Guarantee of hidden defects in the Egyptian law

Sale in the Egyptian law is a contract whereby the seller undertakes to deliver a specific thing to the buyer, and the buyer undertakes to pay a specific price for that thing. This contract is considered one of the most important and common civil contracts in daily transactions. The contract of sale must contain.

Firstly, consent, which means the agreement of two wills, the will of the seller and the will of the buyer, to create the contract and determine its subject and conditions.

Secondly, the scope of the contract (the sold item): which must be specific or capable of being specified, and must be legally permissible and tradable.

Thirdly, the price: the money that the buyer pays in exchange for the sale.

The contract of sale shall result in; The ownership of the sold item is transferred from the seller to the buyer as soon as the contract is concluded, unless the two parties agree to postpone the transfer of the ownership.

A guarantee for hidden defects is also required where the seller guarantees to the buyer that the sold item is free from hidden defects that make it unfit for use or reduce its value.

What is the hidden defect?

A hidden defect is a damage or deficiency in something purchased that was not apparent to the buyer at the time of the contract. In other words, it is a defect that is hidden from the buyer and that he/she was not aware of.

In order for a defect to be considered a hidden defect, the defects must be latent in the material of the sold item itself and present in it at the time the buyer receives it, and they must reduce its value according to the purpose for which it was prepared, and the buyer must prove that he/she was unable to discover it himself/herself if he/she had examined the sold item with the care of an ordinary person unless the seller had assured him/her that the sold item was free of them or had deliberately concealed them fraudulently.

Therefore, the seller’s obligation to guarantee hidden defects is an obligation required by the nature of things, because when a person buys something, it is supposed to be free of defects. If he/she had known that it had a defect, he/she would not have contracted to buy it, or he/she would have contracted for it but in a different form and manner.

The defect guarantee includes all sales, whether the subject matter is real estate or movable property, a tangible or intangible thing. Examples of the defect guarantee in sales of intangible things include if the sale is made to a store, and it turns out that it has a bad reputation

Legal provisions governing the guarantee of hidden defects in the Egyptian Civil Law

• Article (447):

(1) The seller shall be obligated to guarantee if the sold item does not have the qualities that he/she guaranteed to the buyer at the time of delivery, or if the sold item has a defect that reduces its value or benefit according to the intended purpose as inferred from what is stated in the contract or what is apparent from the nature of the item, or the purpose for which it was prepared, and the seller shall guarantee this defect even if he/she was not aware of its existence.

(2) However, the seller does not guarantee the defects that the buyer knew about at the time of the sale, or that he/she could have discovered himself/herself had he/she examined the sold item with the care of an ordinary person, unless the buyer proves that the seller assured him/her that the sold item was free of this defect unless he/she proves that the seller deliberately concealed the defect fraudulently.

• Article (448): The seller is not liable for a defect that is customarily tolerated.
• Article (449):

(1) If the buyer receives the sold item, he/she must verify its condition as soon as he/she is able to do so, in accordance with customary practice in dealings. If he/she discovers a defect for which the seller guarantees, the buyer must notify the seller by it within a reasonable period. If he/she does not do so, he/she is considered to have accepted the sold item.

(2) If the defect is one that cannot be discovered by normal inspection and then the buyer discovers it, he/she must notify the seller of it as soon as it appears, otherwise he/she will be considered to have accepted the sale with the defect in it.

• Article (450): If the buyer notifies the seller of the defect in a timely manner, he/she has the right to claim the guarantee in the manner stated in Article (444).
• Article (451): The guarantee claim remains even if the sold item is destroyed for any reason.
• Article (452):

(1) The guarantee claim shall be extinct by prescription if one year has passed from the time of delivery of the sold item, even if the buyer did not discover the defect until after that, unless the seller agrees to be bound by the guarantee for a longer period.

(2) However, the seller may not claim the extinctive prescription if it is proven that he/she intentionally concealed the defect fraudulently.

• Article (453): The contracting parties may agree to increase, decrease, or waive the guarantee, provided that any condition that waives or decreases the guarantee shall be void if the seller has intentionally concealed the defect in the item sold fraudulently.
• Article (454): There is no guarantee for defects in judicial sales, nor in administrative sales if they are by auction.
• Article (455): If the seller guarantees the suitability of the sold item for operation for a specified period and then a defect appears in the sold item, the buyer must notify the seller of this defect within a month of its appearance and file a lawsuit within a period of six months of this notification, otherwise his/her right to the guarantee will be forfeited, all of this unless otherwise agreed upon.

For a defect to be considered hidden and for the buyer to be entitled to claim the guarantee, the following conditions must be met

1- The defect must be present at the time of the contract:

that is, the defect must be present in the sold item before, after, and before delivery. This is because the seller is not liable for the defect unless it is old. What is meant here by old is that the defect must be present in the sold item at the time of delivery. It is sufficient that the defect be present in the sold item at the time of delivery, even if it was not present at the time of the contract.

However, if the defect arises after delivery, the seller is not liable for it. If it is proven that the defect was present in the sold item before delivery, but its consequences did not become serious until after that, the seller is liable for it. It is sufficient then that the original defect be present at the time of delivery.

2- The defect must be hidden:

the defect is not apparent to the eye and cannot be discovered by ordinary examination, and the buyer is not aware of it at the time of sale. This is because the seller is not liable for a defect that the buyer knew about at the time of sale or could have discovered himself/herself had he/she examined the item sold with due care, unless the buyer proves that the seller assured him that the sold item was free of this defect or that he/she deliberately concealed it fraudulently, it is not enough for the defect to be hidden, but it is also necessary that the buyer was not aware of it at the time of the contract.

If the buyer knew about the defect despite its concealment, the seller is not liable for it because the buyer’s proceeding to purchase despite his/her knowledge of the defect indicates that he/she was satisfied with the item as it was at the time of the contract and included it in his/her considerations when evaluating the price. 

3- The defect must be significant:

An effective defect is one that leads to a decrease in the value of the sale or a decrease in its benefit according to the intended purpose derived from what is stated in the contract or what is apparent from the nature of the thing or the purpose for which it was prepared, and there is a difference between a decrease in value and a decrease in benefit.

A decrease in value can be identified by determining the value of the sale in the market, while a decrease in benefit is determined on the basis of the purpose for which the buyer intends to use the sale, regardless of the value of the sale in the market.

Accordingly, the intended purpose of the sale is inferred from what is stated in the contract or from the nature of the thing or from the purpose for which it was prepared , and the seller does not guarantee the defect unless it is of a certain degree of seriousness and importance, and assessing the seriousness of the defect is a matter left to the judge of the subject matter to decide according to the previous criteria, all of which are objective and not personal. “The seller does not guarantee a defect that is tolerated by custom.”

Buyer’s rights in the event of a hidden defect

If the conditions of a hidden defect are met, the buyer has the right to take one of the following actions:

1. Terminate the Contract: i.e. returning the sold item and refund the price paid
2. Keeping the thing and reducing the price: meaning keeping the thing while obtaining a discount from the price equal to the value of the defect.

When does the plaintiff lose his/her right to file a defect guarantee claim?

There are some cases in which the buyer loses his/her right to claim the guarantee, such as:

If the buyer knew of the defects or should have known of them, he/she is not entitled to claim the guarantee, or if the defect is the result of the buyer’s misuse of the sold item, he/she is not entitled to claim the guarantee.

The legislator did not leave the buyer’s right for a guarantee claim due to the statute of extinctive prescription to the general rules, but rather set a short statute of limitations for its lapse, which is one year starting from the time of delivery of the sold item even if the buyer did not discover the defect during this period. The legislator intended to resolve the dispute in a short period following the sale, which would lead to the stability of transactions. What is meant by delivery in this case is actual delivery, not legal delivery, because actual delivery is what provides the buyer with the opportunity to examine the sold item in a way that enables him to discover the defect. Article (452) of the Civil Code stipulates that:

1- The defect warranty claim shall lapse if one year has passed from the time of delivery of the sold item, even if the buyer did not discover the defect until after that, unless the seller agrees to be bound by the warranty for a longer period.

2- The seller may not invoke the lapse if it is proven that he/she deliberately concealed the defect fraudulently.

The aforementioned statute of limitations period is subject to interruption, but it is not subject to suspension even if the creditor in the case (the buyer) is not fully competent, absent, or has been sentenced to a criminal penalty, and has no legal representative.