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CISG CASE PRESENTATION

Germany 10 December 2003 Appellate Court Karlsruhe (Carpets case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/031210g1.html]

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

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Case identification

DATE OF DECISION: 20031210 (10 December 2003)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 7 U 40/02

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

CASE HISTORY: Landgericht Karlsruhe (10 O 96/80) 1 March 2002 [reversed]

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Brazil (defendant)

GOODS INVOLVED: Carpets


IHR headnote

IHR headnotes this case as follows:

     "If the parties have, after concluding sales contracts that are subject to the CISG, entered into a further agreement on the total sales price, such agreement is not a separate promise of debt but an agreement on the terms of payment pursuant to Art. 29(1) CISG that does not affect the place of performance according to Art. 57(1)(a) CISG." Internationales Handesrecht (2/2004) 62.


Case abstract

GERMANY: Oberlandesgericht Karlsruhe 10 December 2003

Case law on UNCITRAL texts (CLOUT) abstract no. 635

Reproduced with permission of UNCITRAL

Abstract prepared by Ann-Catrin Theisen

The case examines the influence of an agreement regarding the terms of payment on the place of payment pursuant to article 57(1)(a) CISG.

A German seller entered into a contract with a Brazilian buyer for deliveries of carpets. Since the buyer did not settle all payments for the deliveries, the parties concluded a so-called "New Agreement" on the balance, according to which the buyer acknowledged its payment obligation of the remaining receivables. This obligation was to be settled by cheque, with payments due on fixed dates each month. Furthermore, according to a "Record", the parties entered into an agreement, which entitled the buyer to send back carpets up to a specified value. While some of the purchase price was settled by the buyer, there was still a remaining balance.

The seller brought suit at Karlsruhe Regional Court claiming the balance. The Regional Court held that the claim was inadmissible, since the seller had not substantiated if and to what extent the invoices submitted to the court had been discharged by the payment of the buyer. Moreover, the court denied its international jurisdiction with regard to the seller's claims arising out of the "New Agreement" in connection with the "Record".

On appeal, the Higher Regional Court of Karlsruhe held that, lacking any express choice of law by the parties and according to article (1)(1)(b) CISG, the applicable law was the CISG, since the rules of private international law pointed to the application of the law of Germany, a Contracting State of the Convention.

On the substance of the dispute, the court held that, pursuant to article 57(1)(a) CISG, the place of payment was the seller's place of the business in Germany.

The court considered the "New Agreement" as an agreement on the terms of payment: the court held that the parties were free to conclude such an agreement on the terms of payment in accordance with article 29(1) CISG. The court further stated that the buyer's obligation to pay the remaining purchase price derived from articles 53 and 54 CISG: this obligation included freight costs even if they were shown separately. The overall price was to be paid at the [seller]'s place of business (CISG article 57(1)(a)).

As to the issue of limitation of actions, the court held that the limitation of a seller's right to claim was neither governed by the CISG, nor by the UN Limitation Convention of 1974/1980, as Germany has not acceded to the latter Convention. As a result, German law was applicable to the question of prescription or limitation.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 29(1) ; 57(1)(a) [Also cited: Articles 31 ; 53 ; 54 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): statute of limitations];

29A [Parties by agreement may modify or terminate the contract];

57A [Place for payment: in absence of agreement, payment at seller's place of business]

Descriptors: Scope of Convention ; Statute of limitations ; Modification of contract ; Novation ; Payment, place of ; Jurisdiction

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): [2004/2] Internationales Handelsrecht 62-65; CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/911.pdf>

Translation (English): Text presented below

Translation (Portuguese): CISG Brazil database <http://www.cisg-brasil.net/downloads/casos/Carpets-case.pdf>

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Karlsruhe

10 December 2003 [7 U 40/02]

Translation [*] by Tobias Koppitz [**]

Edited by Todd Fox [***]

I.  The Plaintiff [Seller] claims payment of a remaining US $509,273.47 from the Defendant [Buyer] who, like the [Seller], is in the wholesale carpet trade and with whom the [Seller] had an ongoing relationship.

According to the undisputed part of the statement of facts of the decision of the Landgericht [the Court of First Instance], the [Seller] had remaining claims from carpet deliveries against the [Buyer] in the amount of approximately $1,118,000 [all monetary amounts herein are expressed in US dollars]. In payment for these, the [Buyer] had made out the following:

     -   Four promissory notes in the amounts of $55,234.62, $49,967.57, $63,094.50 and $51,604.35, respectively, payable during the period of 31 May 1996 to 31 August 1996; and
     -   Sixteen checks (one check in the amount of $51,100.00, fourteen checks in the amount of $56,100.00 each, and one check in the amount of $56,922.06), payable during the period between 30 September 1996 and 31 December 1997.

From those: two notes were presented and cashed completely (the notes in the amounts of $55,234.62 and $49,967.57), and one partly (the note in the amount of $63,094.50 was partly cashed in the amount of $40,000.00); four checks were also cashed (the check in the amount of $51,100.00 and three checks in the amount of $56,100.00 each).

In addition, the [Buyer] made a cash payment in the amount of $5,000.00 (on the part of the above debt of approximately $1,118,000 that was not covered by the notes and checks transferred).

Regarding the remaining sum of $248,720.91, the [Seller] presented a number of invoice copies as well as a list, contained in the complaint dated 19 October 2001, describing the individual invoices, notes, and checks transferred as well as payments. On 10 June 1997, the parties concluded a "New Agreement" in Sao Paulo, according to which the obligation should be settled by check payments (in the amount denoted there) due on the 15th and 30th of each month, beginning in August 1997. In execution of this agreement, the [Buyer] only paid $45,000.00 (cf. the credit entries in the bank statements of a US dollar currency account of the [Seller] presented in the trial proceedings; these were entries of $15,000.00 on 1 September 1997, $14,974.00 on 8 October 1997, and $15,000.00 on 3 November 1997), so that the remaining claim amounted to $703,720.91. According to a "Record" of 13 October 1998, the parties concluded an agreement, pursuant to which the [Buyer] is authorized to send back carpets to the [Seller] up to the amount of $703,720.91.

From the above $703,720.91, the [Seller] subtracts the amounts of two invoices dated 28 October 1998 and 16 November 1998 in the amount of $99,368.17 and $88,566.29, as well as two further invoice amounts of $5,436.70 and $7,076.28, so that the balance of $509,273.87 claimed remains.

The Court of First Instance held the claim inadmissible insofar as it was based on purchase price claims, due to the lack of demonstration of whether and in what amount the fifty-three invoices presented to the court had been discharged by way of part payments by the [Buyer]; moreover, as far as the [Seller] derived claims from the "New Agreement" in connection with the "Record", the Court of First Instance denied the international jurisdiction of the German courts.

The [Seller] appeals this decision and furthermore continues to seek a judgment ordering the [Buyer] to pay $509,273.87.

In particular, the [Seller] submits that it did indeed raise its claim properly. [Seller] claims it was inappropriate for the Court of First Instance to consider the presented invoices alone, but rather it should have taken into consideration that the remaining balance from the invoices had been accepted by the [Buyer] as the balance according to the "New Agreement" and the "Record" and was undisputed. The [Seller] is asserting a remaining purchase price claim, so according to Art. 57(1)(a) of the CISG applicable here the Court of First Instance also had jurisdiction.

The [Buyer] defends the decision of the Court of First Instance and asserts that the submission of the [Seller] in the second instance leads to an inadmissible amendment of action; in the first instance the [Seller] only asserted claims out of the "New Agreement". Insofar as the action is now based on a purchase price claim, its detailed presentation could not be recovered in the appellate instance. Furthermore, the single purchase price claims and the allegation that they underlie the balance denoted in the "New Agreement" are still denied. [Buyer] repeats that the understanding in the "Record" had nothing to do with the carpets delivered to it by the [Seller]. Finally, [Buyer] still asserts that the parties had agreed that the balance should be settled by a set-off using a part of a right of succession out of family property in Lebanon, to which its manager A.Z. -- a cousin of the general partner of the [Seller] as well as its brother J.T. -- is entitled in the amount of one million dollars. This agreement was reached in 1997. [Buyer] claims this is why it received back from the [Seller] marked "paid", the checks, which it had given to the [Seller] in fulfillment of the "New Agreement". In contrast to [Buyer]'s allegation in the first instance, this is alleged to have occurred in Germany at a visit of [Buyer]'s manager A.Z. on 14 or 15 September 1997.

Reasons for the Decision

II. The appeal of the [Seller] is successful. The claim is admissible and substantiated.

       1. Contrary to the [Buyer]'s opinion, the claim had already been asserted as a purchase price claim in the first instance proceedings. The Court of First Instance also recognized this as is shown under Section 1 of its Reasons for the Decision, according to which the claim, as far as a purchase price claim was being asserted by [Seller], had been regarded inadmissible for the above-mentioned reasons. These arguments would have been unnecessary had the Court of First Instance not also understand the submission of the [Seller] to be also based on the purchase price claims of the invoices presented. This, therefore, cannot be regarded as an amendment of the action in the second instance.

       2. From the above findings, it is accepted that the [Seller] had asserted and still asserts a total remaining purchase price claim from carpet deliveries in the amount of $509,273.47.

According to Art. 28(1) and (2) EGBGB [*], German law is to be applied. The parties did not agree on a choice of law; therefore, the contracts of sale concluded between them are subject to the law of the State with which they have the closest connection. According to the presumption in Art. 28(2) EGBGB, a contract concluded -- as here -- in the pursuance of a commercial activity has the closest connection to the State in which the party to perform the characteristic performance has its principal place of business at the time of the conclusion of the contract. Following this presumption, the contracts concluded between the parties have the closest connection with the Federal Republic of Germany, as the characteristic performance of a contract of sale is the delivery of the goods (general concurrence of opinion, cf. Staudinger/Magnus [2000] Art. 28 EGBGB No. 1) -- in this case the delivery of the carpets by the [Seller] -- and at the time of the conclusion of the contracts, the [Seller's] place of business was in Germany.

As German law is therefore decisive, the United Nations Convention on Contracts for the International Sale of Goods (CISG) is applicable, even though Brazil is not a Contracting State to this Convention. It suffices that the Federal Republic of Germany, for which the CISG entered into effect on 1 October 1991, is a Contracting State and also was a Contracting State at the time of the conclusion of the contracts of sale. Pursuant to Art. 1(1)(b) CISG (according to which this Convention on Contracts for Sale of Goods applies when, according to the rules of private international law, the law of a Contracting State is to be applied), this leads to the application of the CISG to the contractual relations between the parties. The Federal Republic of Germany has not declared a reservation in the sense of Art. 95 CISG (Staudinger/Magnus, id. Art. 95 No. 5).

The application of the CISG leads to the local jurisdiction of the Court of First Instance of Karlsruhe and thus also to the international jurisdiction of the German courts. Decisive are the general rules of jurisdiction and thus also 29(1) ZPO [*], according to which the court of the place of performance has jurisdiction in disputes arising from contractual relations. In this case, the place of performance for the asserted total purchase price claim is the place of business of the [Seller], ergo Karlsruhe. This is derived from Art. 57(1)(a) CISG, according to which the buyer must pay the purchase price at the seller's place of business if -- as is the case here -- nothing else has been agreed and the payment is also not to be made against the handing over of the goods or of documents. This place of payment derived from Art. 57(1)(a) CISG also establishes as place of performance pursuant to 29(1) ZPO the legal venue (BGH NJW-RR 1997, 690, 691; Staudinger/Magnus, Art. 57 CISG No. 20 with further references).

        3. Contrary to the opinion of the Court of First Instance, the [Seller] did also assert the total remaining purchase price claim with a claim in due form in the sense of 253(2) (not para.(1) as mentioned in the decision) ZPO.

It can be left undecided whether the chart presented by the [Seller] -- displaying in the left column the single claims and, in the right column, the payments -- made sufficiently clear that the [Seller] was concerned about the remaining open payments (after taking into account the single payments on the older invoices) in the total amount of $748,720.911, and that the [Seller] wanted the further payments of $45,000.00 as well as the deductions of $99,368.17, $82,566.29, $5,436.70 and $7,776.28 to be taken into account for the respective oldest invoices, or whether the Court of First Instance did not have to clearly point that out. In the "New Agreement", the parties had agreed that the [Seller] should be entitled to a total remaining claim of $748,720.91 for performances under the sales contracts. This is a total remaining claim of the [Seller] against the [Buyer] according to the presented invoices. The [Buyer] had not effectively contested in the first instance, and also not in the second instance, that this was the remaining debt according to the chart … and the accompanying presented invoices, thus, that this amount is based on the single claims out of the sales contracts. [Buyer]'s submission in the first instance, that it could not comment on the invoices because it only had a couple of invoices present (in the pleading of 3 January 2002) or because it had no documents anymore (in the pleading of 22 January 2002), does not suffice for a contestation to be taken into consideration, as long as the [Buyer] does not submit which other carpet deliveries should be the basis for the undisputed $748,720.91 owed. As can be derived from the undisputed part of the decision of the Court of First Instance, it has also not been contested by the [Buyer] in that instance that this amount is based on carpet deliveries. Also in the second instance, the [Buyer] only effectively objects (apart from the objection that the numbers of the invoices did not always correspond with the pagination of the [Seller]'s pleading of first instance of 19 October 2001) that four of the fifty-three invoices did not relate to purchase price claims, but to transport costs.

Contrary to the opinion of the Court of First Instance and the [Buyer], the "New Agreement" of 10 June 1997 is not to be regarded as a separate promise to pay (the Court of First Instance had referred here to 780 BGB [*]) or a novation, even if it does not explicitly refer to the claims underlying the notes and checks to which the [Seller] is entitled from the carpet sales. The notes and checks mentioned on page 1 of the "New Agreement" (typed, table 1) had been given by way of payment. This understanding was an agreement on the terms of payment, in particular also containing a delay of payment, which the parties could conclude pursuant to Art. 29(1) CISG (cf. Schlechtriem, Kommentar zum CISG [commentary on the CISG], 3rd ed., Art. 29 No. 3). According to the "New Agreement", the new checks to be filled out by hand were only to replace these notes and checks given for payment. In that sense, the "New Agreement" was therefore a new agreement, possible for the parties again pursuant to Art. 29(1) CISG, concerning performances to be made by way of payment on the total remaining claim from the contracts of sale (check-payments from the time of August 1997 to July 1999), which in particular meant another delay in payment. At the same time, the parties also agreed that a total remaining claim of $748,720.91 still existed. Even if this was the sum of the still open note and check amounts denoted on page 1 of the "New Agreement" (typed), the agreement on a remaining debt of $748,720.91 is also reasonably construed to mean the [Seller] is entitled to a remaining total claim of $748,720.91 out of the single contracts of sale. In that sense the "New Agreement" is, on the one hand, a new agreement replacing the notes and checks made out so far for new check-payments to be performed in the time from August 1997 to end of July 1999, allowing a (further) delay in payment, and on the other hand, a consensus of the parties on the still existing total debt of the [Buyer] from the single contracts of sale.

However, if the parties have agreed on the amount of the [Seller]'s total claim out of the contracts of sale, then once the [Seller] had claimed the total amount, the [Seller] was not obliged to allocate the amount sued for to single claims anymore. Furthermore, the New Agreement on the terms of payment reached pursuant to Art. 29(1) CISG and the agreement on the amount of the remaining debt out of the contracts of sale did not change anything in the place of payment derived from Art. 57(1)(a) CISG, and thus did not change anything in the jurisdiction of the Court of First Instance of Karlsruhe.

       4. The obligation of the [Buyer] to pay the remaining purchase price is derived from Arts. 53, 54 CISG.

It is irrelevant that among the presented invoices four are for transport costs. The [Buyer] does not deny that the [Seller] is also entitled to the freight costs for sending the goods to Brazil. Even if the freight costs are shown separately, they form a part of the purchase price in the sense of the CISG (Art. 31 CISG; Schlechtriem id. Art. 31 No. 87), which pursuant to Art. 57(1)(a) CISG, is accordingly also to be paid at the [Buyer]'s place of business.

       5. Since a further $45,000.00 was undisputedly paid on the $748,720.91 owed, the remaining claim amounted to $703,720.91, as was found in the statement of facts of the Court of First Instance's decision. This amount is reduced by the amounts further mentioned in that statement of facts to the amount sued for of $509,273.47. Whether these amounts are "considerable", which the [Buyer] denies, is irrelevant. Decisive is that the [Seller] only demands payment of $509,273.47.

All told, the remaining debt of the [Buyer] amounts to the amount sued for. Interest is not being demanded.

       6. The [Seller]'s remaining claim is also not barred by the statute of limitations.

The limitations period of claims of the buyer or the seller is not governed by the CISG (Staudinger/Magnus, Art. 4 CISG No. 38). As the Federal Republic of Germany has not acceded to the UNCITRAL Limitation Convention of 1974/1980 -- according to this convention, a period of limitation of four years is prescribed -- pursuant to Art. 32(1) No. 4 EGBGB [*], the question of the statute of limitations is governed by German law. Therefore, according to Art. 229 6(1) EGBGB, for the time prior to 1 January 2002 the applicable law is 196(1) No. 1, 208, 217 BGB [*] unamended version, so that the four-year period of limitations applicable to the single claims from the years 1994/1995 had not yet lapsed at the time of the acknowledgement of the claims in the "New Agreement" and their limitations period was interrupted by such acknowledgment ( 208, 217 BGB unamended version) with the effect, that the period of limitation of four years began to run anew from this point of time, and at the time of the filing of the extension of the claim on 14 April 2000 (which had been delivered ( 209(1) BGB unamended version, 253(1) ZPO [*]) together with the statement of claim in the sense of 270(3) ZPO (service abroad)) was not yet barred by the statute of limitations.

       7. The [Seller]'s claim has not expired. The [Buyer] did not prove its alleged agreement on a set-off of the claim with the supposed right of succession of its manager A.Z. -- if this discharge agreement could not also have been concluded pursuant to Art. 29 CISG, then pursuant to Art. 32 No. 1 para. 4 EGBGB, German law would in any case be applicable again. The [Buyer] no longer maintains its proven submission that the checks which it had allegedly given the [Seller] in fulfillment of the "New Agreement" were returned to the [Buyer] by the [Seller]'s general partner on a visit in Sao Paolo in October 1998 stamped "paid" and on the reverse stamped with the [Seller]'s company stamp; had it come to this return of the checks, this could be an initial evidence for the alleged set-off agreement. Instead, the [Buyer] now alleges that its manager A.Z. had signed the documents for the disposition of the property succession upon a visit in Germany on 14 or 15 September 1997. Upon this visit, he was handed back the original checks with the numbers 214 to 259 and 261 by J.T. in the presence of the [Seller]'s general partner (S.T.), each stamped "paid" on the front and with the [Seller]'s company name on the back. Even if this new submission (the [Buyer] had declared in the court session that [Buyer] was referring the content of the letter cited in the memorandum of 30 March 2003) is viewed according to the statements of the [Buyer]'s manager A.Z. in the appellate instance, it does not justify the assumption that the [Seller]'s claim had expired. The [Buyer] has neither proven this submission, nor in general the allegation that [Buyer]'s manager A.Z. had declared his consent that his share of the inheritance should amount to one million US dollars and that the [Buyer]'s remaining debt should be set-off with a part of this right of succession. Simply from the facts that the [Buyer] presented in the court session "original checks" with the numbers 214 to 259 and 261 which carried the above stamps and that J.T. -- who, according to the [Seller]'s undisputed statement, was only its silent partner without authority for the [Seller] -- had made payments of $280,000.00 in total in October and November 1997, it cannot be concluded that it had come to the set-off agreement between the parties as alleged by the [Buyer]. How the [Seller] came to be in the possession of the checks presented in the court session is just as unknown as the reason for the possible payments of the $280,000.00.

[Additional ruling]

Reasons for the leave to appeal ( 543(2) ZPO [*]) are not present.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant of Germany is referred to as [Seller] and the Defendant-Respondent of Brazil is referred to as [Buyer]

Translator's note on abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuch [German Code on Private International Law]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Tobias Koppitz holds a degree in law. With the team of Humboldt University, Berlin, he won the Frédéric Eisemann Award for third place in the 8th Willem C. Vis International Commercial Arbitration Moot 2000-2001. He was coach to the team of Humboldt University Berlin in the 9th Willem C. Vis Moot 2001-2002.

*** 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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