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Sale of Goods

 

A contract for the sale of goods can be entered into in writing or orally.  The concept of the Statute of Frauds does not exist in Swiss law.  This holds true for both substantive and procedural law.  The existence of a sales agreement may be proven in court by all means receivable in evidence, including witnesses.  In addition, the requirements that there must be a bargained-for exchange between the parties and that this exchange must have legal value do not exist in Swiss law.

A sales contract - as any other contract - has been validly formed if there has been "mutual assent".  That is, both parties must intend to contract, and they must agree on at least the main terms of their deal.  In determing whether the parties have reached mutual assent, what matters is not what each party subjetively intended.  Instead, a party's intentions are measured by what a reasonable person in the position of the other party would have thought the first party intended, based on the first party's actions and statements.  This principle is known as the "objective theory of contracts".

Switzerland joined the United Nations Convention on contracts for the international sale of goods ("Vienna Convention") on March 1, 1991.  The Vienna Convention applies to sales agreements between parties whose places of business are in different states.  Otherwise domestic law applies.

Contracts for the sale of goods between parties located in Switzerland are governed by Art. 184 to Art. 215 of the Swiss Code of Obligations.  They are, basically, comparable to Art. 2 of the United States Uniform Commercial Code.  There is no separate body of law governing the commercial relationship between merchants.

 

Passage of Title

Passage of title is not automatically triggered by the conclusion of a contract for sale.  The conclusion of such a contract merely constitutes the seller's promise to convey title to the purchaser.  Similarly, the question of whether and when the price is paid does not have any bearing on passage of title.  Rather, passage of title occurs when the seller, in discharge of the promise made, conveys possession of the goods to the buyer.  Hence, title to goods passes once the goods are handed over to the buyer.  If the seller has to deliver a document of title (e.g., a bill of lading), title passes with the delivery of the document.  The very moment of passage of title is usually agreed upon in the purchase contract.  If nothing is defined in the agreement, the buyer is obligated to convey title immediately after conclusion of the sales contract.

 

Warranty of Seller

The parties to a contract are free to determine their respective contractual obligations.  They are free to restrict their liability and they also may extend it beyond statutory limits.  The seller may, for instance, assume an obligation to repair any defects though under the Code of Obligations the buyer has no claim for repairs.  The parties can agree upon an express warranty for the quality of the goods.  Without any contractual provision, the seller is liable for any defective or malfunctioning goods.  The buyer, however, must provide the buyer immediately upon discovery of the defect with a notice informing the buyer about extent of the defect.

 

Damages in Sales Contracts

If the seller fails to deliver the goods at all, or delivers defective goods which the buyer rightfully rejects, the buyer has a choice of remedies:

The most important of these is his right to "cover", i.e., to buy the goods from another seller, and to recover the difference between the contract price and the cover price from the seller.

If the buyer decides not to purchase the goods elsewhere, he can recover the traditional contract measure of damages, i.e., the difference between the contract price and the market price at the time of the breach.

Last but not least, the buyer may also obtain a decree ordering specific performance of the contract. 

No matter which of these three remedies he obtains, the buyer may also recover incidental and consequential damages stemming from the breach.

 

 

     

Roger Groner, Dr. iur., LL.M., Rechtsanwalt

www.gronerlaw.ch