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CISG CASE PRESENTATION

Germany 20 February 2002 District Court München (Shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020220g1.html]

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

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Case identification

DATE OF DECISION: 20020220 (20 February 2002)

JURISDICTION: Germany

TRIBUNAL: LG München [LG = Landgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 10 O 5423/01

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Shoes


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 9 ; 25 ; 39 ; 47 ; 49 ; 58 ; 74 ; 76 ; 78 ; 80 [Also cited: Articles 2 ; 35 ; 40 ; 51 ; 53 ]

Classification of issues using UNCITRAL classification code numbers:

9D2 [Usages impliedly made applicable to contract];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

47A [Buyer's right to fix additional period for performance];

49A [Buyer's right to avoid contract: grounds for avoidance];

58A [Time for payment: buyer to pay when goods placed at buyer's disposition];

74A [General rules for measuring damages: loss suffered as consequence of breach];

76A [Avoidance: damages based on abstract calculation];

78A [Interest on delay in receiving price or any other sum in arrears];

80A [Failure of performance caused by other party (party causing non-performance): loss of rights]

Descriptors: Usages and practices ; Fundamental breach ; Avoidance ; Nachfrist ; Lack of conformity notice, timeliness ; Failure of performance, other party ; Damages ; Set-off ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=904&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/712.htm>; Internationales Handelsrecht (1/2003) 24-26; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=904&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.647; 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. 2 para. 8a Art. 39 para. 16; Spaic, Analysis of Fundamental Breach under the CISG (December 2006) n.278

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Case text (English translation)

Queen Mary Case Translation Programme

District Court (Landgericht) München

20 February 2002 [10 O 5423/01]

Translation [*] by Julian Waiblinger [**]

Translation edited by Mark Beamish [***]

FACTS OF THE CASE AND PLEADINGS OF THE PARTIES

The Plaintiff [seller] demands from the Defendant [buyer] payment for the delivery of shoes and collection samples as well as further costs for development and materials. The [seller] is an Italian company marketing shoes and arranging all services in connection with their production. The [buyer] is a German commercial enterprise, which trades in shoes and is a supplier for the European shoe-retail trade. In autumn 2000, the parties agreed that the [seller] should deliver shoes to the [buyer] in the future. For that purpose, the [buyer] first created the design and a corresponding model, whereas the [seller] was obliged to realize the production of the shoes. In agreement with the [buyer], the shoes were then produced by third-party companies; however, the [seller] and the [buyer] remained the sole parties to the contract.

A first delivery of 1,032 pairs of shoes was made on 14 February 2001 and was invoiced in Italian Lire [LIT] 72,455,500 (invoice No. 27 of 14 February 2001). Further deliveries of 68 and 623 pairs of shoes were made on 1 March 2001 and 8 February 2001 for which the [seller] invoiced [LIT] 5,576,000 (invoice No. 60 of 1 March 2001) and [LIT] 46,976,500 (invoice No. 68 of 8 March 2001) respectively. At the [buyer]īs request, eight pairs of shoes were delivered directly to a customer in Sweden, for which [LIT] 416,000 were invoiced (invoice No. 137 of 20 April 2001).

With three further invoices of 6 November 2000 and 18 April 2001 amounting to [LIT] 1,498,000 (invoice No. 156 of 6 November 2000), [LIT] 305,000 (invoice No. 157 of 6 November 2000) and [LIT] 9,900,000 (invoice No. 132 of 18 April 2001), the [seller] charged the [buyer] for the production of shoe samples. These samples were needed by the [buyer] and the [buyer]īs commercial representatives, inter alia, for the purpose of presenting them to the end consumer.

With a separate invoice "amounting to [LIT] 40,049,000, costs for development and materials were charged" (invoice No. 230 of 12 June 2001).

In the end, the [seller] only delivered 3,300 pairs of shoes instead of the more than 13,000 pairs ordered. In correspondence from February and March 2001, the [buyer] reminded the [seller] of the non-delivery of the ordered pairs. In the correspondence of 19 March 2001 and 23 March 2001, the [seller] pointed out that the [buyer] should make the [buyer]'s payments and that delivery of further shoes could not be made without insurance.

By telefax of 30 March 2001, the [buyer] cancelled the outstanding deliveries.

These bills, amounting to a total sum of [LIT] 177,176,000 were not settled.

The [seller] deducted from that sum [LIT] 16,125,500 by way of a credit note, granted due to the buyer's complaints.

In the correspondence of 7 May 2001, the [seller]īs attorney demanded that the [buyer] settle bills No. 156, 157, 27, 60 and 68 before the deadline of 27 May 2001.

The [seller] alleges that the [buyer] had submitted approximately 70 separate orders to the [seller] according to the orders of the [buyer]īs customers. The [buyer] had not fulfilled the duty to settle the accounts regarding the deliveries which had already taken place within the stipulated term. The parties had agreed that the [buyer] had to pay for each of the deliveries within ten days of taking delivery of the goods; the [buyer] had complied with that only in respect of two deliveries, which were made by way of C.O.D [cash on delivery]. Since the remaining bills were not paid, the [seller] refrained from carrying out further deliveries. However, the [seller] had been neither incapable nor unwilling to deliver.

The [seller] petitions to order the [buyer] to pay to the [seller] [LIT] 161,050,500 along with 13.75% interest on [LIT] 126,811,000 since 28 May 2001 as well as 13.75% interest on [LIT] 34,239,500 since service of the writ.

The [buyer] seeks dismissal of the claim.

The [buyer] asserts by court action that three of the invoices (Nos. 156, 157 and 132) for the collection samples are unjustified since the [seller] had violated the obligation to deliver in pairs. At first, it had been justified that merely half a pair was delivered, since the [seller] was in need of the other half as a sample for the production. The other half should, however, then have been delivered, which did not happen. Only as regards foreign representatives is it acceptable that they received half pairs; as regards the German market, the representation was carried out merely by the [buyer]. Consequently, the [buyer] is entitled to receive complete pairs. In the correspondence of 15 May 2001 and 6 June 2001, the [buyer] unambiguously asked the [seller] to deliver the other half subsequently. Since subsequent delivery was no longer possible due to lapse of time regarding the spring and summer collection, the [seller] was entitled to avoid the contract according to Art. 49(1)(a) CISG.

The settlement of bill No. 230 regarding costs for development and materials could not be demanded since there was no agreement on separate invoicing. These costs were already included in the selling price for the [buyer] and arose within the scope of the development of the spring and summer collection 2001.

The [buyer] takes the position that the [buyer] is entitled to exercise the right to set-off a damage claim for loss of profits since the [seller] had violated the contract by not delivering the entire order. The parties, the [buyer] maintains, had not agreed on a time for payment. Thus, the customary requirement for payment within 60 days of the date of invoice was to be assumed. Therefore, the [seller] was not entitled to a right to withhold performance whatsoever as regards the outstanding deliveries, since it concerned one commission, the payment of which would only become due after complete performance. Since the [buyer] could not supply the customers with 10,494 pairs of shoes, the [buyer] had lost gross profits amounting to Deutsche Mark [DM] 727,614.

In that respect, the [seller] alleges that the shoes of invoice No. 156 and 132 were duly delivered in pairs. The delivery of invoice No. 156 was made directly to the [buyer], whereas, at the [buyer]īs request, the delivery of invoice No. 132 was carried out directly to the [buyer]īs representatives. The objection of the [buyer] that only half a pair was dispatched, is only true of invoice No. 157. Therefore, as is undisputed, only half a pair was charged. Invoice No. 230 concerned development and material costs for the autumn and winter collection 2001/2002. On account of the [buyer]īs cancellation, these costs could not be included in the price of the shoes anymore. The settlement of the account was owed under the contract for services or at least as damages.

REASONS FOR THE DECISION

The admissible claim is partly legally justified.

I. According to Art. 53 CISG, the [seller] is entitled to a purchase-money claim amounting to [EUR] 62,492.06 (= [LIT] 121,001,500).

     1) The UN Sales Convention is applicable according to Art. 1(1)(a) CISG, since the present litigation is based on contracts of sale of goods between two parties from two Contracting States. Art. 2 CISG is not relevant since the purchase of the shoes was for the purpose of the [buyer]'s business, not for his private use.

     2) In the opinion of the Court, the parties concluded several contracts of sale. In this regard, the [seller] pleaded that approximately 70 orders had been submitted since September 2000 according to the entry of the orders received by the [buyer] from the [buyer]'s customers. The [buyer] did not effectively deny this allegation. The [buyer] indeed maintains that only one major order had been submitted, but mentions neither a specific order nor even a date for that order. If merely one major order had been submitted, it should be possible to specify that date precisely. Instead, the [buyer] too mentions an order from Autumn 2000, which again should be substantiated by several constituent orders. Yet, the existence of several orders corresponds more closely with the [seller]'s evidence, since it does not suggest any existence of a unitary contract.

The submitted survey of the confirmed orders of 21 December 2000 by the [buyer] does not disprove the [seller]īs pleadings either, since several individual orders could also have preceded that statement which was made only in December. Moreover, the [seller]īs still undisputed allegation that the [buyer] had paid for the two deliveries of 4 and 12 April 2001 suggests the absence of a unitary major order, which had to be balanced as a whole.

          a) Bills No. 27, 60, 68 and 137 were undisputedly invoiced to the [buyer].

          b) In the opinion of the Court, the demands in invoices No. 156, 157, 132 for the delivered shoe samples is also justified since the [buyer] is in so far not entitled to avoid the contract according to Art. 49 CISG. Taking into account the pleadings of the parties, it appears particularly doubtful whether the [seller] can be charged at all with a breach of contract, based on the fact that the shoe samples had not been delivered in pairs, as pleaded by the [buyer]. From this point of view, the submissions of the [buyer] are self-contradictory and not convincing. Initially, it was alleged that only delivery in pairs had been stipulated, moreover, that the dispatch of half a pair to a representative was out of the question. In the course of the judicial hearing, the previous pleadings were partly corrected by conceding that initially it was acceptable to receive only half a pair and that also foreign agents would receive half a pair. Accordingly, it is undisputed that invoice No. 157 related to the French market, and here too only half a pair was charged. In precisely what respect this invoice should constitute a breach of contract by the [seller], was not further explained.

Even if a corresponding delivery, which did not satisfy the requirements of Art. 35 CISG, had been made as regards invoices No. 156 and 137, the [buyer] is still not entitled to set aside the contract and refuse to settle the account. In the opinion of the Court, the [buyer] lost the right to rely on a lack of conformity -- if existing at all -- according to Art. 39(1) CISG since the [buyer] failed to give notice thereof to the [seller] within a reasonable time after the ascertainment. According to the [buyer]īs own submissions, the [seller] was subsequently asked to deliver the allegedly missing half pairs only by correspondence of 15 May and 6 June 2001. Since this, however, concerned the spring/summer collection 2001 and the [buyer] had needed the other half in order to present the shoes to customers, the demand was too late anyway. Since the deliveries were, according to the invoices, made much earlier, so too the notification as to the lack of conformity should have been made sooner after these allegedly incomplete deliveries.

A time of several months can under no circumstances be regarded as a reasonable time (cf. von Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, Art. 39 No. 8). In the opinion of the Court, Art. 40 CISG does not apply, as the required knowledge of the [seller] could not be established sufficiently by the [buyer]īs submissions. In particular, the fact that half pairs could well be dispatched directly to foreign agents indicates that the [seller] undoubtedly knew or should have known that, regarding the deliveries determined for the German market, whole pairs had to be sent to the [buyer]. Since, by failing to comply with Art. 39 CISG, the [buyer] lost the right to rely on a lack of conformity due to incomplete delivery, the [buyer] is not entitled to rescind the contract according to Art. 49(1) CISG. Therefore, the [buyer] must pay the purchase price, the amount of which remains undisputed (cf. von Caemmerer/Schlechtriem, loc. cit. Art. 39, No. 10).

     3) The [buyer] is not entitled to exercise a right to set-off damages claims for loss of profits against these claims.

          a) On the one hand, the [buyer]'s possible damages claims according to Art. 74 et seq. CISG are frustrated by Art. 80 CISG, according to which a party cannot rely on the non-performance of duties by the other party to the extent that the aggrieved party has caused the non-performance by its acts or forbearances. With this in mind, the Court is of the opinion that the suspension of the deliveries resulted from the fact that the [buyer] had not paid for the deliveries which had already been made. As laid down above, the Court does not consider there to have been a single major order, for which only a single payment was acceptable, but rather several orders and corresponding deliveries.

In default of further agreements, these deliveries had to be settled after receipt according to Art. 58 CISG. The allegation of the [seller], that a time of ten days had been agreed on, was not proven. Nor does the Court know of any custom in that branch of business that payment only has to be made 60 days after the date of invoice. As for the rest, this would also be contradictory to the provision of Art. 58 CISG which contains an express regulation for incomplete contractual agreements. The fact that the [buyer] undisputedly failed to settle the invoiced accounts for the most part had the effect that the [seller] suspended further deliveries. That the outstanding payments were the cause of the suspension of the deliveries follows particularly from the submitted correspondence of 19 March 2001 and 23 March 2001.

          b) Based on an abstract differential calculation, the [buyer] claims damages under Art. 76 CISG. Even if the [seller] had unjustifiably refused to make further deliveries, this would not entitle the [buyer] to claim damages pursuant to this provision. Art. 76 CISG requires a justified avoidance of the contract which, in the opinion of the court, did not occur.

According to Art. 51 and Art. 49 CISG, the cancellation of the contract is admissible in the case of a substantial breach of contract by the seller or in the case of non-delivery within a fixed final deadline as stipulated in Art. 47(1) CISG. A respite in the sense of Art. 49(1)(b) and Art. 47(1) CISG has not been granted. The dispensability of an additional period of time as provided for in Art. 47(2) CISG cannot be established either, since the [seller] did not indicate generally that he was unwilling to fulfil his duties. The correspondence of 19 and 23 March 2001 does not satisfy the requirements of a final refusal to fulfil the obligations, rather the [seller] actually shows a general readiness to perform, provided the [buyer] pay for the earlier deliveries. In such a case, the [buyer], insisting on the [buyer]'s position, should have fixed a final deadline expressly, indicating that no single payments whatsoever were owed in respect of the alleged unitary contract and therefore the outstanding deliveries were expected on a specific date. Mere non-delivery after the delivery deadline does not constitute a substantial breach of contract within the meaning of Art. 49(1)(a) CISG. This Article would otherwise be superfluous since then the fixing of a time limit would never be required. The failure to meet a delivery deadline cannot, as a rule, be regarded as a fundamental breach of contract within the meaning of Art. 25 CISG; reasons for an exception such as the stipulation of a transaction for which time is of the essence were not put forward (cf. von Caemmerer/Schlechtriem, loc. cit. Art. 49, No. 23). Since the requirements of Art. 49(1) CISC are not satisfied, the avoidance of the contract was unjustified and the [buyer] is not entitled to claim damages in reliance on Art. 76 CISG.

A damages claim according to Art. 74 CISG, which does not require the avoidance of the contract, necessitates a specific ascertainment of damage. The submissions of the [buyer] do not suffice in that respect since it was neither explained nor proven that corresponding profits could actually have been made with the sales.

     4) In default of a right to set-off, the [seller] is entitled to complete payment of invoices No. 27, 60, 68, 137, 156, 157 and 132.

II. However, the claim for payment of invoice No. 230, amounting to [LIT] 40,049.00, is not justified.

     1) Firstly, the [seller] failed to prove that the [seller] was supposed at all to perform the obligations charged for in that invoice. According to the [seller]'s submissions, the invoice at issue pertained to costs for development and materials for the autumn/winter collection 2001/2002, with which the [seller] was commissioned. The [buyer] not only denied that the invoice related to this collection, but also that the [buyer] had placed such an order in the first place. Neither point could be proved by the [seller]. For these reasons, neither a claim for performance nor for damages can be upheld.

     2) Even assuming that an order concerning the autumn/winter collection had been placed and that invoice No. 230 related to that order, no claims can be established.

          a) According to the [seller]'s submissions, the claims at issue concerned contracts for services which are not governed by CISG. Rather, in default of a choice of law, Italian law was applicable according to Art. 28 EGBGB [Einführungsgesetz zum Bürgerlichen Gesetzbuch (Introductory Act to the German Civil Code)]. In this respect there are no submissions whatsoever regarding specific agreements or details, e.g., as to whether there were contractual stipulations in the case of production finally not being carried out. This would be essential for a more detailed assessment of possible claims. Likewise, there are no submissions whatsoever regarding claims or conditions of entitlement under Italian law.

          b) The [seller] is not entitled to a damages claim according to the provisions of the CISG either. According to the [seller]īs submissions, the alleged violation of contract lies in the cancellation of the contract regarding the spring/summer collection. This lack of conformity, however, did not cause the damage within the scope of the alleged subsequent contract; consequently, the causation required for the occurrence of the damaging event according to Art. 74 et seq. CISG is not present.

     3) Thus, the claim relating to invoice No. 230 must be dismissed.

III. The claim for interest arises from Art. 78 CISG.

The alleged bank credit and the asserted amount of interest remained undisputed. The [seller] demands interest since 28 May 2000 arising from invoices No. 156, 157, 27, 60 and 68. Deducting the credit entry amounting to [LIT] 16,125.500 carried out by the [seller], the amount of [LIT] 110,685.500 remains, upon which interest can be claimed from that date.

As regards invoices No. 132 and 137, which amount to [LIT] 10,316,000. interest must be paid from the time proceedings began. The writ was served on 12 October 2001.

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Italy is referred to as [seller]; the Defendant of Germany is referred to as [buyer]. Amounts in Italian currency (Lire) are indicated as [LIT]; amounts in German currency (Deutsche Mark) are indicated as [DM]; amounts in the currency of the Euro-currency Area (Euro) are indicated as [EUR].

** Julian Waiblinger, Humboldt University, Berlin, Faculty of Law since 1999; King's College, London, Diploma in Legal Studies 2001/2002.

*** Mark Beamish: Graduate of King's College London - LL.B. Law with German Law (2002); Diploma in German Civil Law, Passau University (2000); LL.M. Master of Law, Humboldt University, Berlin (2003).

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Pace Law School Institute of International Commercial Law - Last updated March 20, 2007
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