Time and again, problems arise in the development of (especially customized) software solutions that lead to disputes between customers and software developers. In its decision of May 27, 2025, the Supreme Court (OGH) dealt with an extraordinary appeal by a (defendant) software supplier. The subject of the proceedings was a claim for rescission due to defects in a software solution developed specifically for a leak detection company. The OGH dismissed the appeal because there was no significant legal issue within the meaning of Section 502 (1) of the Code of Civil Procedure (ZPO). The decision contains important clarifications regarding the definition of merely minor defects in software contracts and the application of the warranty provisions under Section 932 of the Austrian Civil Code (ABGB) (old version).
In spring 2021, the plaintiff commissioned the defendant to develop an integrated software solution for reporting, accounting, and appointment management, including the supply of tablets. During preliminary discussions, certain requirements were specified, in particular the possibility of reusing photos in automatically generated reports. However, this detail was not explicitly addressed. The contract value was approximately EUR 39,000 and was paid in full.
After implementation, it became apparent that photos could not be inserted multiple times in the report – when multiple photos were used, at least one image was missing without an error message being displayed. In addition, the reports contained formatting errors, which, in the plaintiff's view, left an unprofessional impression. Due to customer complaints, the plaintiff discontinued use of the software after just 14 days. She subsequently requested rescission of the contract and reimbursement of the purchase price (less a subsidy), arguing that the software was not functionally usable. The defendant argued that only minor defects ("unsightly defects") existed that did not significantly impair the functionality of the software.
Both the trial court and the appeal court granted the claim.
The Supreme Court (OGH) upheld the legal opinion of the lower courts and dismissed the extraordinary appeal on points of law for lack of a significant legal issue pursuant to Section 508a (2) of the Code of Civil Procedure in conjunction with Section 502 (1) of the Code of Civil Procedure. It clarified that no new leading decision by the Supreme Court was necessary if the specific legal issue – as in this case – could be resolved by balancing interests based on existing case law.
In the opinion of the Supreme Court, the lower courts correctly considered that not only the faulty image function, but also formatting problems led to a serious limitation of usability. These were not mere "cosmetic defects," but rather a functional impairment of the agreed-upon purpose. The plaintiff plausibly demonstrated that the use of the software in operational business was impossible. The cost aspect was also relevant: Fixing the image function would have cost between €2,400 and €12,000 – with a total price of approximately €39,000. The defendant was also criticized for neither offering to remedy the problem itself nor for having pre-financed the replacement work by third parties.
The defendant's extraordinary appeal was therefore dismissed. The decision of the Court of Appeal, which upheld the termination of the contract and the repayment of the sum paid, remained in place. The defects were classified as not minor, which entitled the plaintiff to rescission.
The decision emphasizes the importance of a precise definition of services in custom software projects. If the agreed contractual purpose—in this case, the professional creation of reports for end customers—is not fulfilled, a material defect may exist even with partial functional use. Companies should therefore attach importance to a detailed written service description and comprehensively test software solutions from an operational perspective upon acceptance, or exclude the obligation to provide notice of defects pursuant to Section 377 of the Austrian Commercial Code (UGB). This creates the need for software providers to respond proactively to improvement requests and at least offer remediation to minimize the risk of conversion.
Especially in cases where the specific intended use is highly dependent and significant repair costs are involved, the threshold for entitlement to a refund is quickly exceeded. The decision thus provides a practical and business-relevant definition of the concept of de minimis in the area of software warranties.
Supreme Court 27.05.2025, 1 Ob 67/25x
27.05.2025