Friday, March 28, 2014

Warranties Under the Civil Code

The Omani Civil Code, promulgated by Royal Decree 29/2013, has provided clarity and guidance on several key facets of commercial and civil transactions. One key area relates to warranties.

This article provides an overview in this regard.

“Buyer Beware”, be gone!

“Buyer Beware”, a customary (albeit largely dormant) practice in much of the world, which allocates virtually all risk to the purchaser as regards the “fitness” of a good purchased or service rendered, has been directly addressed and impliedly negated by Article 403 of the Civil Code.

Article 403 provides:

  1. If an old (pre-existing) defect appears in the goods sold, the purchaser shall have the option as he wishes either to return the goods or to accept them at the stipulated price. 
  2. The defect shall be deemed to be old if it was present in the goods sold prior to the sale, or if it arises thereafter while the goods are still in the hands of the seller prior to delivery. 
  3. A new defect (which arises while the goods are with the purchaser) shall be regarded as an old defect if it is attributable to an old cause which existed in the goods when they were still with the seller.
As such, a seller is required to assure that a product sold must be fit for purpose.

Protections for sellers under the Civil Code

The Civil Code provides some protection for sellers against potential claims from purchasers, in that Article 403 provides that the seller shall not be responsible for an old defect if the seller disclosed the defect to the purchaser at the time of the transaction, or if the purchaser purchases the goods with knowledge of the defect therein.

Furthermore, Article 407 provides:
  1. If a new defect arises in the goods in the hands of purchaser, he may not return them on the grounds of an old defect, but he shall be restricted to a claim against the seller for the reduction in price, unless the seller agrees to take the goods back with the new defect. 
  2. If the new defect is removed, the purchaser shall again have a right to return the goods to the seller on the grounds of the old defect.
As such, it is in the seller’s (and purchaser’s) best interest to accurately record the condition of the goods at the time it is sold.

Importantly, Article 401 states that “the seller shall not guarantee a defect which is deemed pardonable by custom”.  For example, a seller of perishable goods, or a seller of auto parts, where mechanical issues frequently arise, cannot be expected to provide (or uphold) warranties that are unreasonable by custom or in practice.