Sale of defective goods: who bears the burden of proof?

With Judgment no. 11748 of May 3, 2019, the Joint Sections of the Court of Cassation settled the jurisprudential dispute over the burden of proof in regard to the sale of defective goods, stating that the buyer who acts to terminate the agreement or to reduce the price, shall bear the burden of proof (among other) the existence of the defect.

Factual background

In the context of a sales relationship between two companies, one company bought several glass items from another.  As a result of the buyer’s non-payment, the seller requested and obtained an injunction for payment against the buyer.

In challenging the payment order, the buyer claimed to have received defective goods, promptly reporting the alleged faults. However, the First Instance Court found that the buyer failed to prove that the items were defective and therefore rejected the buyer’s claims. The decision was appealed and thereafter it was submitted to the Supreme Court.

Legal issues

The Court of Cassation is called upon to decide who is to bear the burden of proof in the event of defective products’ sale.  In other words, is it the buyer who must prove that the good is defective, or is it the seller who must prove that this good is defect-free?

Until 2013 the answer to this question was clear: the buyer had to prove the defectiveness of the good.

From 2013 onwards, however, some courts have gone in the opposite direction, stating that it is up to the seller to demonstrate that they have delivered defect-free goods.

This is because some courts have applied a well-established case-law principle in the matter of contractual liability, affirmed by the Court of Cassation since 2001, to the sales relationship.  According to this principle, in the event of non-performance, the creditor (the plaintiff) has to prove only the contractual basis of the claim (i.e., the existence of a valid agreement), while the burden of proving that the creditor has no rights (e.g., because the performance has been fulfilled) remains upon the debtor (the defendant).

These two different approaches have resulted in conflicting judgments in similar cases.  The Court of Cassation, in its most authoritative composition, has therefore intervened to resolve this conflict.

The Court of Cassation’s decision

To understand whether the principle established by the Court of Cassation as from 2001 applies to the case at hand, it is necessary to ask whether the delivery of a defective good can be regarded as non-performance.

In other words, is the seller obliged to deliver a defect-free good?  The answer of the Supreme Court is, surprisingly, negative.

According to the Joint Sections of the Supreme Court, the seller simply bears the obligation to deliver the goods in the condition in which they were at the time of sale, and in accordance with the agreed terms and conditions.

Indeed, although Section 1476 of the Italian Civil Code requires the seller to guarantee the buyer against defects, such a requirement should not be regarded as an “obligation” in the narrow sense but rather as a state of subjection to the buyer’s willingness to act for the termination of the agreement or for the reduction of the price.

Since the guarantee of the goods cannot be framed within the scheme of non-performance, the principle established by the Court of Cassation in contractual liability matter does not apply in the case of defective products sale. As a result, the burden of the proof that there is a defect in the goods that are being sold falls solely on the buyer

Concluding remarks and practical tips

Although the premises of the Court of Cassation’s reasoning may appear disputable, the practical effect seems reasonable and consistent with both the principle established in Article 2697 of the Italian Civil Code and the so-called principle of “proximity of proof”, according to which the burden of proof is to be shared by taking into account the concrete possibility of the parties proving the facts under their respective purview.

In other words, it is reasonable to put the burden of proof on the party “closest” to the fact to be proved. Indeed, it is easier for the buyer (who holds the good) to demonstrate that the good is defective, rather than for the seller to prove that the good at-issue is defects-free.

This principle is also applied in other very common business contracts, such as, in a procurement agreement. Here, the burden of proving the non-conformity of the good lies with the contractor until the good is accepted by the buyer. Only once the good is available to it does the buyer bear the burden of proving that there are any defects.

In conclusion, while, in the past, the buyer could rest on the circumstance that the mere allegation of the presence of defects might be sufficient to request the termination of the agreement or a reduction in price, following this very important ruling the buyer will have to be much more careful to secure evidence of the defects. For this purpose, the buyer may use any tool, from preventive technical investigations on an interim basis, expert opinions or, perhaps, even simple photographs.

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