§ 38. How a price reduction is calculated

The price reduction (prisavslag) must reflect the ratio between what the goods are worth with the defect (mangel) and what they would have been worth without it. The formula: new price / agreed price = defective value / value under the contract. In practice, the repair cost is often used as an approximation, but the rule itself is proportional.

The Sale of Goods Act (Kjøpsloven)·LOV-1988-05-13-27

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The text of the law (unofficial translation)

If the goods have a defect, the buyer (kjøper) may demand a price reduction so that the ratio between the reduced price and the agreed price corresponds to the ratio between the value of the goods in defective condition and in the condition required by the contract at the delivery time (leveringstid).

Source: Lovdata — Kjøpsloven (the Sale of Goods Act) § 38

What does this mean?

A price reduction is about restoring the balance in the deal. You paid for goods that should have had value X. You received goods that have value Y. You should pay in the same proportion.

The formula:

Reduced price / Agreed price = Defective value / Value under the contract

Example: You paid NOK 100,000. Without the defect, the goods are worth NOK 100,000. With the defect, they are worth NOK 80,000. Then:

Reduced price / 100,000 = 80,000 / 100,000
Reduced price = NOK 80,000

You are entitled to a price reduction of NOK 20,000.

Why not just the repair cost? Because a repair does not always fully restore the goods. Repaired goods may be worth less than flawless goods. A price reduction under § 38 captures the full loss of value.

In practice, the repair cost is often used as an approximation when it is reasonable. But if the goods are old or unusual, a valuation may differ from the repair cost.

The point in time: The value must be assessed at the delivery time — not today. This means the comparison is between the condition required by the contract and the defective condition, both at the time of delivery.

Comparison: Price reduction vs. compensation

TypeWhat does it cover?
Price reduction (§ 38)The difference in value of the goods themselves
Compensation (erstatning) (§ 40)Specific losses caused by the defect — expenses, lost profit

You can claim both at the same time. The price reduction concerns the goods themselves; compensation concerns the damage the defect caused you.

Examples

Sara buys a used car for NOK 80,000. It turns out there is rust that neither she nor the seller (selger) knew about. The car is still usable, but an appraisal shows that a similar rust-free car would have been worth NOK 80,000, while this one with rust is worth NOK 65,000. The price reduction: Reduced price / 80,000 = 65,000 / 80,000, so Reduced price = NOK 65,000. Sara is entitled to a price reduction of NOK 15,000.

Tom buys a sewing machine for NOK 4,500. It turns out that one of the sewing functions does not work. A similar model without that function costs NOK 3,800. Tom is entitled to a price reduction of NOK 700 (the difference between the agreed value and the actual value). A repair would have cost NOK 1,200 — but it is the reduction in value under § 38, not the repair bill, that is the main rule. In practice, sellers often accept the repair cost if it is approximately correct.

Common mistakes

  1. Thinking price reduction = repair cost. That is an approximation, not the rule
  2. Forgetting that the value must be assessed at the time of delivery
  3. Including consequential losses (business interruption, inconvenience) in the price reduction — these belong to compensation
  4. As a seller: offering a small price reduction based on "what is reasonable" without calculating proportionally

What should you do?

As a buyer:

As a seller:

Frequently asked questions

If the goods are useless — is the price reduction = the full price?
Then we are talking about cancellation of the purchase (heving), not a price reduction. A price reduction assumes that you keep the goods. If they are completely useless, cancellation of the purchase is the right claim (§ 39).
Can I claim a price reduction and repair of the defect?
No, not for the same defect. Choose one — or let the seller repair the defect first, and claim a price reduction for the loss of value if the repair is imperfect.
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