Austria 5 July 2001 Supreme Court (Intel Pentium computer parts case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010705a3.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 6 Ob 117/01a
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Contracting State
BUYER'S COUNTRY: Different Contracting State
GOODS INVOLVED: Intel Pentium computer parts
AUSTRIA: Oberster Gerichtshof 5 July 2001
Case law on UNCITRAL texts (CLOUT) abstract no. 535
Reproduced with permission from UNCITRAL
Abstract prepared by Martin Adensamer, National Correspondent
The seller sold computer microprocessors to the buyer, who paid the price and resold the goods in the original package without examining them. A number of final users, claiming the microprocessors were fake, returned them to the reseller, who returned them to the first seller, receiving in return in some cases replacements, and in other cases credit notes. After a certain date, the reseller exclusively requested credit notes. Some months later, the reseller filed a law suit, claiming the sums carried in the credit notes.
The defendant argued, on the one hand, that the plaintiff had not given the declaration of avoidance of the contract within reasonable time and therefore his declaration was not valid; on the other hand, that the plaintiff's notice of nonconformity had not been sufficiently specified, since he had omitted even to examine the goods.
The Supreme Court found that the CISG did not provide for any specific form requirement for the declaration of avoidance, which could therefore be implicit or even derive from the filing of a lawsuit. It also found that under the CISG the notice of lack of conformity of the goods, to be effective, had only to be understandable for the other party. The Court deemed that the plaintiff's exclusive request from a certain date for the reimbursement of the price was a clear sign of its intention to avoid the contract. Moreover, the Court argued that the fact that the defendant was ready to substitute the goods showed that he had implicitly waived both the objections that the notice of non-conformity had not been given timely and that it lacked the necessary specificity.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
25A [Effect of a fundamental breach: avoidance of contract]; 26A [Notification of avoidance: effective declaration of avoidance]; 38A [Buyer's obligation to examine goods: time for examining goods]; 39A11 [Requirement to notify seller of lack of conformity: degree of specificity required]; 49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract]
25A [Effect of a fundamental breach: avoidance of contract];
26A [Notification of avoidance: effective declaration of avoidance];
38A [Buyer's obligation to examine goods: time for examining goods];
39A11 [Requirement to notify seller of lack of conformity: degree of specificity required];
49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract]
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CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=905&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-online.ch database <http://cisg-online.ch/cisg/urteile/652.htm>;  Zeitschrift für Rechtsvergleichung, Heft 1, p. 25;Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=905&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Spaic, Analysis of Fundamental Breach under the CISG (December 2006) n.265Go to Case Table of Contents
Queen Mary Case Translation Programme
5 July 2001 [6 Ob 117/01a]
Translation [*] by Jan Henning Berg [**]
Translation edited by Veit Konrad [***]
The parties to the present dispute are wholesalers of computer parts. In 1998, Defendant [Seller] sold Plaintiff [Buyer] factory-packaged Intel Pentium II/300 processors. [Seller] invoiced these items for:
|-||US $50,750 (referring to 100 processors);|
|-||US $55,110 (referring to 110 processors); [emphasis added by translator]|
|-||US $94,400 (referring to 190 processors);|
|-||US $98,260 (referring to 340 processors).|
[Buyer] resold the goods. In the beginning of March 1998, complaints were first raised by customers. [Buyer] returned to [Seller] the rejected goods -- which had already been paid for -- and complained on various occasions that the processors were forged. These complaints were transmitted together with documents demanding replacement under warranty. [Seller] replaced part of the processors and credits were issued with respect to another portion of the processors in question. As of 19 June 1998, [Buyer] merely transmitted notices in which it demanded further credits.
[Buyer]'s position in First Instance
With its legal action initiated on 30 November 1998, [Buyer] demands reimbursement of US $26,005.00 for returned forged processors.
[Seller]'s First Instance defense
[Seller] mainly invoked that [Buyer] was merely entitled to have the goods replaced. In addition, [Seller] alleged that:
|-||[Buyer]'s declaration of avoidance of the contract was not made within appropriate time;|
|-||[Buyer] had also failed to comply with its duty to examine and to give notice of non-conformity; and|
|-||Any notices given were not sufficiently specific.|
[Seller] further alleged an unsettled purchase price claim of US $28,346.60 as a counterclaim.
RULING IN FIRST AND SECOND INSTANCES
The Court of First Instance dismissed [Buyer]'s action despite its finding that the 110 processors at a price of US $55,110 were actually forged. Under the CISG (BGBl [*] 1988/96), the buyer has to examine the goods, give notice of any lack of conformity and declare the contract avoided within appropriate time in case of a fundamental breach. [Buyer]'s notices were not sufficiently specific. The Court of Second Instance partially accepted [Buyer]'s appeal when it declared the existence of [Buyer]'s claim by way of partial judgment. A judgment could not yet be rendered with respect to the counterclaim.
The Court of Second Instance did not decide whether the delivery of forged processors constituted the delivery of an aliud (different object) or a mere non-conforming delivery of the proper object. Failing an act of bad faith by [Seller] (which would have to be proved by [Buyer]) in terms of knowing that forged goods were delivered, a duty for [Buyer] to examine and give notice of non-conformities existed (Art. 38 et seq. CISG). However, wholesalers have no duty to conduct thorough examinations of factory-packaged processors which should be put to a resale. Even assuming that notice was given too late and that the declaration of avoidance of the contract (after the "replacement process" as found by the Court of First Instance) was given too late, [Seller] had effectively waived any argument that notice of non-conformity had been made too late. [Seller] had unconditionally taken back the goods (meaning that [Seller] itself had received credits from its supplier) and agreed to replace them without any substantial inspection of the alleged lack of conformity. Contrary to the view expressed by the Court of First Instance, [Buyer] had specified sufficiently in its notice that there was an alleged forgery. In any event, [Seller] had also impliedly communicated that it would not require any further specification. [Buyer] could therefore declare the contract avoided due to fundamental breach in terms of Art. 25 CISG even given that it accepted partial deliveries previously. [Buyer] would be threatened with damage to its reputation should more forged processors be sold to its customers. The Court of Second Instance held that regular appeal on points of law was admissible.
POSITIONS OF THE PARTIES IN THE APPEAL TO THE FEDERAL SUPREME COURT
[Seller] seeks to have the judgment amended so that [Buyer]'s claim is denied. In the alternative, [Seller] requests cancellation of supplementary proceedings.
[Buyer] requests the Court to dismiss [Seller]'s appeal.
REASONING OF THE FEDERAL SUPREME COURT
Contrary to the procedural ruling by the Court of Second Instance -- which does not bind the Federal Supreme Court -- appeal on points of law as filed by [Seller] is not admissible.
[Seller] challenges the finding that the forged processors would stem from the delivery of 110 items on 19 February 1998. Even after [Seller]'s submissions in response to [Buyer]'s action, it can be excluded that the forged goods stem from the delivery of 340 items. Only for this delivery, had there been a price per piece of significantly less than US $500. Appellate proceedings were not unlawful according to § 473a ZPO [*]. In the case of § 468(2) ZPO, there is no duty on the Court to deliver information. Accordingly, the party prevailing in the first instance -- being appellee in the second instance -- has to challenge the findings made in the first instance if the appellant bases its legal argument on certain findings of the court in the first instance (Kodek, in Rechberger, ZPO, § 468 para. 5; RSOI 12020). From the findings, no relevant legal issues in terms of § 502(1) ZPO need to be considered (§ 510(3), sentence four, ZPO).
The United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (BGBl [*] 1988/96) - which is applicable because the parties have their places of business in different Contracting States (Art. 1(1)(a) CISG) -- provides for the buyer's right to declare avoidance of the contract in case of a fundamental breach of contract (Arts. 46 to 52 CISG; Koziol/Welser, Bürgerliches Recht II, 164). The declaration of avoidance does not require a particular form (SZ [*] 69/26). It can be given impliedly (1 Ob 74/99k) or by commencement of legal action (1 Ob 292/99v). Likewise, the notice of non-conformity is not dependent on a particular form as long as it is sufficiently comprehensible for the other party (2 Ob 191/98x). It had been clear for [Seller] that -- following complaints by customers referring to possible forgery -- [Buyer] only wanted credits from a certain point in time, meaning essentially avoidance of the contract. The Court of Second Instance properly held that in taking back the goods and expressing its willingness to replace them, [Seller] impliedly waived any contention of late or insufficient notices of non-conformity. Similarly, the Court of Second Instance properly held that mere replacement of the processors was unacceptable to [Buyer]. Admissibility of the partial judgment (cf. Rechberger/Simotta, Grundriss des österr. ZPR, para 491) has not been challenged by [Seller].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff is referred to as [Buyer] and Defendant is referred to as [Seller]. Amounts in the US-American currency (US dollars) are indicated as [US $].
Translator's note on other abbreviations: BGBl = Bundesgesetzblatt [Official Law Gazette of the Federal Republic of Austria]; SZ = Sammlung Zivilsachen [Austrian Collection of Civil Law Judgments]; ZPO = Zivilprozessordnung [Austrian Code of Civil Procedure].
** Jan Henning Berg is a law student at the University of Osnabrück, Germany and participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.
*** 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.Go to Case Table of Contents