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CISG CASE PRESENTATION

Germany 13 November 2002 Appellate Court München (Organic barley case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021113g1.html]

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

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Case identification

DATE OF DECISION: 20021113 (13 November 2002)

JURISDICTION: Germany

TRIBUNAL: OLG München [OLG = Oberlandesgericht = Appellate Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 27 U 346/02

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

CASE HISTORY: 1st instance Landgericht Augsburg (3 O 3379/01) 15 April 2002 [reversed]

SELLER'S COUNTRY: [-] (defendant)

BUYER'S COUNTRY: [-] (plaintiff)

GOODS INVOLVED: Organic barley


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 39(1) ; 44 [Also cited: Articles 30 ; 34 ; 35 ]

Classification of issues using UNCITRAL classification code numbers:

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

44A [Excuse for failure to notify]

Descriptors: Lack of conformity notice, timeliness ; Excuse

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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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=922&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): [2003] Neue Juristische Wochenschrift Rechtsprechungs-Report Zivilrecht (NJW-RR) Heft 12, 849-850; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=922&step=FullText>; cisg-online.ch website <http://www.cisg-online.ch/cisg/overview.cfm?test=786>

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); [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 9 Art. 38 para. 7; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 245

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Case text (English translation)

Queen Mary Case Translation Programme

Oberlandesgericht [Appellate Court] München

13 November 2002 [27 U 346/02]

Translation [*] by Ute Lattmann [**]

Edited by Institut für ausländisches und Internationales
Privat- und Wirtshaftsrecht der Universität Heidelberg
Daniel Nagel, editor
[***]

FACTS OF THE CASE

[Buyer] claims damages from Respondent [Seller] out of a sales contract concerning the shipment of organic barley used for brewing. Claimant [Buyer] could not use the barley because of doubts regarding its origin. It was laid down in the facts of the appealed judgment of the Landgericht [District Court, Court of First Instance]. Under the supplement and delivery contract dated 14 / 31 July 2000, [Buyer] purchased 150 tons of organic barley from [Seller]. Shipment was to take place in August/September 2000. As to quality, the parties agreed that:

"The goods will meet the requirements under Council Regulation EEC No. 2092/91 on organic production of agricultural products, state of origin Germany."

[Buyer] received, at the instance of [Seller], 150 tons of barley divided into six partial shipments of 28 and 29 September, 3 and 9 October, 30 November and 20 December 2000. [Seller] on its part had purchased the barley from Estate R, which in turn had purchased a substantial part from a company located in Gotha. With the last partial shipment of 20 December 2000, [Buyer] received a certificate affirming that these last delivered goods met the standards of Council Regulation EEC No 2092/91. For the first five partial shipments, [Buyer] received no such certificates. [Buyer] only claims damages concerning the first five partial shipments.

In a letter dated 6 February 2001, [Buyer] was ordered by the inspection body of the Belgian Ministry of Agriculture to neither process nor resell these five shipments of barley. This was done because of doubts whether the barley was of organic origin or rather because the requisite proof of this by certificate was missing. [Buyer] notified [Seller] of these facts on 15 February 2001 as a notice of non-conformity. Whether the shipments in question were actually of organic origin was not ascertained in this proceeding. In the relevant wholesale business, quality as organic barley is proven only by certificates accompanying the goods, issued by companies admitted for certification. Conventionally grown barley has substantial less market value than organic barley; this is likewise applicable to the malt products produced out of this barley. [Buyer] calculated the difference between the value of the goods delivered and that of the goods contracted for, and additionally the costs for repurchase of barley to fulfil other contractual commitments and further expense damages at a total amount of 48,480 DM [Deutsche Mark].

The Lower Court ruled in favor of [Buyer]. On appeal, [Seller] claims that the certificate accompanying the goods involved in the last shipment would relate to all five partial shipments in dispute. [Seller] presents a CMR bill of lading for every shipment as well as a delivery note and a sales bill from Estate R. According to Article 1 of Council Regulation EEC No 2092/91, this Regulation is applicable to the organic barley concerned here. Article 5(1) sets out the requirements under which, concerning organic barley, a reference to organic production of agricultural products may be made. E.g., barley has to be produced according to the provisions of Article 6 and has to originate from a company to which the inspection scheme of Articles 8 and 9 apply. According to Article 8(1)(h) in connection with Article 9 III Council Regulation EEC No 2092/91 stated in Annex III to the Regulation applies to [Seller] and [Buyer] as minimum inspection requirements of the inspection scheme. No. 8 of Annex III of the Regulation sets out the minimum inspection requirements for transport of products under Article 1 of the Regulation. The fundamental principle is to ensure an inseparable and unique link between goods and documents that prove the organic origin. Annex III No. 8 in its original version only permitted a transport in locked-up containers marked with an appropriate label so that a swap of contents is not possible. According to the version given by [Seller] at the time of the of conclusion of the contract, an open transport is admissible (No. 8.2) if the addressor and addressee are liable to the inspection scheme under Article 9 Council Regulation EEC No 2092/91 and a covering document is carried along containing the name and address of the person responsible for the production or preparation of the product, or, where another seller is mentioned, a statement which enables the receiving unit and the inspection body to identify unequivocally the person responsible for the production of the product. In the case at hand, the organic barley was shipped in an open lorry. This was not contested between the parties after questioning from the Court. An adequate covering document was not attached. The [Seller]'s appeal succeeded and the [Buyer]'s claim was dismissed.

REASONS FOR THE DECISION

The barley that was delivered did not comply with the quality required under the contract. However, [Buyer] failed to file a timely notice of non-conformity.

1. The barley that [Seller] delivered did not conform to the contract as required by Article 35(1) CISG. Goods were to be supplied that complied with Council Regulation EEC No 2092/91 on organic production of agricultural products. Following the parties' statements, it is certain that [Buyer] received a CMR-bill of lading on delivery. But this note does not fulfil the requirements of Annex III No. 8.

The delivery notes submitted by [Seller] only concern the delivery from Estate R to the [Seller]. There were no delivery notes submitted from [Seller] to [Buyer]. [Buyer] mentions unsigned delivery notes in its last written submission but does not submit such despite the instruction of the Court concerning the importance the Court places on the covering documents.

The shipment of organic barley without covering documents as defined by Annex III No. 8 violated the minimum inspection requirements for the inspection scheme according to Article 9. Therefore, the barley lost the privilege of being declared as "organic". The Belgian inspection bodies were obliged to have the notes of organic origin removed from the goods (Article 9 IX Council Regulation EEC No 2092/91). As a consequence, the barley did not comply with the quality required under the contract.

This very formal construction is justified also in content. Organic barley cannot be distinguished from other barley, at least not by usual methods and with proportional expenditure. The system of the Regulation is not based on the assumption of inspecting the goods but proceeds from a system of certification of companies at production, trade and processing. The fact that goods originate from a certified company and this company confirms that the goods were produced under the requirements of Article 6 Council Regulation EEC No. 2092/91 permits the declaration of "organic" origin and thus a substantial higher price. In the case at hand, this amounted to 625 DM/t organic barley as opposed to 290 DM/t conventional barley. This applies to all stages of processing. [Buyer] alleges a selling price of 1,256 DM for one ton of organic malt and for conventional malt 605 DM.

In the final analysis, the relevant note about the established conformity in the inspection (Article 10 Council Regulation EEC No. 2092/91 in connection with Annex V) relied on by consumers depends on the observation of the inspection scheme in force. In other words, the consumer pays a substantially higher price for an organic product and not for a proven quality but for the observation of the inspection scheme at production, transport and processing. "Certificates accompanying the goods" or "party certificates" are not known to the Council Regulation. Even if these should be customary they can only be regarded as covering documents as defined by No. 8.2 of Annex III of the Council Regulation if they are presented with the goods. An issuing and presentation months after the shipment - as in the case at hand - does not meet the requirements. Retrospective establishment and control that Annex III wants to obtain is no longer possible. This is shown by the "Certificates accompanying the goods" explicitly: This certificate accompanying the goods attests that the company from Gotha delivered organic barley whereas the company did not grow any barley in the year 2000. This was argued by the joint litigant to 2 in the oral hearing. The certificate contains no information whatsoever that the company from Gotha only acted as a trader with the necessary consequence of naming the producer.

2. However, [Buyer] lost its right to rely on the non-conformity of the contract because it did not send notice of defect in time (Article 39(1) CISG).

      a) An appropriate time as defined by this rule has to be seen as a period of two weeks (Staudinger/Magnus, BGB, 13th ed. (1994), Article 39 CISG para. 49) or even a month (Schwenzer in Schlechtriem CISG 3rd ed, Article 39 para. 17). The defect was immediately discernible at delivery - the covering document according to No. 8.2 of the Annex III of the Council Regulation EEC No 2092/91 was missing - so that the fixed period started on delivery. According to the spirit and purpose of the rule of Annex III No. 8.2 and especially in contrast to No. 8.1, the covering document is needed for every shipment. A covering document given with the last shipment is not sufficient, as it does not meet these requirements. This is shown in the case at hand where the last and sixth partial shipment originated from a different producer. A covering document for this shipment therefore had no relevance for the previous ones.

The partial shipments in dispute took place from 28 September to 30 November 2000. [Buyer] gave notice of non-conformity with letter of 15 February 2001. The request for delivery notes on 17 January 2001 does not constitute a notice of non-conformity. However, even if it did, it would have been too late in any case.

      b) Here, it is not crucial whether [Seller] observed its duty to presents certificates accompanying the goods as defined by Articles 30 and 34 CISG and whether Article 39(1) CISG is applicable by analogy to an omitted transfer of documents. Here, the covering document has no independent meaning on its own. But rather its absence renders the goods non-conforming to the contract as shown above.

      c) [Buyer] showed no rational excuse for the omitted notice of defect as defined by Article 44 CISG. The argument raised by [Buyer] that it could only have reacted after information by the inspection body because establishing a non-conformity to the contract was only possible by this agency does not succeed. As shown above, the transport without certificates accompanying the goods did not meet the required inspection scheme laid out by No. 8.2 of Annex III and therefore rendered the goods defective. There was no need for information by the inspection body.

Furthermore, it does not constitute a sufficient excuse that possible certificates are issued after delivery for past shipments. The inspection scheme under No. 8.2 of Annex III is unequivocal and, as shown above, is to be strictly observed on good grounds. A certification after the event for certain goods is not intended under the Regulation. If this took place in the past, both parties were lucky because as shown above, where certificates accompanying the goods are omitted, the inspection body is obliged to require that the notice of organic origin removed, in accordance with No. 8.2 of Annex III under Article 9 IX of Council Regulation EEC No. 2092/91.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For translations should be verified by cross-checking against the original text. For purposes of this translation, the Claimant-Appellee is referred to as [Buyer] and the Respondent-Appellant is referred to as [Seller]. Amounts in the former German currency (Deutsche Mark) are indicated as [DM].

** Dipl.-jur Ute Lattmann, studied law in Germany and England, participated in the Willem C. Vis Moot competition and is currently [2005] completing her articled clerkship to sit her second bar exam in 2006.

*** Daniel Nagel has been a law student at Heidelberg University since October 2002 and an exchange student at Leeds University in 2004/2005.

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Pace Law School Institute of International Commercial Law - Last updated May 10, 2007
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