:

A defect is a discrepancy between the performance promised and the performance provided – that is, a deviation of properties. The reason for the deviation is not relevant, culpability is not investigated, the defect is objective.

Obvious defects:

(Zdroj: https://www.epravo.cz/top/clanky/nemennost-judikatury-v-oblasti-vadneho-plneni-100795.html)

Judgment of the Supreme Court no. stamp 32 Cdo 1040/2009 stipulated that “obvious defects can be considered only those whose existence is known to the buyer, or to the customer, obvious at a glance, or such defects that can be detected by normally performed tests. Obvious defects cannot be considered to be those defects, the existence of which the buyer or customer would have to ascertain by an inspection associated with the destruction of the goods or work, or defects that typically can only become fully apparent when using the goods or the object of the work.”

From this definition it follows that obvious defects can be considered, for example, mechanical damage to parts, disagreement in the number of pieces or weight, coloring of the surface that does not correspond to the requirement, unexpected corrosion or contamination of parts, failure to remove protective pastes and paints, incomplete contractual documentation, or confusion or non-delivery packaging. However, none of these defects are usually related to the heat treatment itself.

If an obvious defect is to be obvious by sight, then even a defect in achieving hardness cannot be considered an obvious defect, because even in good faith the acceptor cannot be expected to carry a hardness tester with him to measure the hardness of the parts. Perhaps the only exception is the case where the contractor himself discovered a defect in hardness and recorded it in the delivery quality certificate. In that case, however, it is an admission of defective performance even before the transfer of responsibility, and it is indifferent whether the transferee noticed it immediately or after a certain period of time, because at the time of taking over the defect was already proven.

That is also why the Civil Code in § 2161, paragraph 1 says that at the time when the buyer took over the thing,

1. a) the part has the properties agreed upon by the parties, and in the absence of an agreement, such properties that the seller or manufacturer described or that the buyer expected with regard to the nature of the goods and on the basis of the advertising carried out by them,
2. b) the item is suitable for the purpose that the seller states for its use or for which the item of this type is usually used,
3. c) the quality or design of the item corresponds to the contracted sample or model, if the quality or design was determined according to the contracted sample or model,
4. d) is the thing in the corresponding quantity, measure or weight and
5. e) the matter complies with the requirements of legal regulations.

If this defect is not detected immediately upon acceptance, and it manifests itself within six months of acceptance, it is considered that the item was already defective upon acceptance – § 2161, paragraph 2.

https://www.epravo.cz/top/clanky/nemennost-judikatury-v-oblasti-vadneho-plneni-100795.html)

 The buyer’s right from defective performance is then based on a defect that the item has when the risk of damage passes to the buyer, even if this defect becomes apparent only later. The buyer’s right is also based on a defect that arose later, which the seller caused by breaching his obligation.

However, we are still talking about obvious defects.

Therefore, if some commercial heat treaters include provisions in their General Terms and Conditions, such as

• “Complaints must be submitted no later than 30 days from the date of receipt of the goods”, or
• “A claim can only be made if no other operations have been started on the claimed parts” or
• “Notification of defects cannot be recognized if the customer makes changes to the defective parts without the written consent of the contractor”, or
• “Identified heat treatment defects that are contrary to the customer’s request must be notified in writing to the Company immediately after their discovery (but no later than within 12 months from the date of transfer of risks)”, or
• “If the customer does not assert a claim due to a possible defect in the work in the manner described above, the work shall be deemed to have been completed and handed over without defects after the expiration of the specified periods” or
• “In case of obvious defects, including weight differences, he is obliged to do so immediately, but no later than three days after taking over the goods”.

then it is necessary to examine whether such provisions are legally valid.

In the link to https://www.businessinfo.cz/navody/odpovednost-vady-zaruka-jakost-ppbi/ we can read that it is not. In general, it is not taken into account such an expression of will by which the seller unilaterally limits the legal scope of his obligations from defective performance in advance (Example: If the seller states in his terms and conditions that the buyer does not have any rights from defective performance after taking over the product). Such legal actions of the seller therefore do not produce legal effects, and the transferee’s legal rights from defective performance remain in full.

If, for example, there were any provisions in the business conditions limiting the acquirer’s legal rights from defective performance, such restrictions are not valid. However, the acquirer can waive his right from defective performance in advance, it is necessary to do so in writing.

Hidden defects:

But what about hidden defects? These are essentially all defects related to the heat treatment itself. It can therefore be defects in surface or core hardness, discrepancies in NHD, CHD, CD, CLT, FHD, SHD, IOD, OLT, but also defects in all other required mechanical properties such as strength limit, yield strength, roughness, impact strength, etc. § 2618 clearly applies to the contract for work, not § 1921, as erroneously stated in some General Terms and Conditions.

Hidden defects can therefore be complained about within 2 years from the transfer of responsibility according to § 2121 of the Civil Code, the only condition is that the customer must make claims from the detected defect without delay. The term “without delay” has no further interpretation and is therefore dependent on each specific situation.

§ 2121: (1) The risk of damage passes to the buyer upon acceptance of the item. (2) The same has the effect if the buyer does not take over the item, even though the seller has allowed him to dispose of it.

 https://www.exiure.cz/blog/bez-zbytecneho-odkladu-co-to-znamena

The Supreme Court in the decision under  32 Cdo 2484/2012 stated that the term “without unnecessary delay” does not directly determine at what specific time the obligation must be fulfilled or otherwise acted upon. It is an indefinite period, the essence of which is already defined by its verbal expression. From the term “without unnecessary delay”, it must be inferred that it is a very short period, which means immediate or undue delay or  prompt action aimed at fulfilling an obligation or performing a legal act or other manifestation of will, while the duration of the period will depend on the circumstances of the specific case. It is a period of days, weeks at the most, in the shortest possible period of time.

 In the case dealt with by the Supreme Court under file number 32 Cdo 2484/2012, it was concluded that in the context of an almost ten-year contractual relationship, two months can be evaluated as no unnecessary delay.

 In the case of  23 Cdo 113/2012, it was a claim for a work with obvious defects. The takeover took place on January 30, and the defects were pointed out only on the last day of February. The Supreme Court concluded that the delay of a full 28 days from the date of handing over the work and pointing out its obvious defects is not legal, and evaluated the claim as not being made without unnecessary delay, and therefore delayed.

 It is also necessary to take into account that the deadline for exercising rights from defective performance is suspended for the period of impossibility to use the defective object of performance, if the acquirer justifiably blames the alienator for the defect. If a guarantee is agreed, the guarantee period does not run for the period during which the buyer cannot use the defective item. In our case, the period for claiming obvious defects of 6 months and hidden defects of 2 years can therefore be extended by the time of complaint resolution.

Therefore, if there is an attempt in the General Terms and Conditions to limit or determine the period during which liability for obvious or hidden defects can be claimed, then these provisions of the General Terms and Conditions are completely invalid with regard to the above.

I quote again:

In general, it is not taken into account such a manifestation of will by which the alienator would unilaterally limit the legal scope of his obligations due to defective performance in advance.

Also, those commercial heat treaters are wrong, which abdicate responsibility for the quality of the input material. It is necessary to maintain a cautious approach to this statement, as it may not always be legally valid – see case law

R NSČR 33 Cdo 4142/2008 Pursuant to § 645/2 of the Civil Code, the contractor is also liable for defects caused by defective material supplied by the customer or inappropriateness of his instructions. He is not responsible for such defects only if he has fulfilled the obligation to point out the inappropriateness of the material or instructions. The responsibility of the contractor is an objective responsibility (i.e. responsibility for the result), the contractor cannot absolve himself of his responsibility even by pointing out the culpable illegal actions of third parties. At the same time, defects of the material are considered not only it’s obvious and hidden defects, but also its properties that make it impossible to properly manufacture the ordered work.

It is therefore the duty of the heat treater to point out the unsuitability of the material, except in cases where this could not be detected even with the necessary care, § 2594. However, it is necessary to admit in favor of the heat treater that, above all, the Customer’s material will mainly be with hidden defects, and therefore the situation according to the above-mentioned jurisprudence will occur only exceptionally, e.g. when it is proven during sampling that some required properties cannot be achieved and a complete analysis of the input quality of the steel is subsequently carried out.

§ 2594: (1) The contractor shall notify the client without undue delay of the inappropriate nature of the item that the client handed over to him for the execution of the work, or the order that the client gave him. This does not apply if he could not detect the inappropriateness even when exercising the necessary care.

Procedures for dealing with claims from defects, both obvious and hidden, must also be handled with care. Rejection of the client’s claims may paradoxically lead to an increase in claims for the damage caused, because the client can have the work repaired by a third party without the Contractor being able to control the costs of such repair by a third party.

R NSČR 23 Cdo 4167/2014 In a situation where the contractor refused to deal with the removal of a duly claimed defect in the work, the customer has the right to a discount on the price of the work, even if he had the defect removed by a third party and did not inform the contractor of this fact before the removal of the defect

R NSČR 32 Cdo 4980/2014 If the contractor does not comply with the customer’s justified request for the free removal of a defect in the work by repair and the costs purposefully and predictably spent on removing this defect exceed the discount on the price of the work corresponding to this defect, these costs to the extent exceeding the discount on the price are reparable damage through damages.

The heat treaters also reserve the right to determine how the defect is to be communicated. As follows from the case law of the Supreme Court, it is immaterial whether the defect was reported orally, in writing or by telephone. It is therefore risky to limit the Customer to a predetermined method according to the General Terms and Conditions, as it may not be legally binding.

What to say in conclusion? The General Terms and Conditions do not and cannot serve to limit the Customer’s rights and claims from defective performance. According to § 1751, the terms of business are intended to specify what the contract does not contain.

However, since heat treatment is usually an activity on the basis of an order, without further contractual agreement, and a contractual relationship is only achieved by confirming the acceptance of the order, then the General Terms and Conditions should primarily contain a more detailed view of the technical requirements, conditioning the acceptance of the order with regard to the drawing specification or to the specification according to the order, and at the same time the definition of everything that does not normally appear in ordinary documents aimed at concluding a contract.

However, what is stated in § 1753 also applies.

 § 1753:   Provisions of business terms that the other party could not reasonably have expected are ineffective unless expressly accepted by that party; contrary arrangements are not taken into account. Whether it is such a provision will be assessed not only with regard to its content, but also to the way it is expressed

However, since the order acceptance process is an internal procedure of the Contractor, in order to review the contract with a feasibility assessment, it is usually a process without the direct participation of the Customer. Therefore, its explicit acceptance is not considered, and this is also the reason why the General Terms and Conditions cannot contain unexpected provisions, more or less limiting the Customer’s rights from defective performance

November 17, 2022

Jiří Stanislav