LICKS ATTORNEYS' AGREEMENTS BLOG
Understanding hidden defects in contracts
Who has never bought an electronic device that, after a few days of use, starts to malfunction? You go into despair because you financed the purchase in many installments and when you look for the store that sold it, you are told that the warranty offered is only 7 days. After this period, the 90-day legal warranty provided for in the Brazilian Consumer Protection Code for non-durable goods comes into effect. However, the defect only appeared after 180 days and, when purchasing the product, you did not “extend” the warranty to 1 year. In fact, despite being a common practice in the traditional or virtual commerce, the extended warranty tends to be very expensive and causes a lot of headaches for the user when in need to use it. Now what?
The fact is that there is no other alternative than to seek technical assistance and be prepared to pay for the repair out of your own pocket. However, when opening the equipment, the technician finds that the equipment had already undergone repairs, therefore being a refurbished equipment that had been sold as if it were a new product.
Here, we are faced with an example of a hidden defect!!! Where at no time was this condition presented to you by the seller.
Definition of Hidden Defect
Although the term “hidden defect” may seem like a dirty word to the average citizen who is not a legal scholar, it means nothing more than concealed defects in a good or product that (i) make it unfit for its intended use or (ii) significantly reduce its value. These defects are not apparent at the time of purchase, being pre-existing in the good or product and, if the buyer had known of their existence, he probably would not have purchased the product or would have paid a lower price.
Therefore, it is clear that the buyer was not aware of the situation described above. On the other hand, if such condition had been exposed in a transparent manner by the seller and if the seller had been able to prove the condition of the product as a refurbished good, such condition would cease to be a hidden defect, that is, a concealed defect, as the buyer would be aware of such condition and possibly purchasing the product at a discount on the average market price, due to such condition.
Legal Grounds for Hidden Defect
In Brazilian law, hidden defects are regulated in the Brazilian Civil Code, specifically in articles 441 to 446:
|
Article |
Description |
|
441 |
The thing received through a commutative contract may be rejected due to hidden defects or flaws, which make it unsuitable for its intended use or reduce its value. |
|
442 |
Instead of rejecting the item, by returning the contract (article 441), the buyer may claim a price reduction. |
|
443 |
If the seller knew of the defect or flaw in the item, he will return what he received, with losses and damages; if the seller was not aware of it, he will only refund the amount received, plus the contract expenses. |
|
444 |
The liability of the seller subsists even if the thing perishes in the possession of the buyer, if it perishes due to a hidden defect, already existing at the time of transfer. |
|
445 |
The buyer loses the right to obtain restitution or a reduction in the price within thirty days if the item is movable property, and one year if it is real estate, counted from the effective delivery; if it was already in possession, the term is counted from the sale, reduced by half. |
Additionally, although the Brazilian Consumer Protection Code is not explicit regarding hidden defects, the provisions below may assist in its grounding, if the object of the dispute arises from a consumer transaction:
|
Article |
Description |
|
18 |
Suppliers of durable or non-durable consumer goods are jointly and severally liable for defects in quality or quantity that make them unsuitable or inadequate for the intended use or reduce their value, as well as for those resulting from disparity with the indications on the container, packaging, labeling, or advertising message, respecting variations resulting from their nature, and the consumer may demand the replacement of the defective parts. |
|
20 |
The service provider is liable for quality defects that make the service unfit for consumption or reduce its value, as well as for those arising from disparity with the information contained in the offer or advertising message, and the consumer may demand, alternatively and at their choice: |
|
23 |
The supplier's ignorance of quality defects due to the inadequacy of products and services does not exempt him from liability. |
|
26 |
The right to complain about apparent or easily detectable defects expires in:
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Deadline for Hidden Defects Complaints
This period varies in Brazilian law, depending on whether the good or product in question is the result of a consumer transaction or not.
If the good or product is the result of a consumer transaction, the rules arising from the Brazilian Consumer Protection Code apply. In this case, the same peremptive periods provided for apparent defect complaints will apply, that is, 30 days for non-durable goods and 90 days for durable goods, with such periods being counted from the day on which the buyer becomes aware of the hidden defect.
If the good or product is not the result of a consumer transaction, the terms of the Brazilian Civil Code prevail, that is, for movable property, the term will be 30 days and for real estate, the term will be 1 year, from the moment of effective delivery of the good. However, the same device establishes that if the defect can only be discovered later, the period will be counted from the moment the buyer becomes aware of the defect, up to a maximum period of 180 days for movable property; and 1 year for real estate.
Seller's Liability for Hidden Defects
Again, there is a distinction in the seller's liability depending on whether we are referring to a good or product arising from a consumer transaction or not.
If the reference is to a good or product resulting from a consumer transaction, the Brazilian Consumer Protection Code makes it clear that the seller's (supplier's) ignorance of quality defects due to inadequacy of products and services does not exempt him from liability. Therefore, the buyer can return the goods or agree to the return of part of the amount paid.
If the reference is to a good or product not arising from a consumer transaction, the Brazilian Civil Code distinguishes the seller's liability according to whether or not he is aware of the hidden defect, that is, if the seller was aware of the defect or flaw in the item, he must return to the buyer what he received, with losses and damages. However, if he was not aware, the seller must only refund the amount received, plus the contract expenses. In this case, the buyer may also request a refund of part of the paid amount and keep the good or product.
Pre-existence of Hidden Defect
An aspect of significant relevance for those who will apply or claim something due to a hidden defect is the need for its pre-existence at the time of sale of the good or product, even if the defect only becomes apparent later.
The predominant court precedents in Brazil draw attention to this requirement, as per the summary below:
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Court of Appeals of DF – XXXXX20218070014 1725503
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DJGO August 09, 2024 – Page 1761 – Section I – Justice Gazette of the State of Goiás
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DJRO June 30, 2021 – Page 2035 – Justice Gazette of the State of Rondônia
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DJSE April 14, 2023 – Page 184 – Justice Gazette of the State of Sergipe
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Therefore, the pre-existence of the defect is imperative to characterize the right to reject or discount the price of the good in favor of the buyer, since the defect could be due to natural wear and tear or some other condition for which the seller would not be responsible, in accordance with the law.
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