Pinpointed advice and assistance within contract law and contractual relations

Limitation (foreldelse) means that a claim becomes so old that it can no longer be enforced.

The Limitation Act (Act relating to Limitation of Claims) governs the limitation of both monetary claims and other types of claims. The general rule is that claims become time-barred three years after the due date. Among the most important exceptions is that claims documented in a promissory note, registered in the Norwegian Central Securities Depository (Verdipapirsentralen), or based on a loan of money, become time-barred after 10 years. Bank deposits become time-barred after 20 years. Claims for damages or compensation for non-pecuniary loss become time-barred three years after the day the injured party obtained or should have obtained necessary knowledge of the damage and the liable party. In any case, claims for damages become time-barred no later than 20 years after the damaging act or other basis of liability ceased.

The limitation period is calculated from the day the creditor is first entitled to demand performance. Where a claim is secured by a guarantee or similar security, the limitation period in relation to the guarantor is calculated according to the same rules as for the principal claim.

The limitation period is interrupted when the debtor acknowledges the obligation, or when the creditor initiates legal action to recover the claim.

Certain other private law statutes also contain provisions on limitation.

Delay in a sales law context means late delivery of a sold item, or that it is not delivered at all. In the transfer of real property, it follows from the Sale of Real Property Act (Avhendingsloven) that there is delay if the seller does not hand over the deed or possession of the property on time. Delay in the performance of services occurs if the service provider has not completed the service by the agreed time, or if deadlines for commencement and progress of the work have been agreed and the service provider has failed to comply with them.

Delay on the part of the seller or service provider gives the buyer/customer the right to withhold payment. As a general rule, the buyer/customer also has the right to demand performance, i.e. that the sale is completed or the service is carried out as agreed. The buyer/customer may also, under certain conditions, have the right to terminate the contract and claim damages.

Default interest (late payment interest) is interest charged in case of late payment. Provisions on default interest are set out in the Act relating to Interest on Overdue Payments (the Late Payment Interest Act). The rate of default interest is set by regulation every six months as a fixed percentage. The parties may agree on a different interest rate, but in consumer purchases this rate may not exceed the general statutory rate.

Several statutes refer to the provisions of the Interest Act. This includes, among others, the Sale of Goods Act, the Home Improvement Services Act, the Sale of Real Property Act, and the Housing Construction Act, all of which provide that if the purchase price or other outstanding amount is not paid on time, interest shall be charged in accordance with the Interest Act.

A power of attorney (authorisation) is a declaration from a natural or legal person granting another person the authority to make legal dispositions on their behalf. General provisions on powers of attorney are found in the Contracts Act, with special rules in certain other statutes. The person granting the authority is called the principal, while the person receiving it is called the agent. The agent acts on behalf of and for the account of the principal (in contrast to a commission agent, who acts in their own name).

Within the scope of the power of attorney, the agent creates rights and obligations for the principal. A power of attorney may be granted in several ways, and this affects the legal consequences of agreements entered into by the agent on behalf of the principal.

Powers of attorney may be revoked under the rules of the Contracts Act. As a general rule, revocation must be made in the same manner as the power of attorney was granted.

In contract law, a guarantee exists when one party warrants that their performance has certain qualities and assumes responsibility for remedying any defects. The Sale of Goods Act, the Sale of Real Property Act, and the Home Improvement Services Act impose extensive liability on the seller or service provider for faults and defects that exist at the time of the purchase. This is not a guarantee in the legal sense. On the contrary, it is considered misleading marketing under the Marketing Control Act if the term “guarantee” is used without giving the buyer rights in addition to those they would already have without the guarantee.

However, it may be the case that the seller or manufacturer of a product, in a guarantee statement, assumes responsibility for remedying defects that are not covered by the Sale of Goods Act for a certain period after the purchase. Such statements, which are quite common in consumer sales, mean that the seller assumes responsibility regardless of whether the defect existed at the time of delivery.

Warranty liability is the responsibility assumed by a seller or manufacturer when they undertake liability for defects and shortcomings beyond what follows from sales legislation. A party that has assumed warranty liability is bound by it.

A promissory note is generally defined as a written and outwardly independent promise to pay a specific sum of money. The requirement that the promise be outwardly independent means that the promissory note must not include any reservation, for example that the debt is conditional upon a counter-performance.

There are two types of promissory notes: simple promissory notes and negotiable promissory notes. Despite the terminology, even simple promissory notes may be transferred. Promissory notes are regulated by the Promissory Notes Act.

Termination (rescission) is a remedy for breach of contract consisting of a declaration by one of the parties to an agreement that the contract shall be brought to an end. The Sale of Goods Act and the Sale of Real Property Act contain similar provisions on termination of sales of movable property, etc., and real property respectively.

A recurring requirement in most provisions is that the breach by one party must be material in order for the other party to be entitled to terminate. The buyer may terminate in the event of material defects in the goods sold or material delay on the part of the seller. If there is a defect that does not constitute a material breach of contract, the buyer may nevertheless terminate the purchase if repair or replacement by the seller is not possible or is not carried out within a reasonable time.

The seller has a right to terminate if the buyer fails to pay, provided that this can be characterised as a material breach of contract by the buyer. The contract may also be terminated if the buyer fails to pay within a reasonable additional period set by the seller for performance. However, if the goods have already been taken over by the buyer, the seller may only terminate if they have reserved the right to do so or if the buyer refuses to accept the goods.

Under the Sale of Goods Act and the Sale of Real Property Act, the seller may also terminate the contract if the buyer fails to cooperate. The condition is that the breach is material, or that the buyer, after a reasonable additional period set by the seller, still fails to cooperate or fails to take over the goods or property, and the seller has a particular interest in disposing of it.

Upon termination, the parties’ obligations to perform the contract lapse. If the contract has been fully or partially performed by either party, what has been received may, as a general rule, be claimed back.

Leasing is a special form of rental, serving as an alternative to purchase. Leasing is common in business when acquiring, for example, machinery, but leasing of real property also occurs. The lessor, who is often a finance company that has purchased the asset from the original seller, is called the lessor, while the user is called the lessee.

The lessee undertakes to lease the asset from the lessor for a specified period. By the end of the lease term, the lessee will have paid a total amount in rent corresponding to the full purchase price of the asset, including interest and costs. Typically, the lessee may then either continue leasing the asset at a very low rent or purchase it at a low price.

Leasing is similar to hire-purchase agreements with a retention of title or security interest, and therefore several of the rules in the Pledge Act concerning security interests also apply to leasing. This applies even though the lessee, unlike a hire-purchase buyer, does not become the owner of the asset at the end of the lease term, but only obtains the right to continue leasing it at a reduced rent.

A defect in the legal sense of sales law exists when a sold item does not conform to the requirements regarding type, quantity, quality, other characteristics, and packaging as stipulated in the agreement between the buyer and the seller. Unless otherwise agreed, the item must be suitable for the purposes for which similar items are normally used. It is also normally considered a defect if the item is not suitable for a particular purpose that the seller knew or ought to have known about at the time the contract was concluded. If the seller has referred to specific characteristics of the item, it is defective if it does not possess those characteristics. The item must be packaged in a customary or otherwise proper manner necessary to preserve and protect it.

The Sale of Goods Act, the Sale of Real Property Act, the Home Improvement Services Act, and the Housing Construction Act also contain provisions stating that a defect exists in the performance if certain specified characteristics are absent. The Tenancy Act contains provisions on defects in rental objects.

The Sale of Goods Act and the Sale of Real Property Act provide that a sold item or real property is defective if there is a deviation from information provided by the seller, provided that the incorrect information may have influenced the purchase. A similar rule applies to home improvement services.

In some cases, the seller or service provider may have made a reservation that a specific defect may exist (a specified disclaimer). If the buyer accepts such a reservation, they will normally not be able to make a claim based on the defect. It is also common for items to be sold “as is”. This constitutes a general disclaimer: the seller indicates that the item may have defects without specifying which ones. However, this does not exempt the seller from all liability. Such general disclaimers are no longer permitted under the Sale of Real Property Act in relation to the sale of real property to consumers.

Where a defect exists in a property, goods, or service at the time of delivery, the buyer/customer has the right to withhold payment and to claim a price reduction. In the case of sales of movable goods, home improvement services, and housing construction, the buyer/customer also has the right to demand rectification of the defect. Under certain conditions, the buyer/customer may also be entitled to demand replacement, termination of the contract, and compensation.

A prerequisite for the buyer to invoke remedies for defects is that they have notified the seller within the required time, see the separate section on notification of defects.

Breach of contract means failure to comply with contractual obligations (breach of agreement, contractual breach). In a sale, there is breach on the seller’s part if the goods are defective or if delivery is delayed. There is breach on the buyer’s part if he or she pays late, fails to pay, or fails to fulfil their duty of cooperation.

Regardless of which party has failed to perform their obligations, there is, however, no breach if the non-performance is due to circumstances on the other party’s side.

A breach by one party gives the other party the right to remedies for breach, such as repair, replacement, price reduction, termination, damages, etc., subject to certain conditions.

The duty to disclose information is an obligation to provide necessary information. In contract law, the duty of disclosure arises partly from case law and partly from specific statutory provisions. Under the Sale of Real Property Act, the seller of real estate has a duty of disclosure. A property is defective if there are circumstances concerning it that the seller knew or ought to have known about, but which the buyer has not been informed of, provided that the information could have influenced the purchase agreement and concerns matters the buyer had reason to expect to be informed about. The Home Improvement Services Act and the Housing Construction Act contain similar provisions for, respectively, home improvement services and the construction of housing.

In the case of sales of movable property, the Sale of Goods Act contains a provision stating that when an item is sold “as is” (typically used for second-hand goods), the seller has a duty to disclose significant matters that they knew or ought to have known about, and which may have influenced the purchase. A defect exists if such information is not provided.

The duty of disclosure also means that a party who provides information to the other party in a contract, regardless of whether there is any formal obligation to provide such information, is responsible for ensuring that it is correct. False or misleading advertising is prohibited under the Marketing Control Act. The Sale of Goods Act and the Sale of Real Property Act provide that a sold item or real property is defective if there is a deviation from information provided by the seller, provided that the incorrect information may have influenced the purchase.

Recourse (regress) means a claim to be reimbursed for an amount one has paid on behalf of another. For example, if a guarantor pays a debtor’s debt, the guarantor may assert a right of recourse against the debtor and claim the full amount from them. If one of several joint and several debtors settles a debt, that debtor may, on the basis of the Promissory Notes Act and general principles of the law of monetary claims, demand that the other co-debtors pay their proportional share of the debt.

In contractual relationships, notification of defects (reklamasjon) means making a complaint about the other party’s performance. If there is a defect in a sold item, the Sale of Goods Act requires the buyer to notify the seller within a reasonable time after the buyer discovered or should have discovered the defect. If this is not done, the buyer loses the right to invoke the defect and cannot use remedies for breach of contract such as demanding repair, termination of the contract, price reduction, or compensation. The Sale of Real Property Act, the Home Improvement Services Act, and the Housing Construction Act contain similar provisions for real property, home improvement services, and the construction of housing respectively.

For sales of movable goods and home improvement services, the general limitation period for complaints is a maximum of two years, but if the buyer is a consumer and the item is intended to last significantly longer than two years, the limitation period is a maximum of five years. For real property, the period is also five years, regardless of whether the buyer is a consumer or not. The same five-year period applies to complaints relating to the construction of housing.

The seller and buyer may agree on a different complaint period than that provided by statute. The seller/service provider may also provide a guarantee involving liability for defects for a longer period than the statutory rules provide. Where the buyer is a consumer, it follows from the Consumer Purchase Act, the Sale of Real Property Act, the Home Improvement Services Act, and the Housing Construction Act that a shorter limitation period than the statutory one cannot be agreed.

In the case of delay on the part of the seller, the rule in the Sale of Goods Act is that the buyer loses the right to insist on performance if they wait an unreasonably long time before asserting the claim. If the item is delivered late and the buyer therefore has the right to terminate the contract, the buyer loses this right if they do not assert the termination claim within a reasonable time. Similar rules apply under the Sale of Real Property Act and the Home Improvement Services Act.

A contract for work and materials (manufacturing agreement) involves the purchase of an item that is not a stock item, but which is to be produced by the seller according to a specific order from the buyer. As long as the buyer is not required to supply a substantial part of the materials, the provisions of the Sale of Goods Act apply, subject to a special rule that makes it somewhat more difficult for the buyer to terminate a contract for work and materials due to delay than in ordinary sales.

In the sense of the Sale of Goods Act, a service contract is an agreement that also obliges the seller to perform work or other services, where this constitutes the predominant part of their obligations. Such agreements fall outside the scope of the Sale of Goods Act, but may fall within the scope of the Home Improvement Services Act, and will in any case be governed by general principles of contract law.

In sales relationships, there is a duty to examine the item sold. This duty of inspection may arise both before and after the purchase.

Before the purchase, the Sale of Goods Act imposes such a duty only if the seller expressly invites the buyer to inspect the item. If the buyer fails to comply with the invitation, they will generally not later be able to invoke defects that they should have discovered upon inspection.

In the case of real property transactions, the Sale of Real Property Act imposes a stricter duty of inspection.

Nor does the buyer have a duty to inspect after delivery in consumer sales. Otherwise, the Sale of Goods Act imposes a duty on the buyer to examine the item “as good practice requires” as soon as they have a reasonable opportunity to do so. In the case of real property purchases, the Sale of Real Property Act states that the buyer has a duty to inspect the property after taking possession, and there is no exception for consumers in this regard.