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CISG CASE PRESENTATION

Germany 23 January 2004 Appellate Court Düsseldorf (Stainless steel plate case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040123g1.html]

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

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Case identification

DATE OF DECISION: 20040123 (23 January 2004)

JURISDICTION: Germany

TRIBUNAL: OLG Düsseldorf [OLG = Oberlandesgericht = Provincial Appellate Court]

JUDGE(S): Plum, Schmitz, Dr. Allstadt-Schmitz

CASE NUMBER/DOCKET NUMBER: 17 U 110/02

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

CASE HISTORY: 1st instance Landgericht Duisburg (21 O 146/01) 14 March 2002

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Netherlands (defendant)

GOODS INVOLVED: Stainless steel plates


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 38 ; 39(1) ; 40 [Also cited: Articles 49 ; 53 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach];

38C [Buyer's obligation to examine goods (time for examining goods): deferral of examination in case of redirection or redispatch];

39A1 ; 39A2 [Requirement to notify seller of lack of conformity: specification of nature of non-conformity; Within reasonable time];

40A [Seller's knowledge of non-conformity]

Descriptors: Fundamental breach ; Lack of conformity notice, specificity ; Lack of conformity notice, timeliness ; Lack of conformity known to seller

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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/918.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 38 para. 10 Art. 39 para. 17 Art. 40 para. 7

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Düsseldorf

23 January 2004 [17 U 110/02]

Translation [*] by Joan Felice Hofmann [**]

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

JUDGMENT

The appeal by the [Buyer] against the judgment of the District Court Duisburg (Case No. 21 O 146/01, 14 March 2002) is dismissed.

The [Buyer] bears the costs of the appeal. The judgment is provisionally enforceable.

The [Buyer] does not have to provide security unless the [Seller] provides security in the amount of 110% of the costs in order to enforce the judgment.

BACKGROUND

The Plaintiff [Seller] seeks payment for the delivery of 28 tons of second quality stainless steel plates of specifically described dimensions. The parties' contractual agreement is based on the [Seller]'s confirmation letter of 3 July 2000, which specified each single plate in its annex, and the Defendant [Buyer]'s order of 17 July 2000. The [Seller] charged Deutsche Mark [DM] 57,053.70 by an invoice dated 1 September 2000. The parties had agreed on "FOT storehouse ___, Netherlands".

A representative of the K-Company, the ultimate purchaser from the [Buyer], was present when delivery was effected on 1 September 2000. The K-Company resold the steel in Turkey. Complaints about the quality of the steel and incorrect dimensions of various steel plates were made thereafter.

The [Buyer] asserts that it gave notice about the objections to the [Seller] by telephone in the middle of October. On 31 October 2000, the [Buyer] informed the [Seller] in writing about the complaint of its customer, however, without indicating the particular details of the complaint. By its letter of 14 November 2000, the [Buyer] set forth the details of the complaint of its customer. Two letters of complaint in Turkish language were enclosed.

Thereupon, the [Seller] contacted the K-Company directly and learned that the K-Company had already paid the [Buyer] for the goods but claimed damages in the amount of DM 8,182.00. The [Seller] subtracted this amount from its invoice and therefore claims only DM 48,871.70. Furthermore, it claims pre-action costs of a Dutch debt collection agency in the amount of DM 2,425.10.

The [Seller] denies the alleged defects and incorrect dimensions.

The [District Court] Duisburg allowed the claim of the [Seller]. It held that the [Buyer] had to pay the purchase price pursuant to Article 53 of the CISG and that the [Buyer] might not allege any breach of contract by the [Seller] because the [Buyer] had not complied with the particular requirements as to the examination of the goods and the notice of non-conformity set out in Articles 38 and 39 of the CISG. Furthermore, in its notice of non-conformity dated 31 October 2000, the [Buyer] had not specified the nature of the lack of conformity as required by Article 39 of the CISG.

The [Buyer] appealed against this judgment.

Both the [Buyer] and the [Seller] assume that this case is governed by the CISG.

The [Buyer] argues that the notice of the lack of conformity was timely: The dimensions of the steel plates could not be checked when the plates were being loaded on truck in Almere, because such an examination of the goods would have entailed a breaking of the packaging. On 20 September 2001, the goods finally arrived in I___. While the goods were kept at the bonded warehouse until mid-October, it was not possible to carry out any examination. Afterwards, the goods were examined. The [Buyer] was informed about the lack of conformity by the K-Company in the middle of October. The [Buyer] submits that the [Seller] consciously included other goods that were placed on the bottom of the packages. As such, in any case, the [Seller] could not rely on the alleged breach of the [Buyer]'s duty to give notice of the lack of conformity within a reasonable time.

[Buyer] requests that the decision of the District Court be repealed and that the claim be dismissed. [Seller] requests that the [Buyer]'s appeal be dismissed.

For further information on the submissions of both sides, the Court refers to the briefs exchanged between the parties as well as to the findings of the District Court.

REASONS

The appeal is admissible but not successful.

The District Court correctly found that the German courts have jurisdiction according to Article 2(1) of the Brussels Convention since the [Buyer] has its principal place of business in Germany.

It is also correct that the contractual relationship between the parties is governed by the United Nations Convention on Contracts for the International Sale of Goods because both Germany and the Netherlands are Contracting States to the Convention. The Convention also applies where the parties have agreed on the application of German law -- as in the present case. Generally, the reference to German law leads to the application of the CISG, which is a part of the German law and the lex specialis for the international sale of goods, prevailing as such over the domestic law (BGH NJW 99, 1259 et seq.).

The District Court rightfully found that the [Buyer] is obliged to pay the purchase price for the goods pursuant to Article 53 of the CISG.

The [Buyer] cannot rely on any non-conformity of the delivery. The District Court correctly pointed out that the [Buyer] failed to give timely notice of the alleged lack of conformity pursuant to Articles 38 and 39 of the CISG.

According to Article 39(1) of the CISG, the buyer loses the right to rely on a lack of conformity of the goods if [Buyer] does not give notice to the seller specifying the nature of the lack within a reasonable time after it ought to have discovered it.

On 31 October 2001, the [Buyer] informed the [Seller] merely about the complaint of its customer. As no further details were given, this letter cannot be considered as an effective notification for the purposes of Article 39(1) of the CISG. The specification of the non-conformity is missing.

The [Buyer] did not give notice in the manner required by Article 39(1) of the CISG until 14 November 2001. That, however, was too late.

By virtue of Article 38(2) of the CISG, the examination may be deferred until after the goods have arrived at their destination if the contract involves carriage of the goods. In the present case, however, the parties had agreed upon that the seller was only bound to arrange the carriage to the place of lading, i.e., A___, and the loading on truck.

According to Article 38(3) of the CISG, the examination may also be deferred, if the goods are redirected in transit by the buyer without a reasonable opportunity for examination by it and if the seller knew of the possibility of such redirection at the time of the conclusion of the contract. In such a case, the examination may be deferred until after the goods have arrived at their new destination. These conditions are fulfilled.

The [Buyer] redirected the goods; this was known to the [Seller]. The [Seller] itself submits that a representative of the ultimate buyer, the K-Company, was present when the goods were being loaded.

Hence, an examination of the goods should have taken place at the latest when the goods arrived at their final destination in Turkey with the K-Company. If the buyer leaves the examination of the goods to its customer, it must take responsibility for the latter's acts (cf. von Caemmerer/Schlechtriem, CISG, 2nd ed., Article 38 para. 26). According to the [Buyer]'s submissions, the goods were released from the bonded warehouse in Turkey in the middle of October. They could have been and should have been examined then. Yet, the [Buyer] gave notice of the non-conformity in a sufficiently detailed manner only by its letter of 14 November 2001, i.e., about four weeks after the goods should have been examined in Turkey. This time period between the moment in which the goods should have been examined and the moment in which the notice of non-conformity was given was too long. No reason has been presented that could explain why four weeks elapsed. If the duty to examine the goods and to give notice of the lack of conformity had been fulfilled within a reasonable time, the notice of non-conformity would necessarily have been given earlier.

The notice being given too late, Article 39(1) of the CISG bars the [Buyer] from relying on the alleged non-conformity of the goods, as the District Court appropriately found.

Furthermore, the [Buyer]'s submission that the [Seller] acted in bad faith when it delivered the non-conforming goods and would therefore be barred from invoking Article 39 of the CISG, is unfounded.

Bad faith in the sense of Article 40 of the CISG means not only deceit but also unawareness of the non-conformity of the goods which is due to gross negligence (cf. Schlechtriem, UN-Kaufrecht, 2nd ed., para. 56).

It is undisputed that the [Seller] delivered plates that differ in their dimensions from the original order. The [Seller] was also aware of that. An essential element of bad faith within the meaning of Article 40 of the CISG is, however, the non-disclosure of the lack of conformity.

The [Seller] denies any lack of conformity, asserting that the [Buyer] had agreed to the deviation from the originally contracted dimensions. Even if this was not true, the [Seller] would have disclosed the non-conforming dimensions by sending the invoice of 1 September 2000, in which the new dimensions were indicated. The [Buyer]'s submission that it received an incomplete invoice without the second page is not persuasive. On the one hand, the [Buyer] thereby admits that it received the first page which also contained a specification of dimensions. On the other hand, the [Buyer]'s submissions are not reliable since the notice of non-conformity of the ultimate buyer in Turkey, which has been enclosed by the [Buyer], lists matters which are stated on the second page of the invoice dated 1 September 2000. Given these circumstances, it is not credible that the [Buyer] did not receive page two of the invoice dated 1 September 2000. Consequently, it cannot be established that the [Seller] acted in bad faith.

Irrespective of the foregoing, the [Buyer]'s argument that it avoided the contract by virtue of Article 49 of the CISG is unfounded. The right of the buyer to avoid the contract presupposes - in addition to the non-conforming delivery - a fundamental breach of contract by the seller. This, however, is only the case if the goods are of no use for the buyer or its ultimate buyer (cf. Schlechtriem, Internationales UN-Kaufrecht, 2nd ed., para. 197). In the present case, none of the circumstances leads to such a conclusion. On the contrary, as the ultimate customer of the [Buyer] claims damages only for a small part of the purchase price, it is to be assumed that most of the steel plates were of some use and were actually used.

[...]

The decision on costs is based upon 91 ZPO [*], the decision on the provisional enforceability results from 708 no. 10, 711 ZPO

Schmitz       Plum (Presiding Judge)   
Dr. Allstadt-Schmitz

FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Germany is referred to as [Seller] and Defendant of Netherlands is referred to as [Buyer]. Funds in the former currency of Germany (Deutsche Mark) are indicated as [DM].

Translator's note on other abbreviations: BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; NJW = Neue Juristische Wochenschrift [German law journal]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Joan Felice Hofmann, Student of Law, University of Heidelberg, Student Assistant, Chair of Prof. Dr. Thomas Pfeiffer.

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

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Pace Law School Institute of International Commercial Law - Last updated May 9, 2007
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