If a product fails to fulfill its intended purpose, this can constitute a fundamental breach of contract under the UN Convention on Contracts for the International Sale of Goods (CISG). The Austrian Supreme Court (OGH) emphasizes that a purpose disclosed to the seller can play a central role in assessing conformity with the contract.
A Slovenian company delivered a mobile telescopic grandstand system worth over €2.5 million net to an Austrian trade fair organizer. The buyer intended to replace its existing container-based grandstand system and, in particular, to significantly reduce assembly and disassembly times. Even before the contract was signed, the site conditions were discussed. The buyer informed the supplier about uneven ground, expansion joints, access routes, and storage areas, among other things. However, after delivery, it became apparent that, due to the specific ground conditions, the system could not be extended and retracted at the push of a button as expected. The anticipated significant time savings therefore failed to materialize.
The Austrian Supreme Court (OGH) first confirmed the applicability of the UN Convention on Contracts for the International Sale of Goods (CISG). This also applies to contracts for goods to be manufactured and can, in principle, also be applied if the contract is concluded within the framework of a tendering procedure. The decisive question then became what requirements had to be met regarding the conformity of the grandstand system with the contract. According to the OGH, a specifically disclosed intended use must also be taken into account when interpreting the contract. If the seller knows for what specific purpose the buyer needs the goods, the lack of suitability for this purpose can constitute a fundamental breach of contract under Article 25 CISG. Therefore, it was not only crucial whether the grandstand system functioned in principle, but also whether it met the requirements known to the seller at the intended place of use. The OGH's statement on national law regarding mistake is particularly relevant. If the issue concerns a mistake regarding the contractual characteristics of the purchased item, recourse cannot be made to national rules on contesting a contract due to mistake. The CISG contains a comprehensive regulation for this area.
This decision demonstrates the importance of clearly documenting the specific purpose of an international supply contract. Sellers should explicitly state known operating conditions and potential technical limitations of their products. For buyers, it can be crucial to disclose specific requirements before concluding the contract. This is because, with complex systems, it is not only important whether the product functions in principle, but also whether it is suitable for the specific application known to the seller.
Supreme Court 30.06.2026, 6 Ob 100/25m