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CISG CASE PRESENTATION

Switzerland 13 November 2003 Supreme Court (Used laundry machine case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031113s1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20031113 (13 November 2003)

JURISDICTION: Switzerland

TRIBUNAL: Bundesgericht [ = BGer = Supreme Court]

JUDGE(S): Corboz (president), Walter, Klett, Rottenberg Liatowitsch, Nyffeler

CASE NUMBER/DOCKET NUMBER: 4C.198/2003/grl

CASE NAME: Unavailable

CASE HISTORY: 1st instance Amtsgericht 6 April 2001; 2d instance Obergericht des Kantons Luzern 12 May 2003

SELLER'S COUNTRY: Germany [plaintiff is seller's assignee]

BUYER'S COUNTRY: Switzerland [buyer]

GOODS INVOLVED: Used laundry machine


Case abstract

SWITZERLAND: Tribunal Fédéral (1ere Cour civile) 13 Novembre 2003

Abstract prepared by Blaise Stucki, Schellenberg Wittmer

Specificity of notice of lack of conformity. The Swiss Supreme Court dealt first with the degree of specificity of a notice of lack of conformity. Article 39(1). The Court notes that the requirements to be met by a notice are less strict than that which may be inferred from the German wording of Article 39(1) (genau zu bezeichnen). To reach this result, the Supreme Court refers to the French and English version, which only state "préciser de ce défaut" or "specifying the nature of the lack of conformity ", i.e., not "specifying with precision the nature of ..."

Burden of proof. Referring to burden of proof as a matter not expressly governed by the CISG, the Court stated that it is to be settled in conformity with the general principles on which the CISG is based. Article 7(2). The Court called attention to well-known principles that a party has to prove the existence of the factual prerequisites contained in the legal provision from which it wants to derive beneficial legal consequences and that a party claiming an exception has the burden of proving its prerequisites. The Swiss Supreme Court then noted that if one applies these principles to the system of the CISG, the seller who claims payment should prove that the goods sold conform with the contract and the buyer who wants to rely on the remedies afforded by the CISG must prove that the goods do not conform. In other words, the burden of proof in relation to the lack of conformity of the goods lies with both parties, which may give rise to delicate issues. Accordingly, the Swiss Supreme Court held that in such cases, the burden of proof lies with the party who has control over the goods, i.e., once delivery has taken place, the buyer (principle of "proximité").

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UNCITRAL case abstract

SWITZERLAND: Federal Supreme Court (Used laundry machine case) 13 November 2003 [4C.198/2003]<

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/87],
CLOUT abstract no. 885

Reproduced with permission of UNCITRAL

Abstract prepared by Etienne Henry

The dispute arose from a transaction involving the sale of a used laundry machine by B & Co., whose headquarters were in Switzerland, to A. GmbH, which had its headquarters in Germany. The machine was delivered in July 1996. By letters sent in August and September 1996 the buyer gave notice of various defects, which the seller failed to remedy. When the seller sued for payment of the sale price of the equipment, the buyer refused to pay, maintaining that it had been released from its contractual obligations as a result of the avoidance of the contract due to the defects in the goods sold.

The Federal Court, affirming the applicability of the CISG to the dispute by virtue of its article 1(1)(a), considered that a notice of defects was sufficient within the meaning of article 39(1) CISG if it stated exactly the nature of the lack of conformity within a reasonable time after discovery. Article 39(1) did not require a more precise description. That argument had become all the more cogent with the advent of electronic communications since that enabled the seller to put questions to the buyer if it required more precise information on the nature of the defect. In particular, it was not necessary for the buyer to describe the causes of the functioning problems of a machine since a description of the symptoms would suffice.

The court also ruled on the question of apportionment of the burden of proof. That question fell within the matters governed by the CISG. However, the CISG did not contain any express rule concerning onus of proof. That gap had to be filled by the application of the general principles underlying the Convention. Among those principles it was recognized that each party had to prove the factual prerequisites of a legal provision that was favourable to it. A party claiming an exception was in principle required to prove that the prerequisites for its application had been met. According to another general principle, facts relating to a sphere clearly better known to one party than to the other party had to be proven by the party exercising control over that sphere.

According to the principle that a party must prove that the prerequisites for the application of a legal provision favourable to it had been met, a seller seeking payment of the sale price had to prove that delivery was in conformity with the contract and a buyer making contrary claims (for example, avoidance of the contract or reduction of the price), alleging a breach of contract, had to prove the existence of such breach. Thus, in line with that principle, it lay with both parties to prove that the contract had or had not been complied with. Since it was not a question here of applying an exception to the rule, the allocation of the burden of proof regarding conformity of the goods with the contract had to be determined from the standpoint of the proximity of the evidence. Pursuant to that principle, it had to be considered whether the goods had entered the buyer's sphere of control. Thus a buyer who had already accepted goods without making any claim had to prove a breach of contract if it wished to derive rights therefrom.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 8 ; 35 ; 38 ; 39 ; 49 [Also cited: Articles 7 ; 60 ]

Classification of issues using UNCITRAL classification code numbers:

4A [Scope of Convention (issues covered): burden of proof];

8B [Intent (interpretation of party's statements or other conduct): interpretation based on objective standards];

38A [Buyer's obligation to examine goods];

39A1 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time ; Degree of specificity required];

49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract]

Descriptors: Scope of Convention ; Burden of proof ; Examination of goods ; Lack of conformity notice, timeliness ; Lack of conformity notice, timeliness ; Avoidance ; Fundamental breach

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

German: [1/2005] Swiss Review of International and European Law (SRIEL) 116 et seq.; [12/2004] Pratique juridique actuelle (PIA) 1472 et seq.; [12/2005] Revue Suisse de Jurisprudence (RSJ) 291 et seq.; [8/2008] Revue de la Société des juristes bernois (RJB) 638 et seq.

CITATIONS TO TEXT OF DECISION

Original language (German): Internet website of the Swiss Supreme Court <http://www.bger.ch>; [5/2004] Internationales Handelsrecht [IHR] 215-219; CISG-online.ch website <http://www.globalsaleslaw.com/content/api/cisg/urteile/840.pdf>

Translation (English): Text presented below; (French): La Semaine Judiciare, No. 34 (2004) 503-513

CITATIONS TO COMMENTS ON DECISION

English: [1/2005] Text presented below; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 49 Art. 39 paras. 6, 7; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at pp. 276, 309

German: [5/2004] Florian Mohs, IHR 219-221

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Case text (English translation)

Queen Mary Case Translation Programme

Swiss Federal Supreme Court (Bundesgericht)

13 November 2003 [4C.198 / 2003 / grl]

Translation [*] by Mariel Dimsey [**]

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

A. Company A-GmbH, domiciled in Germany, sold a used laundry machine of the brand Seco SS 240 to Company B & Co., domiciled in Switzerland. This machine was adapted to use KWL as a substance and thus additionally required a distillation plant and a nitrogen generator. The purchase price was fixed at Deutsche Mark [DM] 55,600. The machine was delivered to the [Buyer] on 29 July 1996. By letter dated 26 August 1996, the [Buyer] gave notice that the distillation of the machine was defective and that the stainless steel (Nieroster) container leaked and urgently needed to be replaced.

On 29 August 1996, a representative of the [Seller] examined the machine in order to compile a "findings report". By letter dated 5 September 1996, under the heading "UNUSABLE MACHINE DELIVERY", the [Buyer] communicated the following to the [Seller]:

"As you are aware from the letter dated 28 [sic - correct: 26] August 1996 and from various telephone conversations, the machine delivered is not usable. Your visit on 29 August 1996 with our Ms. D. as well as the information provided during your telephone conversation with Mr. D., has shown that the machine distillation system does not work. You have confirmed that several things have been forgotten in the course of the delivery and that you are under an obligation to complete this. We are happy to list the defects for you again.

  1. The distillation control unit (floating head) is defective and the consequences of this are: the distillation does not automatically turn off and pulls air into the system, [which] in turn leads to further damages.
  2. The stainless steel (Nieroster) container for the light ends is leaking (The consequences: flooding of the ground with KWL).
  3. The condensed water is not being separated.
  4. The booster pump for the cleaner has not been connected and adjusted.
  5. The impregnating pump was not delivered [...].

[...]

"To this day, we have still not received the pump.

[...]

"Our advice from legal services has shown that we can immediately avoid the contract if these guarantee obligations are not performed within 10 days.

"We will exercise this right if there is no other way to solve the problem. We will offset the entire invoice, since the delivered machine components do not work.

[...]

"We allow 10 days to remedy all grievances; otherwise we shall be forced to institute legal proceedings."

On 6 September 1996, the [Seller] assigned its claim for the purchase price to C, situated in Germany. On 9 September 1996, the [Seller] filed for bankruptcy.

In its letter dated 18 September 1996, the [Buyer] basically communicated to the [Seller] that it would assert a claim for damages in the amount of DM 59,600 based on the failure to repair the machine, which was to be settled within 30 days. In addition, the [Buyer] indicated that it would have the machines disposed of if no repairs were carried out by 30 September 1996.

In its letter dated 27 September 1996, [Seller's assignee] C requested the [Buyer] to pay the purchase price that had been assigned to it by 4 October 1996.

In its letter dated 19 October 1996, the [Buyer] sent a reminder to the [Seller] regarding the claim for damages and set a final 10-day payment deadline. In addition, the [Buyer] basically stated that, as the Seller had shown no interest in resuming possession of the machine, it would dispose of it as indicated.

On 16 April 1998, [Seller's assignee] C brought a claim against D at the Lucerne-Land Local District Court (Amtsgericht) for payment of the purchase price. The claim was dismissed with costs on 21 January 1999 due to D's lack of procedural capacity to act as a Defendant in the present case (Passivlegitimation).

B. On 2 August 1999, [Seller's assignee] brought a claim against the [Buyer] at the Lucerne-City Local District Court (Amtsgericht) for payment of the purchase price of DM 55,600 plus interest at a rate of 4% since 30 July 1996. In addition, the [Seller's assignee] claimed damages in the amount of Swiss francs [CHF] 12,902 plus interest at a rate of 5% since 21 January 1999. As a basis for this claim, the [Seller's assignee] stated that it had had to pay procedural costs in this amount, as it had initially brought a claim against D, which could be attributed to the [Buyer]'s breach of the obligation to correctly denote the name of the company (Firmengebrauchspflicht). The [Buyer] requested the dismissal of the claim, particularly claiming that it had avoided the sales contract due to the defectiveness of the machine delivered.

The [Buyer] was liquidated on 31 December 2000 and was deleted from the commercial register. The deletion was published in the Official Swiss Trade Gazette (Schweizerischen Handelsamtsblatt) on 25 April 2001.

The Local District Court (Amtsgericht) dismissed the claim in a judgment dated 6 April 2001. The [Seller's assignee] appealed against this decision to the Court of Appeal (Obergericht) of the Canton of Lucerne. This court assumed that the [Buyer] could not be deemed to have been liquidated due to the claim raised against it. Consequently, regardless of the fact that the [Buyer] had been deleted from the commercial register, it still continued to exist and thereby was capable of being a party to the action. With an order dated 30 November 2001, the Court of Appeal (Obergericht) ordered the compilation of an expert report for the purpose of clarifying the defects of the delivered machine, which was submitted to the court on 27 August 2002. On 12 May 2003, the Court of Appeal (Obergericht) reversed the judgment of the Local District Court (Amtsgericht) and allowed the claim in the amount of DM 55,600 plus 4% interest since 14 April 1999 and dismissed the claim for damages.

C. The [Buyer] lodged a federal appeal with the applications that the judgment of the Court of Appeal (Obergericht) dated 12 May 2003 should be repealed and the claim dismissed. In addition, the [Seller's assignee] should be ordered to collect the delivered machine from the [Buyer]. Alternatively, the purchase price should be reasonably reduced or this matter should be referred to the previous instance for the purpose of clarifying the price reduction claim. The [Seller's assignee] asks for the appeal to be dismissed.

REASONING OF THE FEDERAL SUPREME COURT

1. The [Seller's assignee] does not cross-appeal the dismissal of its claim for damages, with the consequence that, to this extent, the judgment appealed against becomes legally effective.

2. 2.1. The appeal complies with time limits and requirements as to form, as the final decision appealed against concerns a civil law dispute and cannot be appealed against by proper cantonal legal proceedings (Art. 48(1) OG [*]). In addition, the necessary value of the dispute of CHF 8,000 has been reached (Art. 46 OG).

     2.2 It can be asserted in the appeal that the final decision appealed against concerned an infringement of federal law, including international agreements concluded by the federal state (Art. 43(1) OG). The United Nations Convention on Contracts for the International Sale of Goods (CISG or UN Sales Law, SR 0.221.211.1) is such an agreement. This is applicable in the present case as the sales contract in dispute was concluded between two parties whose places of business lie in different Contracting States (Art. 1(1)(a) CISG).

     2.3 According to Art. 55(1)(c) OG [*], the provisions of federal law and the extent the final decision appealed against has infringed these provisions has to be stated in the request for appeal. In contrast, objections to the actual determinations and to the weight given to the evidence in the previous instance are not admissible, unless an obvious mistake, an infringement of federal evidentiary law provisions (Art. 63(2) OG) or incomplete determination of the facts is being alleged (Art. 64 OG; BGE [*] 120 II 97 Reason 2b p 99; 119 II 84 Reason 3; 116 II 93 Reason 2, 489 Reason d, 749, with references).

The [Buyer] infringes these provisions if it attempts to call into doubt the findings of the Court of Appeal regarding the defects without asserting one of the named exceptions.

Hence, no decision will be made in this respect.

     2.4 The request of the [Buyer] to order the [Seller's assignee] to collect the machine is new and therefore inadmissible (Art. 55(1)(b) OG).

3.  3.1 Under the UN Sales Law, the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances (Art. 38(1) CISG). He loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying [in the German version: precisely] the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it (Art. 39(1)] CISG). Whether these time periods have been complied with is for the court to decide at its own discretion. The Federal Supreme Court (Bundesgericht) is generally free to examine discretionary decisions in appellate proceedings. However, it thereby exercises restraint and only intervenes if the previous instance has deviated from the principles recognized by the leading doctrine and jurisprudence without reason, if it has taken account of facts that should not have played any role in the decision in the case at hand, or if it, conversely, has failed to consider circumstances that it would have been obliged to consider. The Federal Supreme Court (Bundesgericht) will also intervene in discretionary decisions if they prove to be obviously inequitable or manifestly unjust (BGE [*] 127 III 351 Reason 4a p 354, with further references).

     3.2 In consideration of the leading doctrine and jurisprudence, the Court of Appeal (Obergericht) assumed in the present case that a period of examination of one week and a period of notification of one month could be accepted, in which case the notification dated 26 August 1996 took place in good time. In addition, on 5 September 1996, the [Buyer] had given a new, more detailed notification of defects, and thus one month after it could have discovered the defects. In consideration of the circumstance that a representative of the [Seller] examined the machine again on 29 August 1996, the second and more detailed notification of the defects dated 5 September 1996 would also in no way appear to have been given too late. In respect of this finding, the Court of Appeal (Obergericht) does not appear to have exceeded its discretion. This has also not been asserted by the [Seller's assignee].

4. 4.1 The Court of Appeal (Obergericht) accepted that, with the notification of defects dated 5 September 1996, the [Buyer] had notified that the distillation regulator was defective, that the stainless steel (Nieroster) container leaked, that the condensed water was not being separated, that the booster pump for the cleaner was not connected and adjusted and that the impregnating pump had not been delivered. In addition, the Court of Appeal (Obergericht) indicated that although the experts stated that the functionality of the machine had not been guaranteed, as it did not meet the requirements of a standard prototype, the [Buyer] nevertheless had failed to notify the [Seller's assignee] of this defect. Similarly, the [Buyer] had also failed to notify the [Seller's assignee] that the measuring cells on the nitrogen generator were defective and that the nitrogen generator itself was dirty and had been poorly maintained. Therefore, contrary to the view of the Local District Court (Amtsgericht), the [Buyer] could not derive any rights from this defect.

     4.2 The [Buyer] alleges that the Court of Appeal (Obergericht) incorrectly only examined the defects that were individually mentioned in its letter dated 5 September 1996. The court failed to consider that, in this letter, the [Buyer] had generally notified of an "unusable machine delivery" and that the individual defects were only to be understood as referring to the problem areas, to which, in the opinion of the [Buyer], the lack of functionality could be attributed. Thereby, the [Buyer] gave sufficient notice that the machine was unusable.

     4.3 The UN Sales Law was drafted in Arabic, English, French, Spanish, Russian and Chinese. It was also translated into German, among other languages. In the case of ambiguity in the wording, reference is to be made to the original versions, whereby the English version, and, secondarily, the French version are given a higher significance as English and French were the official languages of the Conference and the negotiations were predominantly conducted in English (Witz, in International Einheitliches Kaufrecht, Praktiker-Kommentar und Vertragsgestaltung zum CISG by Witz/Salger/Lorenz, Art. 7 CISG, para. 20; Achilles, Kommentar zum UN-Kaufrechtsübereinkommen (CISG), Art. 7 CISG, para 4; cf. also Siehr, in Honsell (ed), Kommentar zum UN-Kaufrecht, Präambel, para. 6; Ferrari, in Schlechtriem (ed), Kommentar zum Einheitlichen UN-Kaufrecht, 3rd ed, Art. 7 CISG, para. 35). According to the German translation of Art. 39(1) CISG, the buyer must precisely specify the nature of the lack of conformity in the notice to the seller. The English and French texts of the Convention talk about "specifying the nature of the lack of conformity" and "en précisant la nature de ce défaut", respectively. Thereby, the notice must specify the nature, type or character of the lack of conformity (cf. Merriam-Webmaster Dictionary, which defines "nature", being a synonym for "essence", as "the inherent character or basic constitution of a person or thing", cf. also Le Grand Robert de la langue française, which equates "nature" with "essence"). What must be considered is that the verbs "specify" and "préciser" cannot only be translated as "genau bezeichnen" (precisely describe), but also with "bezeichnen" (describe) or with "angeben" (indicate). Consequently, the original versions do not require the description to be as precise as could be expected according to the German translation (Schwenzer, in Schlechtriem (ed), Kommentar zum Einheitlichen UN-Kaufrecht, 3rd ed, Art. 39 CISG, para. 6; Michael G. Gerny, Untersuchungs- und Rügepflichten beim Kauf nach schweizerischem, französischem und US-amerikanischem Recht sowie nach CISG, Diss. Basle 1999, p 196). According to those texts, a notification of defects that (precisely) indicates the nature or the character of the lack of conformity is sufficient. The wording of Art. 39(1) CISG does not require a more precise circumscription. This is not necessary, as in the age of technology, the seller can be expected to ask questions if he desires more precise instructions from the buyer (cf. Schwenzer, ibid, Art. 39 CISG, para. 8; David Rüetschi, Substanziierung der Mängelrüge, recht 2003, p 115 et seq, p 121; Gerny, ibid, p 199). In order to circumscribe the nature or type of the lack of conformity, it is sufficient if the buyer communicates that a machine or parts thereof are not functioning and indicates the appropriate symptoms. It is not necessary that he also elaborates the causes of the functional faults (Schwenzer, ibid, Art. 39 CISG, para. 7; Lüderitz/Schüssler-Langeheine, in Soergel (ed), Kommentar zum Bürgerlichen Gesetzbuch, 13th ed, vol 13 CISG, Art. 39 CISG, para. 8; Hans-Josef Vogel, Die Untersuchungs- und Rügepflicht im UN-Kaufrecht, Diss. Bonn 2000, p 98 et seq). To the extent that the seller is not aware of the intention of the buyer's declaration, its notification of defects and other behavior is to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. (Art. 8(2) CISG).

     4.4 The [Buyer] indicated in its letter dated 5 September 1996 that the delivered machine was not usable. This statement is to be assessed in its context. Additionally, the [Buyer] stated the individual functional faults or missing parts, respectively, and demanded corrective measures. It is evident from the request and the faults listed individually that the [Buyer] was not notifying the [Seller's assignee] of the general lack of functionality based on its construction, but rather regarded the machine as defective but generally functional. Therefore, the Court of Appeal (Obergericht) correctly accepted that the lack of functionality of the machine owing to the failure to meet a prototype standard, which was determined by the experts, had not been notified by the [Buyer]. The fact that the [Buyer] indicated the defects again, shows that the list of defects was to be understood as exhaustive. As the nitrogen generator had not been included in this list, the [Seller's assignee] could assume that there was no objection in this regard. Thereby, the Court of Appeal (Obergericht) correctly found that to this extent, a notification of defects was lacking, and that the Buyer, therefore, could not derive any rights from the defectiveness of the nitrogen generator and the insufficient technical standard of the machine.

5. 5.1 The Court of Appeal (Obergericht) additionally stated that the expert report obtained basically concluded that, in relation to the defects notified in the letter dated 5 September 1996, with the exception of the missing impregnating pump, there was neither evidence indicating the existence or non-existence of such. As these defects were notified within the period under Art 39 CISG, the seller must generally prove that these lacks of conformity did not exist at the point in time in question. However, in the present case, the [Buyer] disassembled the apparatus, which led to the expert being unable to make any statement with respect to the defects notified, with the exception of the missing impregnating pump. In accordance therewith, the evidentiary difficulties were allegedly caused by the [Buyer]; hence it seems justified that it bear the consequences of the lack of evidence. Thereby, the [Buyer] can only derive rights from the missing impregnating pump, as the remaining defects notified could not be proved.

     5.2 The [Buyer] states that the Court of Appeal (Obergericht) incorrectly held that it had to prove that the defects were notified on time. The court allegedly failed to consider that the impossibility of providing evidence was to be borne by the [Seller], as it did not deliver any connection diagram and therefore made the re-commencement of operation of the three machine components stored at various places impossible.

     5.3 According to the leading doctrine, the allocation of the burden of proof forms part of the matters regulated in the UN Sales Law (Siehr, in Honsell (ed), Kommentar zum UN-Kaufrecht, Art. 4 CISG, para. 10; Magnus, in J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch, Wiener UN-Kaufrecht (CISG), 13th revision, Art. 4 CISG, para. 63; Ferrari, ibid, Art. 4 CISG, para. 49, with further references). If the UN Sales Law is lacking an express rule on the burden of proof, then this gap is to be filled in accordance with the general principles upon which this Convention is based (Art. 7(2) CISG; Schnyder/Straub, in Honsell (ed), Kommentar zum UN-Kaufrecht, Art. 45 CISG, para 68). It is recognized as such a principle that, generally, each party is obliged to prove the actual elements of the provision it wants to rely on (Magnus, ibid, Art. 4 CISG, para. 67; Ferrari, ibid, Art. 4 CISG, para. 52; Achilles, Kommentar zum UN Kaufrechtsübereinkommen (CISG), Art. 4 CISG, para. 15; Witz, ibid, Art. 7 CISG, para. 93). Furthermore, a party who is relying on an exception generally has to prove the actual elements of such an exception (Magnus, ibid, Art. 4 CISG, para. 68; Ferrari, ibid, Art. 4 CISG, para. 50, with further references; cf. also Schnyder/Straub, ibid, Art. 45 CISG, para. 68, who differentiate between the existence of the general and the opposing facts). Finally, it is also recognized as a principle, that facts from an area that is clearly better known to one party than to the other are to be proven by the party that has the control over this area (Magnus, ibid, Art. 4 CISG, para. 69; Ferrari, ibid, Art. 4 CISG, para. 51; Schnyder/Straub, ibid, Art. 45 CISG, para. 68; Clemens Antweiler, Beweislastverteilung im UN-Kaufrecht, Diss, Mainz 1994, p 96 et seq). If the proximity to the evidence and a party's possibility to prove facts are observed, then evidentiary problems should be avoided.

According to the principle that a party has to prove the elements of a provision it wants to rely on, a seller who demands the purchase price must prove that delivery was effected in conformity with the contract and a buyer who bases a defense (e.g., for rescission of the contract or for a reduction of the price) on the lack of conformity of the goods must prove the lack of conformity. Thereby, according to the principle mentioned, both parties bear the burden of proving conformity with the contract, to the extent that they derive rights from the presence or lack of such conformity. Consequently, as there is no exception in the present case, the allocation of the burden of proof regarding the lack of conformity of the goods is to be ascertained by reference to proximity to the evidence. Following this principle, the transfer of the goods to the buyer's sphere of control is decisive. This is in accordance with the jurisprudence of the German Federal Supreme Court (BGH), which held that a buyer who has accepted the goods without objection has to prove their lack of conformity. Acceptance under Art. 60(b) CISG means the physical taking over of the goods (Judgment of the BGH dated 8 March 1995, BGHZ 129 p 75 et seq, p 81; CISG-online No 144, Reasons 1b/aa; cf. also the judgment of the Frankfurt am Main Court of Appeal (Oberlandesgericht) dated 13 June 1991, NJW 1991, p 3102, CISG-online No 23; coming to the same result: Judgment of the Cour d'appel, Mons (Belgium) dated 8 March 2001 [R.G. 1999/242]; concurring: Achilles, ibid, Art. 4 CISG, para. 15; Ferrari, ibid, Art. 4 CISG, para. 52; Burghard Piltz, Neue Entwicklungen im UN-Kaufrecht, NJW 2003, p 2056 et seq, p 2061; coming to the same result: Schnyder/Straub, ibid, Art. 50 CISG, para 58; Bianca, in: Commentary on the International Sales Law, the 1980 Vienna Sales Convention, Bianca/Bonell (eds), Art. 36 CISG, para. 3.1.). In contrast thereto, the view that an acceptance of the goods without notification of lack of conformity can only be assumed after the period for examining the goods and notifying the lack of conformity has expired has also been supported. If defects were notified within this period, then the seller would be obliged to prove that these defects were not in existence at the time of the passing of the risk (Huber, in: Schlechtriem (ed), Kommentar zum Einheitlichen UN-Kaufrecht, 3rd ed, Art. 45 CISG, para. 13; Schwenzer, ibid, Art. 35 CISG, para. 49; Antweiler, ibid, p 169; cf. also the judgment of the Zurich Commercial Court (Handelsgericht) dated 30 November 1998, SZIER 1999, p. 185 et seq, p 188). However, this view does not take account of the fact that, after being accepted by the buyer, the goods are solely within his sphere of control and he is therefore in a better position to prove the existence of a lack of conformity than the seller in respect to the absence of such. Particularly during the reasonable period of time in which the buyer is to notify defects under Art. 39 CISG, the seller has no possibility to secure evidence. According thereto, it is justified that the buyer, who has accepted the goods and has obtained control over them, is required to prove the lack of conformity of the delivered goods, to the extent that he asserts rights on this basis.

     5.4 Therefore, the [Buyer] who has accepted and taken possession of the delivered machine is also required to prove its lack of conformity to the extent that he bases his right to avoid the contract or reduce the purchase price on this. Therefore, in conclusion, the Court of Appeal (Obergericht) has allocated the burden of proof in conformity with federal law. It is insignificant, however, that the machine was disassembled by the [Buyer], as this act only made its own submission of evidence more difficult (cf. judgment of the BGH dated 25 June 1997, NJW 1997, 3311 et seq, CISG-online No. 277, Reason 2). It is also irrelevant whether the [Seller] delivered diagrams, as the [Buyer] did not give timely notice of the absence of these plans and cannot, therefore, derive any rights from this from an evidentiary law perspective.

6. 6.1 The [Buyer] bases a claim of avoidance of the contract primarily on the lacks of conformity it asserts. In its appeal, the [Buyer] asserts, in summary, that the machine could not be used for professional cleaning of laundry due to the insufficient technical standard and was thereby obviously unsuitable for the use as set out in the contract. Therein lay a fundamental breach of contract, which could justify the avoidance of the contract in accordance with Art 49(1)(a) CISG. This reasoning cannot be upheld, as the [Buyer], contrary to its assumption, did not notify of the insufficient technical standard and cannot, therefore, derive any rights from this (cf. Reason 4 above). The lack of conformity notified by the [Buyer], with the exception of the missing impregnating pump, has not been proven. The [Buyer] neither asserted that this lack of conformity amounted to a fundamental breach, nor is it apparent; therefore, the [Buyer]'s claim for avoidance of the contract is denied. It is thereby insignificant whether the [Buyer] declared the contract avoided in due time, which was denied by the Court of Appeal (Obergericht). Therefore, owing to the lack of sufficient interest warranting legal protection (Rechtsschutzinteresse), the criticism the [Buyer] directed against this is not to be considered (cf. BGE [*] 122 III 279, Reason 3a, p 282).

      6.2 The alternative claim for reduction of the purchase price was dismissed by the Court of Appeal (Obergericht) reasoning that a decrease in value of the machine owing to the missing impregnating pump could not be determined, as, due to the failure to meet prototype standard, the machine would be worthless anyway. It was neither set out by the [Buyer] how this reasoning is supposed to infringe federal civil law, nor is it apparent. Thus, the ultimate application for return of the matter in dispute for a new determination of the reduction in value is to be dismissed.

7. Hence, the appeal is dismissed. The [Buyer] has to bear the costs and the amount of reimbursement (Art. 156(1) and Art. 159(2) OG).

JUDGMENT

Therefore, the Federal Court (Bundesgericht) holds that:

  1. The appeal is dismissed.
  2. The court fees of CHF 2,000 are to be borne by the [Buyer].
  3. The [Buyer] has to reimburse the [Seller's assignee] with CHF 2,500 for the federal court proceedings.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purpose of this translation, Plaintiff-Appellee, the assignee of the German company that sold the goods is referred to as [Seller's assignee] and the Defendant-Appellant of Switzerland is referred to as [Buyer].

Translator's note on abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGE = Entscheidungen des Bundesgerichts [Official Collection of Decisions of the Swiss Federal Court]; CHF = Swiss Francs; DM = German Marks (no longer in circulation); OG = Bundesgesetz vom 16. Dezember 1943 über die Organisation der Bundesrechtspflege [Swiss Federal Rules of (Civil) Procedure]; SR = Systematische Sammlung des Bundesrechts [Systematic Collection of Swiss Federal Law].

** Mariel Dimsey is a Research Assistant and Teaching Assistant at the University of Basel, Switzerland.

*** 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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Case commentary

Switzerland Federal Supreme Court (Bundesgericht), 14 November 2003

Commentary by Florian Mohs [*]

Translation by Mariel Dimsey [*]
January 2005

The judgment to be discussed raises two questions on the application of the CISG. Firstly, it concerns the requirements as to content of a notification of defects under Art. 39(1) CISG [1.]. Secondly, the Federal Supreme Court (Bundesgericht) takes a position on the issue of the allocation of the burden of proof in the event of delivery of goods lacking conformity with the contract [2.].

1. With respect to the abstract explanation of the legal position under the CISG, the Federal Supreme Court (Bundesgericht) finds absolute approval.[1] It clarifies that the decisive original texts, particularly the English and French version, formulate Art. 39(1) CISG more generously than the German translation and require a general, but not "precise" description of the lack of conformity.[2] In the case of delivery of a machine, only the symptoms, but not the causes of the lack of conformity must be mentioned.[3] In the age of electronic communication, an exact clarification of the situation could be left to questions of the seller.[4]

However, the Federal Supreme Court (Bundesgericht) must be clearly contradicted in the application of this legal position to the case at hand. In its notification, the Buyer had used the heading "Unusable Machine Delivery" and had stated in this letter that the "machine was unusable", the "machine distillation system did not function" and "the delivered machine components did not function".[5] However, the Federal Supreme Court (Bundesgericht) still manages to come to the conclusion that the Buyer viewed the machine as "defective but generally functional".[6] To the extent that the Federal Supreme Court (Bundesgericht) focuses on the fact that the Buyer did not state individual defects, it should be admitted that a buyer generally has to indicate each various defect individually.[7] However, in the case at hand, the Buyer listed five defects, but forgot two others. This was sufficient for it to lose the proceedings, as the Federal Supreme Court (Bundesgericht) assessed its incomplete list as "exhaustive".[8] In my opinion, the context of the list together with the general assessment of the performance of the machine was totally misconstrued. However, the Federal Supreme Court's (Bundesgericht's) assessment of the two "forgotten" defects cannot be upheld by a substantial examination either. That the Buyer did not notify the "insufficient technical standard of the machine" cannot be substantiated by the excerpts from the letter of notification cited above. The fact that the Federal Supreme Court (Bundesgericht) was lacking details regarding the nitrogen generator is to be held against the result that, by entering into this argument, the step would be taken in the area of stating causes, which the Federal Supreme Court (Bundesgericht) itself, in its abstract portrayal of the legal position, does not require. Finally, it can be ascertained that the notification, which was objected to on account of its content, resulted from a joint examination by the Buyer and the representatives of the Seller. The purpose of the requirements of certainty in a notification, namely to give knowledge to the contractual partner to the greatest extent possible,[9] was not achievable with this notification right from the very start, as the Seller itself had already obtained knowledge through its representatives.[10] The statements of the Federal Supreme Court (Bundesgericht) appear unnecessary on these facts, as well as being incorrect obiter dicta.

2. The question of the (objective) allocation of the burden of proof, which is not expressly dealt with in the CISG, can be decided in accordance with the general principles of the Convention, Art. 7(2) CISG.[11] Each party must prove the facts that fulfill the elements of a provision that is favorable to it.[12] From this, the Federal Supreme Court (Bundesgericht) concludes that the lack of conformity of the goods at the time of the passing of risk in the case of a claim for the purchase price is to be proven by the seller, in the case of a remedy claim (cure, damages or (partial) repayment of the purchase price after avoidance or a reduction of the price), by the buyer.[13] The Federal Supreme Court (Bundesgericht) thereby overlooks that the conformity of the goods is not a requirement of a claim for the purchase price. Rather, the case of lack of conformity is concerned with a defense of the buyer (right of retention, reduction of the price or avoidance of the contract), the presence of which, on its elements, is consequentially to be proven by the buyer.[14] A widely held opinion in the German literature that a principle of the Convention derived from Art. 79(1) CISG generally attributes the promisor with the burden of proof for the performance of its obligation, here namely the seller for the burden of proof for the conformity of the goods at the time of delivery, is similarly unpersuasive. Here, a far too obvious attempt is being made to transcribe the German doctrine of performance (Erfüllungslehre) ( 363 BGB) into the uniform sales law. According to a correct reading, under Art. 79(1) CISG, the Seller can attempt to prove that the determined (!) lack of conformity is based on an impediment beyond its control that was neither foreseeable nor able to be overcome. The opinion advocated here is supported by the principle of the proximity of evidence, which has been regarded as a general principle of the CISG by the Federal Supreme Court (Bundesgericht).[15] Owing to its control over the goods, the buyer is in a better position to collect and secure evidence. The importation of Argentinean citrus fruits into Germany may serve as an example: the Argentina-based seller has practically no possibility to rebuke the claim of the German-based buyer that the fruit was already rotten at the time of the passing of the risk. However, support for the claim of the buyer is found in the circumstantial evidence that the rottenness of the fruit was already inherent in the core, or that the goods were not properly packed or chilled. However, even in the case of a complex machine, the buyer can usually more easily demonstrate that a lack of conformity is not to be attributed to incorrect use by its people, but rather to a fault in the machine.[16] Therefore, it can be ascertained as a preliminary result that generally the buyer has to prove the lack of conformity of the goods at the time of the passing of the risk.[17]

Every reversal of the burden of proof that affects the seller is to be established based on this approach.[18] The rule established in the literature and case law, that where the goods are accepted without notifying of defects, the buyer bears the burden of proof,[19] is, in the author's opinion, to be so understood that the seller bears the burden of proof if the buyer gives notice of defects immediately, i.e., when it physically takes over the goods.[20] This must also apply when the buyer notifies after a short period of examination within the meaning of Art 58(3) CISG.[21] It is only right that the seller bear the burden of proof if the buyer rejects the goods; technically speaking, if it asserts a right of retention with respect to the obligation to take over the goods.[22] The much more further-reaching opinion that, where substantiated notice is given within a reasonable period of time, the burden of proof is also transferred to the seller,[23] is to be rejected. According thereto, the buyer would only bear the burden of proof in cases where it had not made proper or timely notice, namely in cases in which, under Art. 39(1) CISG, it is usually precluded; in such cases the allocation of the burden of proof is no longer relevant. In practice, the burden of proof would only affect the buyer in cases of Art. 40 and Art. 44 CISG; according to Antweiler, also in cases of hidden defects.[24] In that way, a far-reaching mechanism of loss of legal rights owing to failure to notify and reversal of the burden of proof would be put in motion, which would detract from the independence of the allocation of the burden of proof. In addition, the opinion that the calculation of a reasonable period is, above all, dependent on the circumstances of the individual case, usually resulting, however, in a period of (at least) one month, has received support at an international level.[25] The period begins to run upon expiry of the period of examination, with the consequence that a total of several months could go by without the buyer ever having to bear the burden of proof. Under this opinion, one could easily establish a notion of protection for the buyer, which is only present in this way under national consumer protection law.[26] The CISG would become unattractive for trade transaction, which is why this opinion is to be rejected.

With respect to the case at hand, the issue is raised as to whether the Seller would have had to have been assigned the burden of proof. The Seller, through its representatives, had the machine and its components examined in order to compile a "report of findings". In such a situation, the argument of physical proximity can no longer be upheld. Rather, the Seller's (usually) greater knowledge of the goods must be taken into account. This is all the more so as, in the present case, a complex machine was being dealt with. As a result, in the case of delivery of a machine and the mutual possibility of being able to secure evidence, the seller must bear the burden of proof. Based on this result, the considerations of the Court of Appeal (Obergericht) that the Buyer knowingly disassembled the machine and kept the parts thereof at different locations in order to create evidentiary difficulties, are to be given due regard. As the Seller bears the burden of proof, a frustration of evidence, to be judged under national procedural law,[27] could be present here, as was held by the Court of Appeal (Obergericht).[28]

By and large, an assessment of the Federal Supreme Court (Bundesgericht) judgment discussed turns out to be inconsistent. The Federal Supreme Court's (Bundesgericht) application of the notification of defects under the requirements of the CISG gives rise to a variety of criticism and is consequently not persuasive. With respect to the allocation of the burden of proof in the event of delivery of non-conforming goods, the Federal Supreme Court (Bundesgericht) resolved a difficult issue of valuation at the highest judicial level. The direction adopted, that the buyer generally bears the burden of proof for the lack of conformity at the time of the passing of the risk, is to be affirmed; it is now the task of scholarly opinion and case law to develop exceptions in which a reversal of the burden of proof in favor of the buyer is indicated.


FOOTNOTES

* Florian Mohs and Mariel Dimsey are Research and Teaching Assistants at the University of Basel, Switzerland. The original German version of this case commentary has been published in Internationales Handelsrecht (5/2004) 219-221. All translations should be verified by cross-checking against the original text.

1. BGE 130 III 258, 262, Reason 4.3.

2. Cf. Schwenzer, in: Schlechtriem/Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG -, 4th ed 2004, Art. 39 para. 6.

3. Cf. Schwenzer, ibid, Art. 39. para. 8.

4. Cf. Schwenzer, ibid, Art. 39 para. 7.

5. BGE 130 III 258, 259, Facts under A.

6. BGE 130 III 258, 263, Reason 4.4.; this argument is also decisively rejected by Stalder, Die Beweislast und wichtige Rügemodalitäten bei vertragswidriger Warenlieferung nach UN-Kaufrecht (CISG), AJP 2004, under IV.A.

7. Cf. Schwenzer, ibid, Art 39. para. 10.

8. BGE 130 III 258, 263, Reason 4.4.

9. Cf. Schwenzer, ibid, Art. 39 para. 6.

10. BGE 130 III 258, Facts under A.

11. Cf. Schwenzer, ibid, Art. 35para. 49. On the application of the CISG on this issue in detail, Ferrari, CISG and Private International Law, in: Ferrari (ed), The 1980 Uniform Sales Law, Old Issues Revisited in the Light of Recent Experiences, Sellier.ELP/Giuffrè: Munich/Milan (2003), pp 19, 40 et seq, with further references.

12. Cf. Ferrari, in: Schlechtriem/Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG -, 4th ed 2004, Art. 7 para. 56.

13. BGE 130 III 258, 265, Reason 5.3.

14. Probably also incorrect: Hager, in: Schlechtriem/Schwenzer, ibid, Art. 67 para. 11. In contrast, correct: Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, 2004, p 170.

15. BGE 130 III 258, 264, 265, Reason 5.3.

16. Cf. in this regard BGH, 3 November 1999, CISG-online 475.

17. Also reaching the same result: Chicago Prime Packers, Inc. v. Northam Food Trading Co., U.S. Dist. Ct. (N. D. Ill.), 24 May 2004, CISG-online 851, IHR 2004, 156, 159; Kruisinga, ibid, pp 168-177; Ferrari, ibid (Fn. 12), Art 4 para 52. Differentiating: Staudinger/Magnus, Wiener UN-Kaufrecht (CISG), Art. 35 para. 55, Art 36. para. 25, according to whom the buyer must prove the lack of conformity at the time of the actual handing over of the goods; however, the seller is responsible for giving contrary evidence of the conformity at the time of the passing of the risk. That, firstly, giving contrary evidence is (procedurally) always possible, and, secondly, the risk of non liquet ("at the passing of risk") is not clearly attributable to one party, is to be held against this opinion.

18. Cf. BGH, 9 January 2002, IHR 2002, 16-21; commented on by Perales Viscasillas, VJ 2002, 217-228. In this judgment, a reversal of the burden of proof based on national law was affirmed, as the seller had recognized the lack of conformity.

19. Cf. BGH, 8 March 1995, CISG-online 144; Schwenzer, ibid, Art. 35 para. 49, with further references; also Staudinger/Magnus, ibid, Art. 36 para. 26.

20. Differing Kruisinga, ibid, p 174.

21. This period is not to be confused with that under Art. 38 CISG.

22. There are insubstantial differences in between the German version, cf. Germany: Abnahmepflicht; Switzerland, Austria: Annahmepflicht.

23. But see Stalder, ibid, III.E. Obergericht des Kantons Luzern, 12 May 2003, CISG-online 846, thereto the summary of the Federal Justicial Office (Bundesamt für Justiz) in SZIER 2004, 103, 104, 105; cf. also Antweiler, Beweislastverteilung im UN-Kaufrecht insbesondere bei Vertragsverletzungen des Verkäufers, Diss Mainz 1994, pp 162-171; Henninger, Die Frage der Beweislast im Rahmen des UN-Kaufrechts - zugleich eine rechtsvergleichende Grundlagenstudie zur Beweislast, Diss Munich 1994, p 222; Baumgärtel/Laumen, Handbuch der Beweislast im Privatrecht, Vol 2, 2nd ed 1999, Art. 35 WKR para. 1, Art. 36 WKR para 11 et seq.

24. The circumstance that, in cases of hidden defects, the period under Art. 39(1) CISG begins to run anew from the time of discovery (cf. Schwenzer, ibid, Art. 39 para. 20, with further references), is held by Antweiler against the fact that Art. 39 CISG, independent, reasonable time period is concerned, cf. Antweiler, ibid, p 168, 169. This construction creates an important case of application for this opinion, but is to be rejected as non-practical.

25. Cf. instead of all these, Schwenzer, ibid, Art. 39 para. 17 and CISG-AC, Op. No. 2 (Bergsten), Examination of the Goods and Notice of Non-Conformity - Articles 38 and 39, IHR 2004, 163, available at: <http://www.cisg-online.ch/cisg/docs/CISG-AC_Op_no_2.pdf>. However, the supporters of the opinion that the burden of proof is connected to the expiry of the period of examination still assumed a short period closely resembling that under ULIS, cf. Antweiler, ibid, pp 164, 165; differing Stalder, ibid, IV.B.

26. Cf. 476 BGB.

27. Even if the frustration of evidence is sanctioned by a reversal of the burden of proof, the effects of this are determined under the procedural law of the lex fori.

28. BGE 130 III 258, 266, Reason 5.4. See also BGH, 25 June 1997, CISG-online 277, Reason II.2.

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