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CISG CASE PRESENTATION

Switzerland 29 July 2002 Appellate Court Luzern (Presses case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020729s1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20020729 (29 July 2002)

JURISDICTION: Switzerland

TRIBUNAL: OG Luzern [OG = Obergericht = Appellate Court]

JUDGE(S): Kreienbühl (Präsident); Maier, Zihlmann-Kurmann (Oberrichterin); Jozic (Gerichtsschreiberin)

CASE NUMBER/DOCKET NUMBER: 11 01 125

CASE NAME: F. AG v. D. GmbH

CASE HISTORY: 1st instance Amtsgericht Luzern 14 August 2001

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Switzerland (defendant)

GOODS INVOLVED: Presses


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 39(1) [Not cited but also possibly relevant: Articles 38 ; 50 ; 74 ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

39A ; 39A11 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required]

Descriptors: Lack of conformity notice, timeliness ; Lack of conformity notice, specificity ; Burden of proof ; Waiver

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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

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/721.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion)

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Obergericht) Luzern
29 July 2002 [11 01 125]

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

1st chamber. Acting as Appellate Court. Judges Kreienbühl (President), Maier and Zihlmann-Kurmann, Court Clerk Jozic. Appeal of the decision of the Court of First Instance [Amtsgericht] Luzern, 1st division, of 14 August 2001.

FACTS OF THE CASE

A. The [seller] is an association under German law with its seat in Elsdorf-Heppendorf, the [buyer] an association under Swiss law with its seat as of late in Luzern, and previously in Littau. Both trade in metal presses from Russia. On 11 November 1996, the [buyer] ordered from the [seller] two Erfurt 1250 presses from a Russian factory in Belaja Kalitva at a price of DM [Deutsche Mark] 300,000.- each, and on 16 March 1998 the [buyer] ordered four small Erfurt presses for a total of DM 980,000.-. The presses were shipped to Genoa [Italy]. Subsequently, the [seller]'s claims for payment of the purchase price and the [buyer]'s remedies for breach of contract became the subject of dispute.

B. [Seller]'s statement of claim of 30 May 2000 demands from the [buyer] the following amounts:

-    DM 400,300.- plus calculated interest in the amount of DM 98,620.86 from 1 June 1997 to 20 February 2000 plus 8% interest on DM 400,3000.- from 21 February 2000;
- DM 580,600 plus calculated interest in the amount of DM 59,578.83 from 1 August 1998 to 20 February 2000 plus 8% interest on DM 580,600.- from 21 February 2000;
- US $7,000.- plus calculated interest in the amount of US $654.99 from 18 September 1998 to 20 February 2000 and DM 519.95; and
- DM 14,488.40 for the expenses of the pre-judicial prosecution in Germany, with cost of the proceedings and reimbursement of the [seller]'s expenses to be borne by the [buyer].

The [buyer] requested that the claim be dismissed, offsetting several counterclaims resulting from the mutual business relations, and that the [seller] be ordered to bear the costs of the proceedings and to reimburse the [buyer] for its expenses.

[DECISION OF COURT OF FIRST INSTANCE]

On 14 August 2001, the Court of First Instance (Amtsgericht) Luzern-Land, 1st division, handed down the following decision:

     1. The [buyer] is ordered to pay to the [seller]:
         a) DM 400,300.- plus calculated interest in the amount of DM 98,620.86 from
             1 June 1997 to 20 February 2000 plus 8% interest on DM 400,3000.- from 21 February 2000;
         b) DM 580,600 plus calculated interest in the amount of DM 59,578.83 from
             1 August 1998 to 20 February 2000 plus 8% interest on DM 580,600.- from
             21 February 2000;
         c) DM 519.95 and US $7,000.- plus calculated interest in the amount of US $654.99 from
             18 September 1998 to 20 February 2000 plus 8% interest on US $7,000.- from
             21 February 2000.
     2. All other claims are dismissed.
     3. The [buyer] is to bear the cost of the proceedings.
     4. (Instruction about the right to appeal).
     5. (Remark regarding the service of the decision).

The Court of First Instance essentially considered as follows:

The CISG (Vienna Sales Law) and German law (following the Hague Convention of 15 June 1955 on the law applicable to international sales of goods) applied to the dispute.

Regarding the sales contract for two Erfurt 1250 presses, it was undisputed that an overall purchase price of DM 600,000.- had been agreed and that the [buyer] had so far failed to pay DM 400,300.- of that amount. As Mr. F. had previously viewed the presses for the [buyer] in the Russian factory, it did not have to be decided whether the presses had in fact been unused. The previous instance assumed that the packaging of the presses conformed to the contract. The bill of lading, which had been accepted by the [buyer] and was undisputedly dirty, referred to the packaging; the alleged lack of conformity of the presses could not be inferred from it. The [buyer] had failed to give notice to the [seller] specifying any possible lack of conformity in this or any other way. The [seller] had also not waived its right to rely upon the insufficient notice of non-conformity. Since the [buyer] had lost the right to rely on the lack of conformity of the goods, the counterclaim for reduction of the purchase price and damages, which the [buyer] was seeking to set-off, had to be dismissed. In any case, the [buyer] neither sufficiently submitted the alleged lower value of the goods, nor did [buyer] show that it, as a reseller, suffered any losses at all. Consequently, the Court of First Instance ordered the [buyer] to pay to the [seller] the remaining purchase price in the amount of DM 400,300.-.

With respect to the sales contract for the four small Erfurt presses, the Court of First Instance found that it was undisputed that DM 980,000.- had been agreed as the overall purchase price and that the [buyer] undisputedly had of yet failed to pay DM 580,600.-. The delivery of brand-new presses manufactured in the years 1983 and 1984 had been agreed. The findings in the report of C.D. on 1 December 1998 regarding the findings on spot on 21/22 July 1998 did not refer to the presses, but solely to their packaging. The communication of the [buyer]'s customer to C.D. of 3 August 1998. containing the remark that the damage is to be compensated consisted, solely of a control panel that had to be exchanged and of some accessories for the total amount of It£ [Italian Lira] 25,000,000.-. Even if the said damage did not constitute a loss covered by the carrier's insurance, but a non-conformity of the presses for which the [seller] was liable, the notice of non-conformity given roughly four months later was without doubt too late. The same was obviously true for the alleged lack of conformity of the presses regarding the question used / unused. Even if the presses had in fact been used, the [buyer]'s customer and [buyer] itself could have and ought to have ascertained that fact already in August 1998, so that a notice of non-conformity given in December of 1998 was belated. Since the [buyer] failed to prove that it notified the [seller] of the lack of conformity in an orderly fashion, [buyer] was unable to set-off counterclaims for the reduction of the purchase price and damages, but had to pay the remaining purchase price in the amount of DM 580,600.-. Furthermore, the [buyer] failed to make sufficiently substantiated submissions regarding the alleged lower value and did not prove that it suffered any losses at all.

Regarding the sales contract for the Smeral press with the swage holder, the Court of First Instance held that the [buyer] owed the [seller] US $7,000.- plus interest for the swage holder subsequently ordered and delivered; furthermore, it was undisputed that transfer costs arose in the amount of DM 519.95. The [buyer] failed to prove an orderly notice of lack of conformity; the claim for damages in the amount of DM 125,000.-, which the [buyer] was seeking to set-off with, was dismissed because the [buyer] had lost all its remedies for breach of contract. Therefore, the [buyer] still had to pay the [seller] US $7,000.- plus DM 519.95.

The [buyer] did not posses any set-off claims arising from the contract for the Smeral press LZK 4000B. It had not been ascertained that the [buyer] suffered damages as a result of the confiscation of the press and the erroneous false indication of the country of origin by the [seller] (Czechoslovakia instead of Russia). The loss of US $103,000.- caused by an allegedly missing support plate and a deduction of the agreed purchase price undertaken by the [buyer]'s customer (US $43,000.-) had not been established.

Furthermore, the Court of First Instance also held that the [buyer] did not possess counterclaims resulting from the sales contract for the presses LMZ 1600 and LZK 2500 with swage holders. The [buyer] claimed that it suffered damages as a result of the [seller]'s late delivery, as [buyer] was consequently unable to supply its customer in time, but not until January 1998, at which point in time numerous lacks of conformities were found. In the following period of time, [buyer] pleads it received from its customer only DM 100,000.-, so that DM 260,000.- were missing. The Court of First Instance found that it was neither ascertained nor probable that the [seller] failed to later hand in the missing documents. Furthermore, proof of a timely and orderly notice of non-conformity from the [buyer] to the [seller] was again lacking. According to the [buyer]'s own submissions, [buyer] had delivered the presses to its customer before 5 August 1997. This could only be the case if the [seller] had also delivered the goods timely ex works in Russia. Apart from that it had not been established that the [seller] was responsible for the late delivery to the [buyer]'s customer. Why this should be the case was neither shown with the required substantiation, nor was it evident.

Following the Court of First Instance, the [buyer] did not dispute that the [seller]'s claims were due on the dates named by the [seller]. The [seller]'s pleadings (including the basis and the calculation) regarding interest on arrears and damages for default in the form of interest on debts were also not disputed by the [buyer]. In the absence of a substantiated denial by the [buyer], the interest on arrears and the additional damages for interest on debts was granted to the [seller] as requested. This was because damages could be claimed independently from interest on arrears and because the [buyer] had breached the contract and the damage was foreseeable.

Finally, the court held that the [seller] had failed to prove the existence and the extent of the loss caused by the cost of its pre-judicial enforcement of rights in Germany in the amount of DM 14,488.40. The [seller]'s corresponding claim was consequently dismissed. The value of the dispute was fixed at Sf [Swiss Francs] 3,097,115.80 (Sf 810,467 for the claim on the date the action was filed on 30 May 2000, Sf 2,286,648.80 for the counterclaims on the date the statement of defense was submitted on 23 October 2000).

[THE APPEAL]

C. With its timely appeal of 6 September 2001, the [buyer] requests the reversal of the decision of the previous instance and the dismissal of the claim, with costs and reimbursement of [buyer]'s expenses to be borne by the [seller]. Regarding the hearing of evidence, [buyer] requests that the witnesses E.H., S.T., G.G., C.D., W.V. and R.H. be heard.

The [seller] requests in its reply to the appeal of 22 January 2002, which was also submitted within time, that the appeal be dismissed and the decision by the Court of First Instance be upheld, with costs and reimbursement of the [seller]'s expenses to be borne by the [buyer]. The Court will refer to the parties' submissions regarding the appeal where necessary.

D. With decision of 15 April 2002, the [seller]'s request of 22 January (2002) (date of postage) to secure the costs was dismissed.

E. The parties waived the right to oral appellate proceedings.

CONSIDERATIONS

1. [The Court explains the prerequisites for a correct appeal / appellate reply under the Code of Civil Procedure of the Canton Luzern.]

2. Hearing of evidence

     2.1 The documents submitted in the course of the second instance are taken to the files.

     2.2 [The Court considers whether the [buyer]'s employee S.T. can be heard as a witness. The Court confirms the decision of the Court of First Instance not to hear S.T.'s testimony. While S.T. did not possess the formal position of one of the [buyer]'s organs and was as such not registered in the commercial register, S.T. had the de facto position of one of [buyer]'s representative bodies. S.T. could therefore not be heard as a witness, but solely as one of the parties to the dispute. However, the prerequisites for party testimony under § 157(3) ZPO [*] had not been met].

     2.3 The following considerations show that there is no need for a further hearing of evidence.

3. [Applicable law; Duty to examine goods and notify specifying non-conformities; Remedies in general]

It was not contested that the dispute is governed by the United Nations Convention on Contracts for the International Sale of Goods (Vienna Sales Law or CISG) and that, for matters not settled in that Convention, German law applies as the law of the country in which the seller is domiciled (Arts. 2 and 3 of the Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods). The same is true for the provisions regarding the seller's breach of contract under the CISG as explained by the Court of First Instance. For the sake of simplicity, the Court refers to the corresponding considerations of the previous instance, especially those regarding the duty to examine the goods and give notice specifying any non-conformities as well as the respective burden of proof. The [seller] disputes the [buyer]'s alleged counterclaims, with which the [buyer] is seeking to set-off, with sufficient detail. In particular, [seller] denies – where necessary – that [buyer] notified it of non-conformities, that [buyer] adhered to the periods allowed for the examination of the goods and the notification of the [seller] and that the [buyer]'s claims for reduction of the purchase price or damages were sufficiently specified.

4. The two Erfurt 1250 presses

     4.1 Contrary to [buyer]'s submission, the [buyer] did not always assume that the machines were unused. [Buyer] itself argued that the pictures taken in the Genoa port clearly showed that the machines could not possibly be “brand-new, that is unused”. The [seller]'s letter to the [buyer] of 6 January 1997 clearly shows that the [buyer]'s employee Mr. W had viewed the Erfurt 1250 presses in the year of their construction 1984, with the [seller] at the factory Belaja Kalitva. The letter does not contain any indication that Mr. W. allegedly was unable to exactly verify the machines. Such a remark would undoubtedly have been made – if the contract had at all been formed under those circumstances. Therefore, the Court agrees with the previous instance's assessment that the [buyer] knew in time what it was that it was buying, even if the [buyer]'s submission is correct that the machine plates were missing and the stocks were in disorder at the time of the viewing by Mr. W. After all, the [buyer] resold the presses to the company IMC S.r.l. as used machinery, a fact which it confirmed to IMC S.r.l. on 2 February 1996. The [buyer]'s submission that it later turned out that neither the completion noted in the [seller]'s fax of 6 January 1997 nor other promised obligations were performed, is a repetition of the [buyer]'s submissions in its statement of defense and does not constitute a discussion of the decision of the Court of First Instance, at least not a sufficient discussion, and is therefore irrelevant. Consequently, the [buyer] is unsuccessful regarding this matter.

     4.2 The [buyer] does not try to set-off with claims for remedy for breach of contract or damages regarding the non-conforming packaging of the presses. Therefore, the [buyer]'s submissions before the second instance regarding the packaging of the presses and the request to hear the witness E.H. are without significance and do not help the [buyer].

     4.3 The [buyer] asserts that: The presses were delivered without any documentation and drawings and that there were also no markings or machine plates. Therefore, an examination and assembly of the presses was impossible. The [buyer] had notified the [seller] of this fact with letter of 9 July 1997 and therefore within time, since a period for notification of eight days was not sufficient for machines of this complexity. According to the [buyer], the further considerations of the previous instance under 4.2.c. solely referred to the missing documentation. The lack of conformity that the presses could not be assembled and examined due to the lacking markings and machine plates was not considered by the Court of First Instance, even though these non-conformities were also queried timely with letter of 9 July 1997.

However, the [buyer]'s letter to the [seller] of 9 July 1997 does not contain a complaint that the presses could not be assembled and examined due to the lack of markings and machine plates. It only contains an account of the suspicion of [buyer]'s customer that in addition to the damages on the machines known to the [seller], the [seller] had delivered pestles that did not fit. The letter furthermore remarks that the parties had agreed in October of 1996 that drawings would be put at [buyer]'s disposal and that the machines were delivered without any documentation. Afterwards, the [buyer] requests the [seller] to ascertain why all of the machine plates were removed.

Finally, the [buyer] voices its expectation that [seller] would immediately send the drawings and tell the [buyer] the machine numbers “in order to clarify the problems that have now additionally arisen” These statements by no means constitute a sufficiently substantiated notice of the alleged non-conformity, which – in the [buyer]'s opinion – the previous instance failed to further expound upon. Furthermore, the [buyer] does not contest the finding of the Court of First Instance that the presses were unloaded in the port of Genoa on 22 May 1997. [Buyer] solely asserts its notice to be timely, since a period of eight days was not sufficient for a notice of non-conformity regarding complex machinery. [Buyer] thereby overlooks the fact that a period of roughly one and a half months passed between the unloading of the goods in Genoa on 22 May 1997 and the notice of non-conformity of 9 July 1997. This constitutes several times the period of eight days and is a time frame which was certainly not needed for the finding that the documentation and drawings as well as markings and machine plates were missing, which was why the presses could be neither examined nor assembled. [Buyer] itself talks about a period granted for the notification which is counted by the days. The Court therefore agrees with the Court of First Instance that the notices of non-conformity were belated, even if their content had been sufficient. Apart from that, the [buyer] in the present proceedings neither demands a reduction of the purchase price nor does it claim damages based upon the fact that documents were missing or handed over too late. [Buyer] is consequently also unsuccessful in this regard.

     4.4 The [buyer] furthermore submits that it notified the [seller] of the non-conformity of the machines with letter of 28 May 1997. According to the [buyer], the Court of First Instance, when finding this notice to be not sufficiently specified, overlooked that [buyer] was at the time simply unable to give a more specific notice of non-conformity due to the missing documentation. In the [buyer]'s opinion, the time limit for the notice of non-conformity was therefore certainly kept by the notice of 28 May 1997. Neither the [buyer]'s customer nor [buyer] itself had ever received the documents. After the [buyer] succeeded in putting the machines into a state that allowed for examination – despite the fact that the documents were still missing and in a very time-consuming manner – the examination was undertaken by company G. and the results were transmitted to the [buyer] with letter of 28 February 1998. The [buyer] then immediately forwarded the results to the [seller] and therefore gave a sufficiently specific notice of non-conformity.

The [buyer]'s letter to the [seller] of 28 May 1997 solely states with respect to the condition of the machinery: “The machines are in the worst condition imaginable” and are therefore absolutely inadequate. The Court of First Instance, however, does not rely upon that declaration, but assumes that the examination of the presses was not completed until September of 1997. The Court of First Instance establishes this point in time because the [buyer] in its letter to the [seller] of 5 September 1997 declared that [buyer]'s customer had promised payment – an action which the customer, amongst other things, had made dependent on the delivery of the machine's documentation in order to undertake a complete examination and to calculate the damages. The previous instance also finds that even if the report of Company G. of 28 February 1998 was in fact forwarded by the [buyer] to the [seller] immediately, this would overrun even a very generously calculated notification period. Under the assumption that the examination period only started to run in the beginning of September 1997, a point in time when the documentation had definitely been handed over and the presses were undisputedly with the [buyer]'s customer, the Court of First Instance helds that a period for examination of roughly five and a half months is too long under the CISG, even for machines as the one concerned in the case at hand. Furthermore, the reasonable time period granted for a notice of non-conformity was in any case not adhered to, as the [buyer] failed to prove that it forwarded the report by Company G. within roughly eight days from 28 February 1998 to the [seller]. In particular, the previous instance regards the notice of 20 March 1998 as belated. There is nothing to add to that.

In this context, the [buyer] further submits that the previous instance assumed that the [buyer]'s customer did receive the documentation at some later point in time. According to the [buyer], this is incorrect, since neither the [buyer] nor its customer had ever received the documents and the [seller] had never proven such a receipt. However, this submission does not sufficiently discuss the Court of First Instance's considerations regarding the [buyer]'s letter to the [seller] of 5 September 1997 and the implications flowing thereof. The legal finding of the Court of First Instance is therefore not to be queried. Hearing the witness G. regarding the time of examination and the condition of the machines is already out of the question because such a hearing of evidence requires that the evidence topic is defined with sufficient substantiation. This is presently not the case. It would have been up to the [buyer] in its appellate brief to make definite and coherent submissions regarding the length of time of the examination and the condition of the machinery, but the [buyer] failed to fulfil this requirement. As it has already been explained (under Considerations 1.), the lack of specific submissions cannot be made good with requests for the taking of evidence. The [buyer] is therefore also without success in this regard.

     4.5 The [buyer] alleges that the [seller] accepted [buyer]'s complaints regarding the goods without reservations in the “Memorandum of Understanding” of 20 March 1998, because there was no such thing as an acceptance of non-conformities of the goods sold by way of settlement. The said memorandum of understanding is explicitly viewed by both parties, namely by the [buyer], as invalid. Respectively, the Court of First Instance held, and this was not contested, that the memorandum was put out of force already a few days after it was signed. Following the [buyer]'s own accord, the provisions in the memorandum constitute an amicable settlement. The [buyer] does not explain and it is also not self-explanatory why an acceptance of non-conformities of the goods sold by way of settlement should not be possible. Therefore, one cannot assume that the [seller] accepted the [buyer]'s notice of non-conformity without reservations. Again, the [buyer]'s pleadings are without success.

     4.6 It evidently follows from the above considerations that the [buyer] is not entitled to any claims regarding the two Erfurt 1250 presses which [buyer] could set off against the [seller]'s claim.

5. The four small Erfurt presses

     5.1 The [buyer] holds on to its submission that it ordered brand-new presses with the year of construction 1983 and 1984, but received used ones. According to the [buyer], this followed from the final report of the expert C.D. of 1 December 1998. Notices regarding the lack of conformities of the machines (missing documents, used machinery) had been given immediately after the goods were unloaded (which was finished on 22 July 1998), as could be proven by the testimony of S.T. The [buyer] had not yet been able to give a detailed notice of non-conformity in August of 1998, as a final examination could not be undertaken due to the missing documents and since the [buyer] had to wait for the final report D. The four presses could not be put into operation as agreed until 29 March 2000. The [seller] disputes that the [buyer] gave an orderly notice of non-conformity.

The Court of First Instance held that a notice of non-conformity in December of 1998 – if it was in fact given – would have been too late, since the [buyer]'s customer and [buyer] itself could and ought to have discovered the alleged non-conformity of the presses (whether they were used or unused) already in August of 1998. The [buyer] does not make a substantiated statement regarding that court's finding. In the second instance, [buyer] does not even assert that [buyer] forwarded the report D. (immediately) to the [seller]. Hearing the testimony of S.T. upon the [buyer]'s request is not possible (cf. Considerations 2.2.), so that the alleged immediate notice of non-conformity remains unproven. The [buyer] complained that the previous instance allegedly overlooked that a notice of lack of conformity does not have to be in writing, so that the witnesses should have been heard. However, [buyer] fails to name these witnesses in its appellate brief and solely requests the hearing of S.T. and C.D. An evidence topic which would be relevant under the law is neither submitted regarding the latter witness, nor is it in any way evident. Under these circumstances, the [buyer] is presently unsuccessful.

5.2 [Buyer] submits that it agreed with the [seller] (apart from DM 400,000.- to be paid before the loading of the goods) to effect payment only dependent on the condition of the machinery. Since the machines' condition did not conform to the contract, [buyer] holds that it is able to offset against the [seller]'s claim the damages ascertained by C.D. in the amount of It£ 25,000,000.- (lesser value [used instead of brand-new] and costs for repair, reloading etc.). Starting out from US $980,000.- (for unused presses, year of construction 1991), the reduction of the purchase price to US $400,000.- was justified. The [seller] denies that the parties formed such an agreement and adds that the [buyer] had to pay at any rate since [seller] effected an orderly delivery which in particular conformed to the contract. [Seller] submits that it in any case had nothing to do with the transport damage ascertained by D.; the [buyer] had also been compensated for that damage. [Seller] submits that the damages claims, which the [buyer] was seeking to set off, were not sufficiently specified.

The agreement asserted by the [buyer] was disputed by the [seller] and not proven. Therefore, there is no ground for the [buyer]'s named set-off claims which are allegedly based upon an agreement between the parties.

     5.3 The above considerations show, in conclusion, that the [buyer] is also not entitled to any set-off claims regarding the four small Erfurt presses.

6. The Smeral press with swage holder

     6.1 The [buyer] alleges that: [Buyer] resold press LMZ 1600 to Company M. in Austria and commissioned Company G. with the installation and necessary repairs of the machinery. This process confirmed the non-conformity of the machines, whereupon Company M. sued Company G. By fax of 5 November 1998, the [seller] was immediately and timely notified that the delivered Smeral press did not conform to the contract. [Buyer] submits that the sufficiently substantiated damage of DM 125,000.- consists of invoices of Company M. and Company G., compensation of interest and the sending of an additional, free swage holder. Since the notice of non-conformity was given within time, the previous instance had been incorrect in not hearing witness W.V., whose testimony was requested to prove the alleged damage.

     6.2 The Court of First Instance considered that the [buyer] failed to submit the list of non-conformities referred to in the letter of 6 (correct: 5) November 1998. Therefore, the [buyer] failed to submit the proof upon it that it did give an orderly notice of non-conformity. This was especially true in view of the fact that [buyer] did not make any further submissions regarding the delivery and the examination, etc., as well as the respective time frame, which would have allowed inferences regarding the timeliness of a possible notice of non-conformity. Moreover, the said letter evidently concerned a different press, it referred to a press from Ko ..., whereas the case at hand concerned a press from Kin ...

     6.3 The [buyer] does not at all discuss the considerations and therefore the decision handed down by the previous instance; which is the first reason why [buyer] remains without success (cf. Considerations 1.). [Buyer] rather essentially limits itself to a repetition of the submission contained in [buyer]'s rejoinder. In the second instance, the [buyer]'s pleadings regarding the time frame are again completely insufficient. [Buyer] again failed to submit the list of non-conformities which was allegedly attached to the fax of 5 November 1998. The letter alone is completely insufficient as a notice of lack of conformity; items are queried “according to the list of non-conformities attached”. Contrary to the [buyer]'s opinion, the damage claimed is not sufficiently substantiated. The [buyer] is therefore unsuccessful, hearing W.V. as a witness is unnecessary.

7. The Smeral press LZK 4000B

      7.1 The [buyer] asserts that its customer informed it by letter of 24 July 1997 that the support plates of the press were missing, which resulted in expenses of US $60,000.-. Furthermore, [buyer] submits that the [seller] did not correctly perform the contract, regardless of whether the support plate just could not be found or whether it did not exist, and that [buyer] was therefore entitled to a reduction of the purchase price as well as damages. It was undisputed that the machine had been confiscated. [Buyer]'s customer had in the following period not been willing to effect payment according to the agreement. The resulting loss amounted to US $43,000.- and was in the [buyer]'s opinion proven by the confirmation of order and the modification of the letter of credit.

     7.2 The Court of First Instance held that it was not proven that the [buyer] suffered damages as a result of the confiscation of the press, as [buyer]'s customer, by letter of 10 March 1997, only declared that it would defer the payment date. With respect to the support plate, it did not follow from the [buyer]'s customer's letter to the [buyer] of 24 July 1997 that the support plate was missing at the time of delivery, but only that it could not be found at the port and that it had probably drowned in the cement. The [buyer] neither asserted nor did [buyer] prove that the [seller] was notified of any possible breach of contract in a timely and proper manner. Consequently, [buyer] had lost any possible remedies for breach of contract and was neither entitled to a reduction of the purchase price nor to damages. The modification of the letter of credit submitted to prove the damages was dated 24 December 1996 and was undertaken long before the said events. In view of this background, it was neither shown nor evident how this was supposed to prove any damage allegedly caused by the [seller].

7.3 While the [buyer] notes that the confiscation of the machine was undisputed, [buyer] fails to discuss the previous instance's considerations regarding the confiscation. Consequently, the decision of the previous instance is upheld for this reason (cf. Considerations 1.). The fax of [buyer]'s customer to the [buyer] of 24 July 1997 does not prove that the support plate was missing at the time of delivery; rather, it has to be assumed on the basis of this message that the support plate vanished in the cement. Regardless, the [buyer] does not submit why the [seller] is supposed to be responsible for the missing plate, and therefore supposedly obliged to reduce the purchase price and compensate losses. There is consequently no coherent submission to that respect. Furthermore, the [buyer] in the second instance again failed to prove a timely notice of lack of conformity. [Buyer] also does not make any statement regarding the Court of First Instance's considerations with respect to the modification of the letter of credit; the consequences of that omission flow from the above considerations under 1. The [buyer]'s appeal is therefore also without success in this regard.

8. Presses LMZ 1600 and LZK 2500 with swage holders

     8.1 The [buyer] contends that the [seller] was unable to deliver the presses as agreed in July of 1997, and that [seller] told the [buyer] in the following period of time that [seller] would not deliver at all, unless the [buyer] ordered two additional swage holders. [Buyer] alleges that it suffered a loss of DM 160,000.- as a result of this belated delivery, since [buyer] itself was unable to deliver to its customer within time. Since the guarantee for the agreed remaining payment had expired, the [buyer] had to deliver the machinery against collection, as there it was not provided with a timely means for payment. At the time of the delivery, the [buyer] had received DM 1,000,000.-. Consequently, the remaining amount consisted of DM 260,000.-. Witness R.H. of the [buyer]'s customer could confirm that the delivery was effected late and that the [buyer] was responsible for the delay. [Buyer] managed to deliver the machines to its customer in January of 1998, and it was not possible to examine them until the machines had reached their destination. [Buyer]'s customer notified the [buyer] by letter of 27 January 1998, that the [seller]'s delivery was made without any drawn documents. The [buyer]'s notices of non-conformity to the [seller] of 29 January 1998 were therefore made within time and with sufficient substantiation. By letter of 23 March 1998, the [buyer] asked the [seller] for a final time to send it the drawn documents – without success. The [buyer] requests that S.T. be heard as a witness.

     8.2 The Court of First Instance was convinced that the [buyer]'s customer informed the [buyer] of the missing documents by letter of 27 January 1998, that the [buyer] forwarded this notice to the [seller] on 29 January 1998, and that [buyer] again informed the [seller] on 3 February 1998 that it urgently needed those documents. However, the Court of First Instance held that it was neither proven nor probable that the [seller] had up to the present still not handed over those documents, because otherwise there would surely have been further requests and correspondence on the part of the [buyer] and [buyer]'s customer. The same was true for the belated delivery and alleged defects of the packaging or the presses themselves. Regarding supposed non-conformities, the [buyer] had again failed to prove that it gave a timely and orderly notice to the [seller], and a corresponding request for the hearing of evidence had not been made.

Regarding the damages claimed in the amount of DM 260,000.- because of the [seller]'s alleged incapacity to deliver in July of 1997, the court firstly held that [buyer] had not even shown at what point in time the [buyer] had been obliged to deliver to its customer under the order of 26 May 1997. Furthermore, [buyer] had confirmed by letter to its customer of 5 August 1997 that the [buyer] had already delivered the presses. This could only have been true if the [seller] had also delivered within time ex works in Russia. At this point in time, the bank guarantee issued on 1 August 1997 had still been valid for roughly three months. Moreover, the [buyer] had repeatedly been informed in the beginning of August 1997 that the guarantee in the form issued (bank guarantee in case of non-payment combined with requirements of documentary credit) could prove to be problematic. Even if one supposed a late delivery to the [buyer]'s customer, it had not been established that the [seller] bore the corresponding responsibility. In view of this background, it was neither submitted in a substantiated way nor was it evident, why the [seller] was supposed to be responsible for the losses suffered. Therefore, the hearing of witness R.H. was unnecessary, in particular as lacking factual submissions could not be replaced by requests for the hearing of evidence.

     8.3. It firstly needs to be pointed out that S.T. cannot be heard as a witness on the basis of [buyer]'s request (cf. considerations 2.2.). R.H., on the other hand, cannot be heard as a witness because the evidence topic regarding his testimony has not been coherently formulated. This is because the [buyer] omitted to name the reason for the [seller]'s alleged responsibility (cf. Considerations 1.). The Court of First Instance had already pointed out that a hearing of evidence presupposes coherent submissions.

The [buyer] fails to comment on the considerations of the Court of First Instance repeated above (cf. Considerations 8.2.), and therefore fails to deal with the decision of the previous instance. The consequences of this omission follow from Considerations 1. Regarding the belated delivery, the appeal limits itself to repetitions of the arguments in [buyer]'s rejoinder. The [buyer] in the second instance again fails to make submission regarding the point in time at which the [seller] delivered the goods. After [buyer] itself invoiced [buyer]'s customer on 5 August 1997 with the remark that [buyer] had delivered presses LMZ 1600 and LZK 2500, the [buyer]'s notice of non-conformity of 29 January 1998 querying the missing documents is in any case late and it need not be decided whether it was sufficiently specified. In view of all these circumstances, the hearing of R.H. as a witness regarding the belated delivery can be dispensed with. After the above considerations, questioning R.H. regarding the [seller]'s responsibility would even be unnecessary if such a responsibility was principally possible. Consequently, the findings of the previous instance are upheld and the [buyer]'s appeal is also unsuccessful in this regard.

9. In conclusion, the [buyer]'s appeal is unsuccessful in its entirety and the entire decision of the previous instance is therefore upheld. The [buyer]'s submissions regarding interest on arrears and compensation for interest on debts do therefore not possess any relevance.

10. The [buyer] is to bear the cost of the proceedings corresponding to the outcome of the appellate proceedings (§ 199(1) ZPO [*]). The previous instance's decision on costs is upheld. The court fee before the Appellate Court amounts to Sf 20,000.- and was paid by the [buyer]'s cost advance in the same amount.

[The Court fixed the fee of [seller]'s attorney to be compensated by the [buyer] under the law of the Canton Luzern].

DECISION

1. The [buyer] is ordered to pay to the [seller]:

1.1 DM 400,300.- plus calculated interest in the amount of DM 98,620.86 from 1 June 1997 to 20 February 2000 as well as 8% interest on DM 400,3000.- from 21 February 2000;

1.2 DM 580,600 plus calculated interest in the amount of DM 59,578.83 from 1 August 1998 to 20 February 2000 as well as 8 % interest on DM 580,600.- from 21 February 2000;

1.3 DM 519.95 and US $7,000.- plus calculated interest in the amount of US $654.99 from 18 September 1998 to 20 February 2000 as well as 8% interest on US $7,000.- from 21 February 2000.

2. All other claims are dismissed.

3. The [buyer] is to bear the cost of the proceedings. The court fee amounts to Sf 46,000.- before the Court of First Instance, and to Sf 20,000.- before the Appellate Court. The fees have partially been paid by the parties' advances ([seller] Sf 17,100.-, [buyer] Sf 20,000.-). The [buyer] is ordered to pay to the Court Cash Office of the Canton another Sf 28,900.- for the court fee of the first instance. Furthermore, the [buyer] is to compensate the [seller] for the cost advance in the first instance in the amount of Sf 17,100.-. The [buyer] is ordered to reimburse the [seller] for attorney fees before the Court of First Instance in the amount of Sf 59,169.- (including Sf 489.- expenses) and for the attorney fees accrued before the Appellate Court in the amount of Sf 25,125.- (including Sf 125.- expenses).

4. This decision is to be served to the parties and to the Court of First Instance Luzern-Land, 1st division.

For the 1st Chamber of the High Court:

The President

[Instruction about the right to appeal according to the attachment]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee is referred to as [seller]; the Defendant-Appellant is referred to as [buyer]. Amounts in the currency of Germany (Deutsche Mark) are indicated as [DM]; amounts in the currency of Switzerland (Swiss francs) are indicated as [Sf]; amounts in the currency of Italy (Italian Lira) are indicated as [It£].

Translator's note on other abbreviations: ZPO = Zivilprozessordnung [Code on Civil Procedure of the Canton Luzern].

** Ruth M. Janal, LL.M. (UNSW), a Ph.D. candidate at Albert-Ludwig-Universität Freiburg, has been an active participant in the CISG online database of the University of Freiburg.

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Pace Law School Institute of International Commercial Law - Last updated September 22, 2006
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