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CISG CASE PRESENTATION

Germany 28 February 2000 Appellate Court Stuttgart (Floor tiles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000228g1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20000228 (28 February 2000)

JURISDICTION: Germany

TRIBUNAL: OLG Stuttgart [OLG = Oberlandesgericht = Provincial Court of Appeal]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 5 U 118/99

CASE NAME: German case citations do not identify parties to proceedings

CASE HISTORY: 1st instance LG Heilbronn (6 O 3055/97) 31 May 1999 [reversed]; case under appeal to BGH [Supreme Court]

SELLER'S COUNTRY: Germany [or Spain; that is the issue that was disputed] (plaintiff)

BUYER'S COUNTRY: Spain (defendant)

GOODS INVOLVED: Floor tiles


Case abstract

EDITOR: Ulrich G. Schroeter

OLG Stuttgart 28 February 2000

A German manufacturer of floor tiles sued a company based in Spain for payment of the price of the goods delivered. The core question is whether the German courts had jurisdiction over the dispute according to Article 5, No. 1 of the Brussels Convention.

The court points out that the place of performance for the payment obligation is to be determined according to Article 57(1)(a) CISG, which would give the German courts jurisdiction. That, of course, presupposes that the CISG is applicable, which brings us to the primary subject in dispute: Was this an international contract of sale concluded with the German manufacturer? Or was it a national (Spanish) contract concluded with the Spanish place of business of the German manufacturer?

This is disputed between the parties. The Spanish buyer negotiated the contract with a legally independent company based in Madrid, Spain. The name of the German manufacturer is quoted as "D", its Spanish representative is called "D. S.A. Madrid". The members of the Board of both firms are partially identical. The buyer's initial order was sent to the Spanish "seller"; all other communications took place with the German manufacturer, which shipped the goods directly to the buyer.

The court held that this was an international contract subject to the CISG. The court leaves open whether D. S.A. Madrid is a trade representative or a place of business of German manufacturer D. The Spanish firm might have acted as though it were a "place of business", but legally it was not as it did not possess power to bind the German manufacturer. Moreover, even if one were to assume that D. S.A. Madrid in fact was a place of business of German manufacturer D, the manufacturer's place of business had the closest relationship to the contract and its performance, which was also known to the buyer (Art. 19(a) CISG).

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 1(2) ; 10(a) ; 78 [Also cited: Articles 3(1) ; 8(1) and (3) ; 14 ; 57(1)(a) ]

Classification of issues using UNCITRAL classification code numbers:

1A1 [Internationality (parties' relevant places of business in different States): what constitutes place of business?];

10A [Place of business: which of multiple places of business is relevant?];

78B [Rate of interest]

Descriptors: Business, place of ; Jurisdiction ; Interest

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Editorial remarks

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Citations to other case abstracts, texts, and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=829&step=Abstract>

French: Recueil Dalloz (17 January 2002) No. 3, 315

CITATIONS TO TEXT OF DECISION

Original language (German): Click here for the original German text of this case; see also cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/583.htm>; OLG-Report Karlsruhe/Stuttgart (2000) 407-408; <http://www.unilex.info/case.cfm?pid=1&do=case&id=829&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 1 para. 27 Art. 8 paras. 5, 51 Art. 10 para. 3 Art. 14 para. 2

French: Limbach, Recueil Dalloz (17 January 2002) No. 3, 315-317

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Case text (English translation)

Queen Mary Case Translation Programme

Oberlandesgericht Stuttgart 28 February 2000

Translation [*] by Ruth M. Janal [**]

Translation edited by Veit Konrad [***]

FACTS OF THE CASE

The German [plaintiff] is a manufacturer of floor covering. The defendant [buyer], a Spanish entity, installs floor coverings, mostly in sports grounds. The [plaintiff] demands that the [buyer] pay for several deliveries of floor coverings, basing the jurisdiction of the German courts on its German place of business. The [buyer] objects, claiming that it always contracted only with Company D., an independent company under Spanish law. According to [buyer], the German courts lack international jurisdiction to decide the case and the claim is unfounded.

I. Between 1990 and 1996 the [plaintiff] delivered floor covering and equipment to the [buyer] in the overall amount of roughly 1.8 million DM [Deutsche Mark]. The claim is based on deliveries effected during the time between November 1992 and December 1993, amounting to roughly 84,000 DM, which the [buyer] paid neither to the [plaintiff], nor to its alleged contracting party, Company D.

II. The [plaintiff] submits that it is the [buyer]'s contractual partner with respect to the deliveries in question. At the time, the [plaintiff] had not yet held 100% of Company D's shares. Company D. had been the [plaintiff]'s commercial agent without the power to close a deal. The [buyer] had been informed of the nature of the relationship between the [plaintiff] and Company D., before they entered their business relations. All matters of importance had been dealt with directly by the parties. At the beginning of the business relationship the [buyer]'s legal representative had traveled to the [plaintiff]'s place of business in Germany. While the parties had not closed a formal framework contract at the time, they had negotiated the delivery conditions. The [buyer] always directed its requests to Company D., who then forwarded the requests according to the agreed procedure to the [plaintiff]. The [plaintiff] sent both goods and invoices to the [buyer] itself. The [buyer] partly paid the purchase price to the [plaintiff], but - upon [plaintiff]'s request - also partly effected payment to Company D.

The [plaintiff] further submits that the United Nations Convention on Contracts for the International Sale of Goods (CISG) is the applicable law, as the case concerns the cross-border delivery of goods. According to Art. 57(1)(a) CISG, the place of performance of the buyer's obligation to pay the purchase price is the seller's place of business, which is why the Court of First Instance possessed international jurisdiction under Art. 5(1) of the Brussels Convention [*].

The [plaintiff] requests relief as granted by the Court.

The [plaintiff] objects to the international and local jurisdiction of the Court of First Instance. [Buyer] initially denied that it ordered the goods and received the deliveries and the invoices. After the [seller] presented the [buyer]'s faxes to Company D. and the list of unpaid deliveries drawn up by the [buyer] itself, it no longer keeps up its denial. However, it submits that with respect to the deliveries at hand its sole contact was with Company D., regarding both orders and payments. [Buyer] does not submit any non-conformities of the deliveries in question or any other deliveries made by the [plaintiff].

On 31 May 1999, the Court of First Instance dismissed the claim due to lacking international jurisdiction of the German courts. The Court held that there was no international sales contract, as the [plaintiff] failed to prove that the delivery contracts had been concluded with the [plaintiff]. The offer had consisted of the respective fax or telephone call by the [buyer] and had been accepted by Company D; the invoices later issued by the [plaintiff] did not change the fact that the contract had been concluded between the [buyer] and Company D. Finally, the closest relationship had existed between the latter two parties.

III. The [plaintiff] appeals the decision of the Court of First Instance. It repeats its submission before the Court of First Instance and presents a written confirmation of order issued by the [plaintiff] on 4 August 1993, as well as original price lists of the years 1992 and 1993.

The [plaintiff] requests relief as granted by the Court

The [buyer] requests to dismiss the appeal.

The [buyer] defends the decision of the Court of First Instance. Despite the Court's invitation it did not voice any objections against the merits of the claim.

With respect to the further submissions of the parties, the Court refers to the briefs and the attachments presented by the parties as well as to the statement of facts in the decision of the Court of First Instance.

The Court heard the testimony given by witnesses P. and R. The [plaintiff] dispensed with hearing witness O.

GROUNDS FOR THE DECISION

The [plaintiff]'s appeal is successful. The German courts have international jurisdiction over the present dispute. The claim is justified.

I. The German courts have international jurisdiction over the dispute under Art. 5(1) and 53 of the Brussels Convention [*].

1. The Brussels Convention as amended by the Third Accession Convention of 26 May 1989 entered into force in the Federal Republic of Germany on 1 December 1994 and in Spain on 1 February 1991. The claim was submitted in the year 1997.

2. According to Art. 57(1) CISG, the place of performance for the [buyer]'s obligation to pay the purchase price is the [plaintiff]'s place of business in Germany.

    a) According to Art. 1(1)(a) CISG, the Convention is the applicable law for the present contracts over the sale of goods, since the parties have their places of business in different Contracting States. The CISG entered into force in the Federal Republic of Germany on 1 January 1991 and in Spain on 1 August 1991. The deliveries of floor covering and equipment, for which the [plaintiff] seeks payment, concern goods. The CISG applies to both contracts for the sale of goods and for the supply of goods to be manufactured (Art. 3(1) CISG).

    b) Following the hearing of evidence, the Court is convinced that the contracts were concluded with the [plaintiff] and that the [plaintiff]'s place of business in Germany was the decisive one, because it held the closest connection to the contracts and their performance.

       aa) As the Court of First Instance correctly pointed out, the conclusion of the contracts is to be evaluated under Art. 14 and following CISG provisions. Regard is to be had to Art. 8(1) CISG, which provides that statements made by and other conduct of a party are to be interpreted according to its intent where the other party knew or could not have been unaware what that intent was. Under Art. 8(3) CISG, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.

The documents presented and the testimony given by the witnesses P. and R. lead the Court to conclude that the contracts were concluded between the parties to the dispute and not between the [buyer] and Company D. Company D. was the [plaintiff]'s agent without the power to close a deal (cf. the agent contract concluded on 15 April 1986). The Court was convinced by the respective testimony given by witness P., the chairman of Company D. The relationship between Company D. and the [plaintiff] was also known to the [buyer]. Witness P. convincingly illustrated that he and the [buyer]'s director had conferred about this matter before entering into a business relationship, as the [buyer]'s representative had voiced its surprise over the evidently low turnover of Company D. After the unpaid deliveries had been effected, but before the legal dispute arose, Company D. informed the [buyer] by letter of 9 February 1994 that it had acted as an agent of the [plaintiff] ("como representante") with respect to the delivery of the floor covering.

According to the testimony given by witness P. and witness R. (the [plaintiff]'s export sales manager) the [buyer]'s representatives, including its director, further visited the [plaintiff] in Germany before the start of the business relationship, not only to view sports grounds that had been fitted with the [plaintiff]'s material, but also to negotiate the delivery conditions. It was obvious that the [plaintiff] was to be the contracting partner. Even if there had been a reason to conceal this fact before Spain became a member of the European Union, this reason ceased to exist in the year 1992. Import quotas for floor covering no longer applied.

While it is true that the [buyer]'s written inquiries regarding the deliveries in dispute were addressed to Company D., not to the [plaintiff], the Court is of the opinion that these faxes and phone calls did not constitute offers in the meaning of Art. 14 CISG. According to the testimony given by the witness R., the price was oftentimes issue of subsequent negotiations between the [plaintiff] and the [buyer]. When taking into account the other circumstances, the fact that the requests were addressed to Company D. does not make this company party to the contract. The [buyer] has neither submitted why it would have been necessary for Company D. to be a party to the contract with respect to at least some of the orders of floor covering, nor are any such reasons self-evident. The [plaintiff] moreover presented a confirmation of order (dated 4 August 1993) with respect to the [buyer]'s request of 21 July 1993 regarding 1,858 m2 of floor covering. The Court is convinced that this confirmation of order concerns the [buyer]'s request of 21 July 1997, which the [plaintiff] invoiced on 11 August 1993, as the Court excludes the possibility that the same amount of floor covering was ordered twice on the same day. In so far as confirmation of orders were not issued with respect to the other inquiries, the sales contracts were formed through the deliveries and invoices; these constituted the offers which were implicitly accepted by [buyer]'s taking of the goods.

It is of importance that all invoices were issued by the [plaintiff] in its name. The invoices contained further terms and conditions concerning the method of payment and remedies for breach of contract. The invoices further yield that the deliveries were cross-border transactions within the European Union and thus VAT-free. The Court is therefore convinced that the deliveries constituted cross-border sales between the [plaintiff] and the [buyer], and not cross-border deliveries fulfilling obligations of Company D.

The [buyer] mostly paid the purchase price to Company D. However, some of the deliveries made before the time period in dispute had been paid to the [plaintiff]. There is also evidence that subsequent deliveries were paid to the [plaintiff] directly. Finally, the [plaintiff] presented two original price lists from the years 1992 and 1993. According to clause 9 of the conditions of sale included in these lists, all payments on invoices issued by the [plaintiff] were to be made in convertible Spanish Pesetas, payable either in Germany or to one of [plaintiff]'s Spanish accounts

       bb) For the reasons stated above, the Court is furthermore convinced that both formation and performance of the contract were so decisively determined by the [plaintiff] that it is justified to qualify the transaction as an international sales contract under the CISG. It is therefore irrelevant to the dispute whether Company D. constituted a place of business of the [seller] in the meaning of Arts. 1 and 10 CISG.

A place of business exists if a party uses it openly to participate in trade (v.Caemmerer/Schlechtriem-Herber, Einheitliches UN-Kaufrecht, 2nd ed. 1995, Art. 1 n. 26; Staudinger-Magnus, UN-Kaufrecht, 1999, Art. 1 n. 63 and 65; Art. 10 n. 4; Reithmann/Martiny, Internationales Vertragsrecht, 5th ed. 1996, n. 633), which means that the place of business must not be merely temporary and must display a certain degree of independence. The requirements of permanence, stability and principally an independent ability to act are met by Company D., as it is an independent corporation under Spanish law. Both the company's name - which was used without an addition indicating the company's position as an agent - and the partly identical members of the board of directors give the impression that Company D. is a place of business of the [plaintiff]. Witness P. testified that the company acted "just as a place of business". In reality, however, Company D. in its relationship to the [plaintiff] did not possess representative authority. Thus, it did not possess an independent authority to act in the form of power to decide upon and close a deal (according to the testimony given by witness R., the company's only competence was to decide not to forward inquiries to the [plaintiff]). The company thus did not posses sufficient actual weight in its relationship to the [plaintiff], a fact known to the [buyer]. Negotiations concerning the formation of a contract, prices, delivery periods and remedies had to be held with the [plaintiff].

Even if the Court followed the broad interpretation of "place of business" given by the ECJ to Art. 5(5) of the Brussels Convention [*] (cf. ECJ NJW [*] 1988, 625), the requirements of negotiations in the name of a higher association and the closure of a deal are missing in the present dispute (see also ECJ NJW 1981, 341, in which the Court denied the classification as a place of business under very narrow conditions).

In the end, this is of no concern. If Company D. did constitute a place of business of the [seller], the application of the CISG would still have to be decided taking into account Art. 10(a) CISG. Thus, if a party has more than one place of business, the place of business is that which has the closest relationship to the formation and performance of the contract (cf. v.Caemmerer/Schlechtriem-Herber, Art. 10 n. 3; Staudinger-Magnus, Art. 10 n. 5; Martiny, n. 634). This is the [plaintiff]'s place of business in B., Germany. The physical proximity between the [buyer] and Company D., and the latter company's part in procuring the contract diminish against the [plaintiff]'s control over the formation and performance of the contract, which the [buyer] was well aware of.

II. The [buyer] did not object to the merits of the claim. The [plaintiff]'s claim for interest on the purchase price is based on Art. 78 CISG, the interest rate follows from Art. 28(2) EGBGB [*] and 352 HGB [*].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant is referred to as [seller]; the Defendant-Appellee is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].

Translator's note on other abbreviations: Brussels Convention = Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters; ECJ = European Court of Justice; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; HGB = Handelgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [pre-eminent German law journal].

** Ruth M. Janal, LL.M (UNSW) is a PhD candidate at Albert-Ludwigs-Universität Freiburg.

*** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.

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Pace Law School Institute of International Commercial Law - Last updated September 17, 2007
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