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CISG CASE PRESENTATION

Germany 26 November 2003 District Court Hamburg (Phtalic anhydride case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031126g1.html]

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

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Case identification

DATE OF DECISION: 20031126 (26 November 2003)

JURISDICTION: Germany

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

JUDGE(S): Schlichting, Geist, Matthews

CASE NUMBER/DOCKET NUMBER: 411 O 199/02

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (defendant)

BUYER'S COUNTRY: Korea (plaintiff)

GOODS INVOLVED: Phtalic anhydride


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 18(1) ; 26 ; 75 ; 77 [Also cited: Articles 23 ; 49(1) ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

18A [Criteria for acceptance of offer];

26A [Effective declaration of avoidance: when notice can be dispensed with];

75A2 [Damages established by substitute transaction after avoidance: repurchase by aggrieved buyer];

77A [Obligation to take reasonable measures to mitigate loss]

Descriptors: Acceptance of offer ; Avoidance ; Damages ; Cover transactions ; Mitigation of loss

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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/875.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

District Court (Landesgericht) of Hamburg

26 November 2003 [411 O 199/02]

Translation [*] by Sabine Kossebau [**]

Edited by Todd Fox [***]

[RULING]

The court rules:

     I.    The Defendant [Seller] is ordered to pay the Plaintiff [Buyer] US $108,000.00 together with interest from 23 April 2002 at a rate of eight percentage points above the basic interest rate.
    II. The [Seller] is to pay the costs of the litigation.
   III.     The decision is provisionally enforceable by the [Buyer] against security in the amount of 110% of the amount to be enforced.

[FACTS OF THE CASE]

The [Buyer] claims damages against the [Seller] for failure to perform a sales contract concerning chemicals.

The [Buyer] is a Korean commercial enterprise located in Seoul. The [Seller] is a dealer in chemicals located in Hamburg, Germany.

On 14 March 2002, the [Buyer]'s manager had a phone conversation with the Korean [Seller]'s representative, Mr. C.H.Y. [hereinafter Mr. Y], in which Mr. Y offered the delivery of phthalic anhydride by the [Seller]. Subsequently, Mr. Y forwarded to the [Buyer] an e-mail of the [Seller] of the same day (attachment K1) with an exact specification of the offered chemicals. Following this, the manager of the [Buyer] again spoke with Mr. Y on the phone.

On the next day (15 March 2002), the [Seller] made known to Mr. Y by e-mail (attachment K2 lower part) that the [Seller] could confirm the delivery of 1,000 mt [*] phthalic anhydride. In as much as Mr. Y was unable to push the price by an additional US $3.- to 5.-, the [Seller] stated that it would accept a price of US $550.-/mt; CFR Shanghai, with a sixty-day letter of credit and shipment in two installments consisting of 25 kg bags. The [Seller] further stated that it would expect Mr. Y's confirmation of the sale the next day at the start of its business hours.

Although this e-mail was intended to be for Mr. Y's eyes only, Mr. Y forwarded the entire e-mail to [Buyer] via an e-mail sent on 15 March 2003 (attachment K2, upper part) at 7.47 a.m. local time, adding "I got this confirmation from [Seller]. Please comment."

On the same day at 11:20 a.m. local time, the [Buyer] asked Mr. Y via e-mail (attachment K3) for confirmation that [Buyer] had bought from Mr. Y or his principal 1,000 mt phthalic anhydride, ex. Mexico, at a price of US $ 550.- mt, CFR Shanghai, sixty-day letter of credit, in accordance with the specification and packaging previously communicated and with prompt shipment. Furthermore, in the same e-mail, the [Buyer] asked Mr. Y for information on the exact shipment dates and the necessary information for the letter of credit.

This e-mail was followed by a phone call between the [Buyer]'s manager and Mr. Y discussing the delivery ordered. Furthermore, at 2:18 p.m. local time on 15 March 2002, the [Buyer] received an e-mail from Mr. Y (attachment K22), in which Mr. Y thanked the [Buyer] for its order confirmation and announced that further information with regard to the [Buyer]'s inquiries would follow at around 6:00 p.m.

In an e-mail of 18 March 2002 (8:46 a.m., attachment K4), Mr. Y advised the [Buyer] that he had forwarded [Buyer]'s inquiry to the [Seller] and that [Seller]'s Mr. M. would clarify the shipment dates. Mr. Y would give the information to the [Buyer] in the afternoon of the same day. The [Buyer] stated in an e-mail of the same day (9:03 a.m., attachment B2) that it urgently needed a confirmation of the sale and the bank details, as it had its customer waiting for that information.

In an e-mail of 19 March 2002 (attachment K5), Mr. Y informed the [Buyer] about difficulties the [Seller] was having regarding its own supply from Mexico, as the supplier in Mexico invoked the applicability of an Act of God clause, or force majeure.

The [Buyer] then informed Mr. Y in a further e-mail of 19 March 2002 (attachment K6) that it had already sold the goods to a Chinese customer. The [Buyer] requested information on further particulars in order to keep the damages as small as possible.

At 5:51 p.m. on the same day (attachment K7), Mr. Y forwarded to the [Buyer] an e-mail addressed to himself from the [Seller]. The [Seller] stated therein that it had not received a conclusive confirmation from its supplier, although it had accepted the supplier's binding offer within the allotted period of time. It stated that the supplier now invoked an act of God. Nevertheless, the [Seller] would insist on performance of the order and if there really was an act of God, it would insist on proof of this by official documents. The [Seller] stated that Mr. Y could forward this information to the [Buyer].

Thereafter, the [Seller] refused to sign a written sales contract (attachment B3) presented to it by the [Buyer] (see attachment B5). Furthermore, in the communications that followed (see attachment K17), [Seller] took the position that a binding sales contract with the [Buyer] had not yet been concluded. In an e-mail of 21 March 2002 (attachment K9), the [Buyer] demanded performance of the contract or reimbursement for the difference in price to the market price, which had since gone up. In a letter from its lawyer dated 25 March 2002 (attachment K 21), the [Buyer] asserted that it had resold the goods to its own customer in reliance on the existence of a sales contract concluded with the [Seller]. Following the [Seller]'s refusal to fulfill that contract, [Buyer] now intended to purchase the goods elsewhere at a price of US $660.- per mt. The [Seller] was asked to state by 10:00 a.m. the following day if it would accept the described cover purchase and reimburse the [Buyer] for the price difference as well as for other damages. In an e-mail to the [Buyer] dated 26 March 2002 (attachment K 11), the [Seller] replied that it would not comment on this and that the [Buyer] should do what it deemed appropriate. Nonetheless, the [Buyer] should keep in mind that the [Seller] had been assured by its U.S. supplier, which was in communications with the Mexican supplier, that indeed an Act of God applied.

The [Buyer] subsequently informed the [Seller] on 1 April 2002 (attachment K13) of its intention to make the announced substitute purchase at 10 a.m. on 2 April 2002. In a fax dated 2 April 2002 (attachment K15), the [Buyer] gave notice of the conclusion of a substitute purchase and demanded the difference in purchase price of US $110. per mt x 1,000mt = US $108,000.00. In a letter from [Buyer]'s lawyer dated 10 April 2002 (attachment K16), payment was demanded by 22 April 2002. This demand remained fruitless.

The [Buyer] pursues its claim for damages with the present action.

[Buyer's position]

[Buyer] submits that a binding sales contract concerning 1,000 mt phthalic anhydride was concluded between the parties. This follows from the correspondence submitted. Moreover, [Buyer] asserts that Mr. Y, who acted as an authorized representative of the [Seller], had again expressly confirmed the conclusion of the contract in the telephone conversation of 15 March 2002. In reliance on that, the [Buyer] resold the purchased chemicals to its own customer. After the [Seller]'s refusal to perform, the [Buyer] had to buy elsewhere to fulfill its contract with its own customer, as it had informed the [Seller] beforehand. The cover purchase was made accordingly. The [Buyer] submits that the resulting price difference of US $110,- per mt phthalic anhydride it was required to pay should be reimbursed by the [Seller].

The [Buyer] requests the court to find for [Buyer] as submitted.

[Seller's position]

The [Seller] requests the court to dismiss the [Buyer]'s claim.

The [Seller] submits that Mr. Y is not its representative in Korea and is not authorized to make or accept legally binding statements that are binding on the [Seller]. Against this background, a contract was not concluded between the parties. Concerning the e-mail of 15 March 2002 (attachment K3), [Seller] states that this was not a confirmation of a contract already concluded but merely an offer by the [Seller], which still required confirmation. No legally binding confirmation followed. [Seller] pleads lack of knowledge concerning the damages alleged by the [Buyer] and the alleged substitute purchase. Furthermore, [Seller] claims that the quality of goods allegedly bought by the [Buyer] from an Italian production was of a distinctly better quality than the Mexican goods which had been offered by the [Seller]. In relation to the Mexican goods, the Italian quality commands an extra charge of US $30.- per mt. A deduction of a further US $20.- per mt is justified because of a packaging handicap of the Mexican goods. Apart from that, the market price for West European phthalic anhydride was below US $600.- at the end of March 2002. The [Buyer] therefore breached its duty to mitigate the damages by purchasing Italian goods at US $ 660.- per mt in the context of the alleged substitute purchase.

Regarding the further details of the parties' submissions, reference is made to the exchanged writs and their attachments.

[GROUNDS FOR THE DECISION]

The [Buyer]'s claim is justified in accordance with Art. 75 of the UN Convention on the International Sale of Goods (CISG), which is applicable between the parties. According to this provision, a party may claim the difference between the contractually agreed upon price and the price of the substitute purchase as damages if the contract is avoided. A party's serious and definite refusal to perform is equivalent to avoidance of the contract, since that party cannot then claim that the other party should have previously given it notice of avoidance of the contract (Schlechtriem-Stoll, CISG, 3d ed. 2000, Art. 75, para. 5). In the present case, a contract for 1,000 mt phthalic anhydride was concluded between the parties to this dispute, the performance of which was undeniably refused by the [Seller].

Pursuant to Art. 23 CISG, a contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the Convention.

It can remain open whether the e-mail of 15 March 2002 (attachment K2), which was forwarded to the [Buyer] and originally sent by the [Seller] to its Korean representative Mr. Y, constituted a binding offer by the [Seller] regarding the chemicals previously specified in the earlier e-mail of 14 March 2002 (attachment K1). At least it can be concluded from this e-mail that the [Seller] agreed to have Mr. Y offer to the [Buyer] the 1,000 phtalic anhydride at a price of US $550.- per mt insofar as it was not possible for him to additionally raise the price by US $3.- to 5.- per mt.

After Mr. Y, acting within the scope of his authorization, had forwarded the confirmation of the [Seller] to the [Buyer] with a request for comment, only an acceptance of the offer contained therein would have been needed. Yet, as the offer contained an open price range of US $550.- plus maybe US $3.- to US $5.-, there could have been a deficiency of agreement regarding the price. However, in its e-mail from 15 March 2002 (attachment K3), sent to Mr. Y as representative of the [Seller], the [Buyer] accepted the [Seller]'s offer at the price of US $550.- per mt and at the offered conditions within the time for acceptance stated in the previous e-mail (attachment K2) ("tomorrow at our opening").

To the extent that a subsequent, additional confirmation of the sale by the [Seller] was even needed, such a confirmation exists. In accordance with Art. 18 CISG, a statement or other conduct of the offeree indicating assent to an offer is an acceptance. In the opinion of this court, such an acceptance is found, at the latest, from Mr. Y's e-mail on the same day (attachment K22) wherein he thanked the [Buyer] for its order confirmation (attachment K3) and said that at around 6:00 p.m. he would inform the [Buyer] concerning its inquiry. As the [Seller's] representative, Mr. Y thereby at least implicitly confirmed the deal; hence, at the latest, a contract between the parties was concluded at this point in time.

Insofar as Mr. Y announced further information regarding the inquiry by the [Buyer], this did not refer to the conclusion of the contract itself, but merely to the bank and shipping information the [Buyer] asked about for performance of the deal. A reservation concerning the formation of the contract itself is not expressed in this and was obviously not meant to be expressed. Instead, as Mr. Y thanked the [Buyer] for its order confirmation he expressed his acceptance in the sense of Art. 18(1) CISG. This must be honored by the [Seller].

The objection that Mr. Y was not authorized to make any legally binding declarations cannot be taken into account, as the content of the e-mail from 15 March 2002 addressed to Mr. Y announces otherwise. From this e-mail, it is undoubtedly clear that Mr. Y was authorized by the [Seller] to conclude a contract with the [Buyer] at a price of at least US $550.- per mt and meeting the further conditions (60 day letter of credit, shipment in two installments, 25 kg bags). Those conditions were met. The statement in the sales confirmation of "shipment prompt" does not contradict the default "shipment in two lots", especially since the [Seller] itself gave notice to Mr. Y that the goods were intended "for a prompt shipment" (attachment K1). Prompt delivery in two installment shipments was therefore agreed upon.

Taking into account that the contract was concluded at the latest with the e-mail of Mr. Y to the [Buyer] on 15 March 2002 (attach K22), it was no longer of importance for the decision whether Mr. Y expressly confirmed the conclusion of the contract in the phone call made on the same day, as submitted by the [Buyer].

Apart from that, a further confirmation of the sales contract by the [Seller] is to be seen in the fact that Mr. Y told the [Buyer] on 18 March 2002 (attachment K4), without mentioning any reservations as to the conclusion of the contract, that the [Seller] was working on the shipping dates and the [Buyer] must therefore be a bit patient.

The fact that the [Buyer] for its own security and in anticipation of the resale of the goods after 18 March 2002 still asked Mr. Y for a "sales confirmation", which it never did receive because of the [Seller]'s problems with its supplier that arose shortly thereafter, changes nothing in the already concluded contract. The [Buyer]'s quest to additionally safeguard itself by obtaining an expressly worded sales confirmation in light of the [Seller]'s delays in answering questions concerning the transaction (bank details, shipment dates) cannot harm the [Buyer]'s position. That the [Seller] also proceeded on the assumption that there was a binding sales contract is evident from the fact that the [Seller] itself purchased corresponding Mexican cover goods at the same time and demanded performance by its own supplier, as can be seen from the submitted correspondence (attachment K5, K7, K8).

As the [Seller] subsequently undeniably refused to deliver the ordered quantity of chemicals at the agreed upon price of US $ 550.- per mt (see Art. 49(1)(b) CISG), the [Buyer] was entitled to avoid the contract. In light of the [Seller]'s lasting refusal to perform -- as stated above -- the [Seller] cannot rely on the fact that the [Buyer] did not expressly declare the contract avoided to the [Seller]. In accordance with Art. 75 CISG, the [Buyer] may therefore demand the difference between the contract price and the price of the substitute goods acquired in a reasonable manner.

The [Buyer] sufficiently pleaded and substantiated that it had made a corresponding substitute purchase within a reasonable period of time. Pursuant to the submitted sales contract of 29 March 2002 (attachment K14) with H Corporation, which, according to the submission of the [Buyer] was signed on 2 April 2002, the [Buyer] bought 1,015 mt phthalic anhydride of Italian origin at a price of US $660.- per mt to be delivered in April 2002. Regarding shipment by L. of Milan, the attachments K23 and K24 (bills of lading) are present. Cooresponding sales invoices from the H Corporation to the [Buyer] were submitted as well (attachment K25 and K26). A corresponding "Local Letter of Credit" in the total amount of US $669,900.- was submitted as attachment K27. An account statement detailing the account withdrawal by the [Buyer] was provided as attachment K28. These papers are sufficient proof for this court regarding the execution of the cover purchase. This is so even though the [Buyer] only submitted copies or notarized translations of the original documents. However, the [Seller] never made an objection of forgery against these papers, the last of which were submitted with the writ of 2 April 2003. Only shortly before the first date of hearings on 26 November 2003 did the [Seller] in a writ of 12 November 2003 declare, regarding alleged discrepancies in the submitted papers on the substitute purchase, that "under these circumstances it is obvious that the [Seller] denies the authenticity of the papers submitted by the [Buyer]."

Independent of the fact that this declaration does not sufficiently substantiate which specific documents or parts thereof were supposed to be denied as unauthentic (total forgery?) the court in precaution requested the [Buyer] to submit the original documents on the court date of 26 November 2003. The [Buyer] was not able to do so because the period of time given was too short with regard to its customer in the Far East.

In any event, insofar as the objection of a total forgery would even be relevant procedurally, it is too late pursuant to 296(2) ZPO [*]. Since the [Seller] had the documents in question in its possession since at least the middle of April 2003, it would not be compatible with a diligent conduct of the case in the sense of 282(1) ZPO to raise an objection of forgery only shortly before the court date in November 2003. This is so because it was probable that neither original documents nor witnesses could be obtained within the short period of time of only a few days still available. The consideration of the objection of forgery would have required a further court date and would thereby have considerably delayed the proceedings. Furthermore, the alleged discrepancies regarding the documents on the substitute purchase raised by the [Seller] do not yield sufficient doubts as to the accuracy and authenticity of those papers.

The fact that in the sales contract (attachment K14) with Company H the date given is the 29th of March 2003 is readily consistent with the submission of the [Buyer] that this contract was signed on 2 April 2002 -- after the additional period of time (Nachfrist) given to the [Seller] had expired. The shipment dates of the bills of lading (attachments K23 and K24) do not conflict with the substitute purchase having been concluded on 2 April 2002, since according to the submission of the [Buyer] it was a purchase of goods already on water. Even if it might appear unusual that the conditions of a "Local Letter of Credit" did not allow a ninety-day period and fell considerably short of the payment goal of ninety days agreed upon for the substitute purchase, the court does not doubt the truthfulness of the substitute purchase in its overall evaluation.

The [Buyer] is entitled to demand the entire difference in price of US $110.- per mt from the [Seller].

The allegation of the [Seller] that the [Buyer] had breached its duty to mitigate damages by purchasing from Company L rather than buying goods of Mexican origin and of a lower quality is not substantiated. The [Buyer] also addressed this in the writ of 27 June 2003 (p. 5). Undeniably, the Italian phthalic anhydride is chemically of the same specification. The [Seller] did not sufficiently submit where and at what possible lower price the [Buyer] at the relevant point of time could have bought cheaper goods of Mexican origin. The [Seller] was given notice about the upcoming cover purchase and was requested to declare its position regarding the cover purchase. The [Seller] at that time did not object that the [Buyer] was purchasing goods that were too expensive; nor did the [Seller] name another tangible source of supply with better prices.

The resale of the goods to the [Buyer]'s customer did not effect the claim for damages pursuant to Art. 75 CISG.

The [Buyer]'s claim for interest is based on Art. 78 CISG.

The subsidiary decisions are based on 91, 709 ZPO.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Seoul, Korea is referred to as [Buyer] and the Defendant of Hamburg, Germany is referred to as [Seller]. Amounts in the currency of the United States (United States dollars) are indicated as [US $].

Translator's note on other abbreviations: CISG = United Nations Convention on Contracts for the International Sale of Goods; mt = metric tons; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Sabine Kossebau, student of law at the University of Hanover, Germany.

*** Todd Fox received his J.D. from Rutgers University and his LL.M. summa cum laude from the University of Freiburg, Germany. A member of the Bar of the State of Pennsylvania, he is an Associate of the Institute of International Commercial Law.

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