Manipulation of Emission Values by Car Manufacturers
Manipulation of Emission Values by Car Manufacturers from a Legal Perspective
Various car manufacturers have systematically, primarily through software, manipulated emission values during measurements. The software originates, at least in its basic structure, from suppliers, e.g., from the company Bosch. The software was often only permitted and approved by these suppliers for use in testing purposes, but is being misappropriated by individual manufacturers for “optimization” of measurement results in regular operation.
The consequence is that now there are massive numbers of vehicles on the road where:
- software is in use that was not intended for this purpose and is not approved by the software supplier
- the vehicles, due to the manipulation of emission values, show a discrepancy between type approval and the actual condition of the vehicle
- the vehicles have now suffered severe reputational damage and consequent depreciation.
Legal Foundations
No damage cases have arisen due to the manipulations so far. Therefore, the questions are not relevant to product liability law.
However, there is a deviation of the actual condition from the intended condition. The vehicles do not have the condition that is contractually owed. The false emission values can then constitute a material defect and lead to claims under material defect law (formerly: warranty law). Since the operating permit is at risk – the Federal Motor Transport Authority is involved – there may also be a legal defect: Because a vehicle of this type with these emission values may not be covered by the type approval; the vehicle then has no type approval and is therefore not eligible for registration without individual approval.
A prerequisite for claims arising from material or legal defects is that the actual condition of a product deviates negatively from the contractually owed condition.
The agreed, so-called target condition, is defined on the one hand by product descriptions, data sheets, etc. In addition, the type approval is also decisive for motor vehicles.
It is still being discussed whether the type approval should be withdrawn. Vehicles with the affected technology would not be allowed to be driven in such a case. This would be a legal defect.
Furthermore, the vehicle has properties other than those owed. It has different emission values, possibly also different consumption values than announced and assumed. This is a material defect.
The question of whether the classification for vehicle tax changes due to altered emission values has not yet been discussed. This would also be a negative deviation of the actual condition from the target condition and legally relevant. Because the description would provide for a different classification than what actually occurs.
Material and legal defects primarily entitle to subsequent performance. Subsequent performance means repair or replacement delivery. According to the law, the customer has the right to choose. Through general terms and conditions, the right to choose is often transferred to the seller, although the effectiveness of such regulations in business transactions with consumers is disputed. In the best case, the affected consumer has the right to choose whether to demand replacement delivery or repair.
If subsequent performance fails twice, there is a right to return the vehicle or reduce the price.
In addition to these claims, there are also claims for damages and reimbursement of expenses in principle.
Individual courts have already dealt with these issues and in some cases denied a defect – in our opinion, wrongly. Because there is undoubtedly a negative deviation from the owed properties. The significance – which is probably also present here – is irrelevant. Therefore, claims should exist, especially since depreciation is measurable in the market.
All related claims are primarily directed against the respective seller, who can then in turn seek recourse from the car manufacturer. With regard to the distribution situation with contract dealers, a customer will have to contact their seller, who then in turn handles the matter with the legal department of the manufacturer.
In addition to claims from material defect liability, one could consider contestation due to fraudulent misrepresentation. The problem with this: The dealer with whom the contract was concluded often did not know about the issue. This can potentially lead to an enforcement problem through the distribution chain.
Implications for the situation regarding emissions manipulations
a) Type approval
If the type approval is withdrawn and not subsequently restored, a subsequent performance will factually not be possible and will thus be considered as “ultimately failed” from the outset. In this case, the customer has the direct right – at their choice – to return the vehicle in exchange for a refund of the paid purchase price. The purchase price is to be subject to 5% interest p.a. since payment. However, usage can be offset, whereby approximately 0.3-0.7% of the purchase price may be deducted per 1000 kilometers driven.
If it is possible for the manufacturer to obtain the type approval – in a modified form – this defect will indeed be remedied, but during any potential waiting period between the cut-off date of October 7, 2015, and the receipt of the new type approval, the vehicle is not permitted on German roads. The vehicle may no longer be driven on public roads. For this downtime, there is then a claim for damages in the amount of the actual or notional reasonable rental car costs.
b) Increased emission values
In external communications, VW, for example, currently promises to rectify the faulty software. If this achieves the actually owed emission values, it is a successful rectification. In this case, only the expenses for presenting the vehicle for repair are conceivable as damages.
However, if such a repair is not possible, for example because the emission values remain permanently too high and the values after changing the software also do not maintain an acceptable certain tolerance (about 10% would be appropriate here), then the subsequent performance could also ultimately fail in this respect. Then the rights to withdraw from the contract or reduce the price would again be available.
c) Vehicle tax
If the classification regarding vehicle tax is affected, at least the difference would have to be borne.
d) Further claims for damages?
Due to the media coverage and the manipulations, the value of the vehicles has changed dramatically. There are indeed prospects that one could claim this depreciation as damages in the event of selling a vehicle.
e) Legal problems
It is problematic that all claims are based on warranty law/material defect law.
Short deadlines apply here. In principle, material defects (and essentially also the consequential claims, such as damages) are only possible within 2 years after the transfer of risk. Owners of older vehicles could be excluded from claims for damages from the outset.
In addition, claims must generally be legally asserted within these two years. Exceptions can only exist in cases of fraudulent misrepresentation. Many courts are currently dealing with this question and are coming to partially diametrically opposed assessments. A uniform view will only be laboriously established by the Federal Court of Justice (BGH) over time.
f) Last resort: Contestation due to fraudulent misrepresentation
As a last resort, for all sales that occurred longer ago, an attempt could be made to contest the contract due to fraudulent misrepresentation. Such a contestation can be declared within ten years after the conclusion of the purchase contract, whereby one may wait a maximum of one year after becoming aware of the circumstance of fraudulent misrepresentation. This means: One could try until early September 2016 to declare such a contestation of the purchase contract – with the consequence of returning the vehicle in exchange for a refund of the purchase price minus usage benefits – and possibly also enforce it in court. In this case, the lawsuit does not yet have to be filed, but the mere declaration is sufficient for meeting the deadline.
The problem is that the contestation must be made to the direct contractual partner. That is the dealer. They will rarely have known about the manipulation.
One could then at most consider having the dealer’s claims against VW assigned to oneself as a customer and thus attempt to eliminate the legal problems of the contract chain.
Summary
It is undisputed that the vehicles have both a legal defect and a material defect. However, enforcing legal rights can still be difficult – especially for owners of vehicles that are more than two years old.
Should the vehicle manufacturer, contrary to expectations, fail to agree with the Federal Motor Transport Authority on a modification and maintenance of the type approval, claims for the return of the vehicles and possibly further compensation could indeed be enforced in a simplified form.
Ultimately, one should wait to see if the vehicle manufacturer reaches an agreement with the Federal Motor Transport Authority regarding the handling of the type approval. If this is not the case, a wave of lawsuits can be expected.