Termination of a Purchase Agreement under the Alienation Act – Delays and Defects

The Alienation Act regulates the buyer's right to terminate the agreement both in case of delay (§ 4-3) and defects (§ 4-13). In both cases, the condition is that the breach of contract constitutes a "significant breach of contract." An overall assessment must be made of whether the buyer has a reasonable basis to be released from the agreement. The threshold for termination is generally high, as this is a severe reaction reserved for the most serious cases of contractual breach.

Termination in case of delay

A delay occurs when the seller does not make the property available to the buyer at the agreed time. In Rt. 2007 p. 1587, the Supreme Court stated that the right to refuse can only be applicable in cases where the property needs repair at the time of takeover and, until repaired, cannot be considered habitable.

Termination in case of defects

For agreements entered into after January 1, 2022, the seller cannot make general reservations about the condition of the property ("as is" reservations) in consumer purchases. For a defect to give right to termination, it must constitute a significant breach of contract. In Rt. 1998 p. 1510, the Supreme Court stated that a significant breach of contract exists if the defect gives the buyer a "reasonable basis to be released from the contract."

In the assessment, emphasis is placed on whether a price reduction can restore the balance in the contractual relationship. As an example, in Rt. 2010 p. 710, the Supreme Court concluded that the conditions for termination were met in a case where repair costs amounted to 35% of the purchase price. In addition to the costs, it was emphasized that the repair would cause significant inconvenience.

Complaint and termination declaration

The buyer must complain within a "reasonable time" after discovering the defect (§ 4-19). Subsequently, the buyer must declare termination to the seller within a "reasonable time" after becoming aware of the reason for termination (§ 4-13 second paragraph).

The right to terminate can be lost if the property is "deteriorated" while the buyer bears the risk for it (§ 4-13 third paragraph). However, this does not apply when the cause of deterioration is an accidental event or other circumstances for which the buyer does not bear the risk.

Conclusion

Case law shows that it takes a lot to succeed in a termination claim. When assessing whether the conditions are met, a concrete overall assessment must be made, considering all relevant circumstances.