1. Overall
This article is an extension of our first article on delay where we reviewed the options at an overall level, as well as set out in more detail the buyer's right to maintain the purchase. The article exists here.
In this article, we focus on three forms of sanctions, namely reparations, day mulches and elevations.
Both standards have provisions for these sanctions, and the provisions are identical.
The provisions of the Standards on compensation and restitution also contain references to the rules of the Purchase Act.
2. Rule mirror
3. Replacement
3.1 Basis of responsibility
If there is “delay on the part of the seller” the buyer receives a claim for compensation, cf. the first paragraph of NS 8411 paragraph 17.1 and NS 8412 paragraph 15.1, respectively.
That the delay lies on “seller's page” means that the reason for the delay must be something the seller either has the responsibility or the risk for. If the delay was due to a circumstance for which the buyer is responsible or at risk, there will be no “delay on the part of the seller” and then the condition for claiming compensation is not met.
In order to establish a liability to the buyer, it is sufficient to establish that the above conditions are met.
No negligence or other reprehensible conduct on the part of the seller is required. Responsibility is objective.
The fact that the liability is objective also follows from Section 27 of the Purchase Act, to which the two provisions of NS 8411 and NS 8412 refer respectively.
3.2 Exceptions for events beyond the control of the seller
In NS 8411 paragraph 17.1, first paragraph, an exception is included from the seller's objective liability when there are delays. It follows from the provision that the seller is not liable for damages if the delay is caused by a “obstruction beyond the control of the seller”.
The exception is taken from Section 27 of the Purchase Act which NS 8411 paragraph 17.1, first paragraph also refers to.
Despite the fact that NS 8412 paragraph 15.1 refers to Section 27 of the Purchase Act, there is nothing in section 15.1 that the seller is not liable if the delay is due to a “obstruction beyond the control of the seller”.
The question is whether this is an oversight on the part of the Committee, and whether the Committee believes it follows from a natural interpretation of Section 27 of the Purchase Act that the exemption also applies to manufacturing purchases.
In our view, it is natural to read NS 8412 paragraph 15.1 so that it refers to Section 27 of the Purchase Act as a whole, which implies that obstacles beyond the seller's control exempt the seller from liability in case of delays.
If the seller wishes to claim that a delay is due to obstacles beyond his control, it is important to observe all the terms of the provision.
First, the obstacle doesn't have to be something that sells “could not reasonably be expected to have taken into account the appointment time” or “reasonably (...) avoid or overcome the consequences of”.
In other words, the provision assumes that the obstacles must have been outside the seller's sphere of control.
If the seller runs out of money and therefore cannot pay his contract assistants, a delay due to missing deliveries to the seller will be within the seller's sphere of control. Likewise, it will be within the seller's sphere of control if he is delayed because one of his contract assistants goes bankrupt.
From recent times, the outbreak of covid and the restrictions of the authorities on the freedom of action of people and enterprises have been considered an event outside the sphere of control of the parties. However, this only applied to contracts signed before the onset of the first COVID outbreak in March 2020. For contracts entered into now, obstacles that may result from covid will not be considered to represent conditions beyond the control of the parties. At least not if covid does not develop in such a negative way that one suddenly faces a completely different situation from the one, one has now become accustomed to dealing with.
Note otherwise the clarification in NS 8411 paragraph 17.1, second paragraph that the seller may be exempt from liability if the obstacle affects one of his contract assistants. The condition is that this contract assistant must in that case also be exempt from the rule of force majeur.
The same provision follows from Section 27 of the Purchase Act and we assume that it therefore also applies to purchases governed by NS 8412, cf. Paragraph 15.1, first paragraph of this standard.
3.3 Indirect losses
The liability we have described in paragraphs 3.1 and 3.2 relates to the direct financial loss of the buyer. This loss includes, among other things, expenses incurred by the buyer as a result of the delay, price difference if he has to cover deductions (because he does not require fulfillment) and lost profits.
Incidentally, no definition of direct loss has been given which must therefore be anything that is not explicitly described as indirect loss.
If the buyer is to win a claim for compensation for his indirect loss, it is required that the seller, or someone for whom he is responsible, acted negligently. We refer in this regard to the last paragraph of NS 8411 paragraph 17.1 and NS 8412 paragraph 15.1, respectively.
What is indirect loss is stated in Section 67, second paragraph letter a — d of the Purchase Act.
We have entered the individual loss records by reference in the matrix below.
The wording of Section 67 (2) and (3) of the Purchase Act is not included here, but it exists here.
3.4 Limitation of Liability
Liability can be very high and the members of the committee have taken the consequence of this.
Accordingly, the liability is limited to the size of the purchase price, cf. the first paragraph of NS 8411 paragraph 17.2 and NS 8412 paragraph 15.2.
Please note that the purchase price does not include VAT, see the first paragraph of NS 8411 paragraph 30.1 and NS 8412 paragraph 32.1, respectively.
From the second paragraph of NS 8411 paragraph 17.2 and NS 8412 paragraph 15.32, it is stated that where the supply is distributed among several construction sites, and only until some of these deliveries are delayed, the compensation shall be limited to a proportionate proportion of the purchase price.
From the main rule of limitation of liability there are two exceptions, and these are found in the last paragraph of the provisions.
The one exception applies in cases where the seller has failed to notify the buyer “without undue delay” that one is going to be delayed. In this case, the seller becomes liable for the loss “the seller should have averted by notifying” and without limitation in terms of purchase price.
The second exception applies to the case where the seller has acted “grossly negligent or otherwise contrary to probity and good faith”.
Whether gross negligence occurs in the event of a delay depends on a concrete assessment.
It's a complex assessment and normally a number of factors will come into play.
First, one will have to consider whether the seller has behaved negligently (a more popular term is to have shown guilt), and then it must be considered whether the negligence is gross.
The Supreme Court has ruled on this question a number of times, and in various situations.
In an oft-cited 1989 Supreme Court judgment (1989 p 1318), the Supreme Court stated that there must be “a marked deviation from the requirement of prudent course of action” and it must be about a “conduct which is highly reprehensible, in which the person concerned is therefore substantially more to blame than in the case of general negligence”.
In other words, for gross negligence to be considered to exist, there must be strongly reprehensible circumstances on the part of the seller. Traditionally, courts shy away from using such strong words about a party, and it usually takes a great deal of effort. This does not mean that gross negligence is not invoked before Norwegian courts, but it is one of the rare cases that one gets a conviction.
What is meant by acting “contrary to probity and good faith” can be so much, but it is clear that the seller must in that case have behaved in a way that most people consider to be untrustworthy. We do not go into more detail about this term here -- simply because it is rarely occurring and because there is little case law.
4th. Daymulch
As an alternative to compensation, the parties may agree that the agreed delivery time shall be coated with day mulch, cf. the first paragraph of NS 8411 paragraph 18 and NS 8412 paragraph 16, respectively.
If you have agreed on a daybreak, you are prevented from claiming compensation.
This is clearly stated in the first paragraph of the provisions, where it is stated that one can agree on a daybreak “instead of” replacement.
Note the exception to this rule in NS 8411 paragraph 13.2, second paragraph and NS 8412 paragraph 11.3.2, second paragraph where it is stated that the buyer may claim compensation in addition to the day mulch if the seller failed to notify “without undue residence” about the expected delay.
An exception has also been made for cases where the delay is due to gross negligence on the part of the seller or someone for whom he is responsible, or one of them has acted contrary to probity and good faith.
On these terms, we refer to point 3.4.
In our view, it is not a stupid idea to make a daybreak appointment. If a daybreak has been agreed, this will be accrued almost automatically and you will avoid a complicated settlement where the buyer has to document his loss, and where the buyer will normally dispute what is put forward.
Something else, however, is what size to set the daymulch to. Namely, we cannot see that NS 8411 or NS 8412 says anything about this.
In the contracts of contract law, there are separate rules that limit what can be claimed in total (10% of the contract amount) and what is the day mulch unless otherwise specifically agreed (1 ! 0/00 of contract amount per day).
However, we will assume that it is not appropriate to limit the total amount of daymulch to 10% of the contract price when purchasing construction products or products since the replacement rules give the buyer the opportunity to claim compensation upwardly limited to 100% of the purchase price.
On the other hand, it should be recalled that the daymulch requirement is completely objective in the sense that it does not matter whether the buyer has suffered an actual loss, or not.
Legal considerations may therefore suggest that a daybreak is agreed, but that the maximum liability is reduced in the light of the considerations we have mentioned here.
What about the amount of mulch per day? It should be large enough to represent an incentive for the seller to deliver within the agreed time. At the same time, it should not be so large that the maximum ceiling for daylight mulch is reached too early. Here, the parties must make some careful deliberations to ensure that a daymulch respects the considerations and wishes that justify the choice of daymulch. Presumably it is not simple since the committee has refrained from making such rules we know from the standards of contract law.
5. Raising
Both standards contain two brief provisions concerning, respectively, the basis for raising and settlement of the raising.
In essence, the provisions of the Purchase Act refer to the provisions of the Purchase Act.
As for the raising basis, refer to Section 25 of the Purchase Act, which you can find here.
In order for the buyer to raise as a result of delay, this must entail a “substantial breach of contract”.
What is required for the materiality requirement to be met must depend on a concrete assessment.
Presumably it doesn't take that much to of delays before a buyer can raise. In this regard, we refer to the fact that construction products and products are input factors to be used in ongoing construction or construction projects. If one is stuck and the progress of such projects is limited as a result of delayed deliveries of goods, one will normally put far more at stake in terms of value and cost than is at stake by a possible increase in a delivery.
At the same time, the threshold for raising will probably have to be set higher in the case of manufactured products designed only to meet the needs of one buyer than in the case of the purchase of generic construction products (which can be sold to others). That the threshold is higher for manufactured products is apparent from the last paragraph of NS 8412, paragraph 17.1. From that provision it is clear that the set is not sufficient that the materiality requirement is satisfied to raise. In addition, the buyer's purpose for the purchase must have been “substantially flawed” as a result of the delay.
It may be appropriate to clarify that the considerations which enable the buyer to withdraw a purchase of the products to be manufactured do not apply if the seller has not initiated and is far from completing the processing. If nothing has happened, there is no reason to treat a manufacturing purchase differently than a purchase of generic construction products.
In conclusion, it is noted that if the parties have agreed that daylight saving will be delayed, and in this regard also agreed on a certain period of daylight saving, then it has almost by definition agreed that a delay within the daybreak period is not to be regarded as a significant delay.
This should therefore be considered when/ if the parties decide to agree on a daybreak period.
As for the raising settlement itself, the provisions of the two standards of Chapter IX of the Purchase Act show “Common rules on raising or re-delivery”.
We do not go into these rules that you can read about here.
