The sales contract can be reduced to the simple formula “goods for money.” Here you will find an overview of the sales contract law.
Subject of the sales contract
With a sales contract, the seller undertakes to sell the object of purchase to the buyer and transfer ownership to it. The buyer is obligated to pay the purchase price (art. 184 para. 1 CO).
The object of purchase can be of various kinds:
- Movable goods and immovable goods (real estate)
- Generic goods and specific goods
- Generic goods or fungible goods: The object of purchase is determined only by general characteristics (quality, etc.).
- One ton of wheat
- 1,000 liters of heating oil
- A clothing item from a catalog
- etc.
- Specific goods: An individually specified object of purchase and no other is to be bought.
- A painting
- A used car
- An exhibit
- etc.
- Generic goods or fungible goods: The object of purchase is determined only by general characteristics (quality, etc.).
- Rights
- Claim rights (purchase of a debt, etc.)
- Intellectual property rights
- etc.
- Complexes of things
- Library, inventory, etc.
- Inheritance
- etc.
- Business (asset deal)
- Company shares, stocks (share deal)
Distinguishing from other contracts
Work Contract
If an item is custom-made for the buyer, a contract for services or a contract for work and materials is concluded (art. 363 et seq. CO). If the items are mass-produced, a sales contract exists, even if the purchased item has not yet been manufactured.
Leasing
In leasing, the lessee does not become the owner of the leased object. The lessee only has a right to use the leased object.
Gift (Donation)
Gifts are made without charge, unlike purchases. If the purchase price is intentionally lower than objectively expected, it is considered a mixed gift. If such a gift intention is absent, it is regarded as a purchase, even if the price is very low.
Exchange (Barter)
In an exchange contract, the exchange objects are simply swapped instead of mutual payment of a purchase price. Therefore, no money flows in this transaction.
Form of the Sales Contract
The sales contract for movable goods is concluded without any formal requirements and can, therefore, be concluded orally or implicitly.
Depending on the situation – and the complexity of the sales contract – it may be sensible to conclude the contract in writing and reserve the written form for the conclusion of the contract. In everyday transactions (such as shopping in a supermarket or at a kiosk), written contracts would be an obstacle.
Sales contracts for real estate, as well as preliminary agreements and contracts that involve a right of preemption, purchase, or repurchase, must not only be in writing but also require public notarization (art. 216 CO).
Purchase price
Usually, the purchase price is specified in the sales contract. It is sufficient if it can be determined. The purchase price is to be paid in money (art. 84 para. 1 CO).
If the purchase price is not determined in the sales contract, it is presumed that the average market price at the place of performance and at the time of performance is intended (art. 212 para. 1 CO).
In case of uncertainty about the value of the purchased object at the time of future transfer of ownership, price adjustment mechanisms can be agreed upon. The price is adjusted based on the increase or decrease in the value of the purchased object.
If the price is to be calculated based on the weight of the goods, the packaging is deducted (art. 212 para. 2 CO).
The determination of the purchase price is generally left to the parties (supply and demand). However, there may be limits to private autonomy (price regulators, pharmaceuticals, etc.).
The cantons may require that claims arising from the retail sale of spirits and restaurant bills (food and drink in restaurants) are not subject to legal action (art. 186 CO). However, dining and dashing (leaving without paying the bill) is punishable by law (art. 149 of the Swiss Criminal Code).
Conclusion
The sales contract is concluded as soon as the parties have agreed on the essential terms of the contract. The essential points are the subject of purchase and the purchase price. For real estate purchase contracts, public notarization is required for the conclusion of the contract.
Seller’s Obligations
Transfer of Possession
The seller must transfer possession of the purchased item to the buyer in the case of movable goods. This is usually done by handing over the item itself (art. 184 para. 1 CO; art. 922 et seq. CC).
Transfer of Ownership
The seller must “convey” ownership of the purchased object to the buyer (art. 184 para. 1 CO). In the case of movable goods, ownership is transferred with the transfer of possession (art. 714 CC), and in the case of real estate, it occurs with the registration of the acquirer in the land register (art. 656 CC). When transferring rights, the seller must take all necessary steps to ensure that the acquirer becomes the holder of the right.
The buyer must be provided with unencumbered ownership in principle. The purchased object must be free from third-party rights (limited real rights, obligatory rights).
The transfer of ownership depends on the existence of a valid sales contract. If the sales contract is defective (disagreement, invalid form, immorality, etc.), ownership does not transfer.
Ancillary Obligations
Unless otherwise agreed or customary, the seller bears the costs of the transfer (art. 188 CO).
Default and Non-fulfillment by the Seller
If a specific delivery date has been agreed upon (firm deal) in commercial transactions, the buyer’s claims are governed by art. 190 CO. It is presumed that the buyer rescinds the contract and claims damages for non-fulfillment. The buyer can instead insist on contract fulfillment (art. 190 para. 2 CO).
In non-commercial transactions where a specific delivery date has been agreed upon, the buyer must proceed according to art. 107 CO. The buyer must set a grace period for the seller (art. 107 para. 1 CO). A grace period may be dispensable in special cases (art. 108 CO). After expiry of the grace period, the buyer can alternatively:
- Demand contract fulfillment and claim damages for delay (art. 107 para. 2 CO).
- Waive performance and claim damages for non-fulfillment (art. 107 para. 2 CO).
- Rescind the contract (art. 107 para. 2 CO) and claim damages due to the contract’s lapse (art. 109 para. 2 CO).
Buyer’s Obligations
Payment of the Purchase Price
The buyer is obligated to pay the agreed purchase price to the seller (art. 184 para. 1 CO; art. 211 para. 1 CO).
Unless otherwise agreed, the purchase price is to be paid upon the transfer of the purchased item (art. 184 para. 2 OR; art. 213 para. 1 CO).
Without a different agreement, the purchase price must be paid in Swiss Francs (art. 84 para. 1 CO).
Acceptance of the Purchased Item
The buyer is obligated to accept the purchased item offered by the seller in accordance with the contract (art. 211 para. 1 CO). Acceptance must take place immediately, unless otherwise agreed or customary (art. 211 para. 2 CO).
Ancillary Obligations
If nothing else is agreed, the buyer bears the costs for the transport of the purchased item (art. 189 para. 1 CO).
Inspecting the purchased item at or after delivery is not an obligation but a duty of the buyer (art. 201 para. 1 CO).
Default and Non-fulfillment by the Buyer
If the buyer is in default with the payment of the purchase price, the seller can immediately withdraw from the contract (art. 214 para. 1 CO). No reminder is needed. If the seller wants to withdraw from the contract, they must inform the buyer immediately. If the purchased item has already been handed over, the seller can only withdraw if they have expressly reserved right to do so (art. 214 para. 3 CO).
In commercial transactions, the seller can also claim damages from the buyer (art. 215 CO).
Benefits and risks
In general, the use and risk of the purchased item are transferred to the buyer upon the conclusion of the sales contract, unless the parties have agreed otherwise or specific circumstances exist (art. 185 para. 1 CO).
Unless otherwise specified in the sales contract, the buyer bears the risk of accidental loss of the purchased item. This provision is not problematic when the purchased item is handed over simultaneously with payment upon concluding the sales contract.
In situations where the buyer does not immediately become the owner, it is recommended to specify the point in time when the use and risk are transferred in the sales contract.
If the seller is in default with handing over the purchased item, they bear the risk of accidental loss (art. 103 para. 1 CO).
Agreement | Risk Transfer | Basis |
---|---|---|
Sale of specific item (specific goods) | At the conclusion of the sales contract | art. 185 para. 1 CO; art. 74 para. 2 cif. 2 u. 3 CO |
Agreement on a place of performance | When the purchased item arrives at the place of performance | BGE 84 II 162; art. 74 para. 1 CO |
Agreement on an obligation to deliver | When the purchased item arrives at the buyer’s place of business / residence | art. 74 para. 1 CO |
Sale by dispatch (shipment sale) | With the handover of the purchased item to the carrier or forwarder | art. 185 para. 2 CO |
Generic purchase | With the segregation of the goods | art. 185 para. 2 CO |
Sale subject to a suspensive condition | When the condition occurs | art. 185 para. 3 CO |
Entitlement by Others
The seller must guarantee that the purchased item is not taken away from the buyer by a third party due to legal reasons that existed at the time of contract conclusion (art. 192 para. 1 CO). This may be the case if the purchased item was not owned by the seller or if the seller was not authorized to sell it. If the purchased item is taken away from the buyer, they can demand, among other things, a refund of the purchase price and damages (art. 195 CO).
If the buyer was aware of the risk of entitlement by others, the seller is only responsible to the extent that they have expressly committed to it (art. 192 para. 2 CO).
The warranty against entitlement by others can be waived unless the seller deliberately concealed the third party’s right (art. 192 para. 3 CO).
If the buyer of a movable object is acting in good faith, the object cannot be taken away from them (art. 714 para. 2 CC; art. 933 CC). Therefore, in such cases, the buyer has no claim for damages.
Defects and Warranty
Defects of the Purchased Item and Seller’s Warranty
The seller is liable to the buyer for ensuring that the purchased item is free from physical or legal defects that would either deprive it of its value or suitability for the intended use or significantly reduce it. The same applies to guaranteed characteristics of the purchased item (art. 197 CO).
Buyer’s Knowledge
If the buyer is aware of the defect, the seller is not liable. For defects that the buyer should have known about, the seller is only liable if they have guaranteed their absence (art. 200 CO).
Waiver of Warranty
The warranty can be contractually waived. Such waiver from the warranty is invalid if the seller deceitfully conceals existing defects (art. 199 CO).
Warranty is often replaced by a “guarantee” provided by the seller. Guarantee services replace the buyer’s warranty claims and limit the services to be provided by the manufacturer or seller in case of defects.
In the case of the purchase of used vehicles (second-hand vehicles), the warranty is often waived by statements like “sold as seen” or “without warranty.”
Distinction between Warranty and Guarantee
In colloquial language, the term “guarantee” is often not distinguished between an independent guarantee according to art. 111 CO, the buyer’s warranty claims according to art. 197 et seq. CO, and the guarantee provided by the seller. The independent guarantee according to art. 111 CO is a promise of performance made by a third party. The guarantee provided by the seller can replace the buyer’s warranty claims through a voluntary commitment by the seller to provide certain services in case of defects (e.g., exchange under certain conditions, etc.).
Inspection and Notice of Defects
The buyer must inspect the purchased item as soon as possible and check for any defects. This is an obligation on the part of the buyer. If defects or deviations from guaranteed properties are discovered, they must be promptly notified to the seller (art. 201 para. 1 CO). The time required for the buyer to inspect the purchased item and make a notice of defects depends on the complexity of the purchase and the extent of the examination. In general, a few working days are sufficient.
If the buyer does not notify the seller of a defect or does so untimely, the purchase shall be deemed approved with regard to visible defects (art. 201 para. 2 CO).
Non-apparent defects can also be notified later when discovered. The notice must be given immediately after discovery (art. 201 para. 3 CO).
If the seller has deliberately deceived the buyer, the seller is still liable even if the buyer did not notify or delayed the notice of defects (art. 203 CO).
Buyer’s Claims for Defects
The buyer can only assert claims for defects if the warranty has not been validly excluded.
Buyer’s Right to Choose
The buyer has the right to choose between “rescission” (cancellation of the contract) and “reduction of price” (reducing the purchase price) (art. 205 CO). Although “remedial action” is not provided for by law, it is often agreed upon. If remedial action is agreed upon, the seller often retains the right to carry out the remedial action. However, the buyer’s right to choose is usually restricted in such cases.
If the purchased item consists of a specific quantity of fungible goods, the buyer can choose between rescission, price reduction, or delivery of non-defective goods (art. 206 para. 1 CO). In a “place sale,” the seller can free themselves from further claims of the buyer by immediately delivering non-defective goods and compensating for damages (art. 206 para. 2 CO).
Rescission
With rescission, the sales contract is unwound. The buyer must return the purchased item to the seller, and the seller must refund the received purchase price (art. 208 CO). If the seller does not comply with rescission voluntarily, the buyer must initiate legal proceedings.
In addition to the purchase price with interest, the seller must also compensate the buyer for the legal costs and the direct damages incurred due to the delivery of defective goods (art. 208 para. 2 CO). The seller must also compensate the buyer for any further damages, unless they can prove that they are not at fault (art. 208 para. 3 CO).
Rescission can also be demanded if the purchased item is lost due to defects or by accident (art. 207 para. 1 CO). If the buyer has resold or processed the purchased item or if the loss of the purchased item is due to the buyer’s fault, rescission is excluded, and the buyer can only claim a reduction in price (art. 207 para. 3 CO).
If circumstances do not justify unwinding the purchase, the court may order a reduction in price instead of rescission (art. 205 para. 2 CO).
Reduction of Price
With the reduction of price, the reduced value of the purchased item is taken into account, and a reduced price for the purchased item is determined. The buyer pays the reduced price to the seller, or the seller refunds a portion of the purchase price to the buyer.
The reduction of price is calculated using the relative method. he value of the purchased item in a non-defective condition is compared to its value in a defective condition, and the purchase price is reduced in proportion to the reduced value.
If the reduced value is equal to the amount of the purchase price, only rescission is possible (art. 205 para. 3 CO).
Damages
The buyer has the option to claim damages for non-performance or inadequate performance in addition to rescission or a price reduction (art. 97 et seq. CO). The seller’s fault is a prerequisite.
Compensation claims based on tort law are also possible under certain conditions (art. 41 et seq. CO). Finally, compensation claims based on the Product Liability Act or the Product Safety Act may be applicable if the necessary conditions are met.
Expiration of Buyer’s Claims for Defects
The general limitation period for the buyer’s claims for defects is two years from the delivery of the purchased item to the buyer (art. 210 para. 1 CO).
The limitation period is five years if the purchased material is intended for use in a building and has caused a defect in the construction work (art. 210 para. 2 CO).
The limitation period can be shortened by agreement. However, shortening the limitation period is not or only partially permissible if the purchased item is intended for the personal or family use of the buyer (art. 210 para. 4 CO). The buyer’s warranty claims can be fully waived by agreement (art. 199 CO).
If the buyer has raised a notice of defects in time and within the limitation period, their claims (rescission, reduction of price) remain valid (art. 210 para. 5 CO).
In cases of deliberate deception of the buyer, the seller cannot rely on the limitation period (art. 210 para. 6 CO).
Contract Rescission due to Defects in Will Formation
Alternatively to the warranty claims for defects, the buyer can rely on a mistake according to art. 23 et seq. CO and, for example, claim that they would not have purchased the item if they had known about its defectiveness.
The mistake must be asserted within one year from its discovery (art. 31 CO).
If the buyer asserts warranty claims before asserting the mistake, the contract is considered accepted according to the case law, which excludes the assertion of a mistake.
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