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CISG CASE PRESENTATION

Germany 29 January 2004 Appellate Court Frankfurt (Frozen pork case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040129g1.html]

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

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Case identification

DATE OF DECISION: 20040129 (29 January 2004)

JURISDICTION: Germany

TRIBUNAL: OLG Frankfurt [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: 1st instance Landgericht Giessen 18 March 2003 [affirmed]; 3d instance Bundesgerichtshof 2 March 2005

SELLER'S COUNTRY: Belgium (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Frozen pork


Case abstract

GERMANY: Oberlandesgericht Frankfurt am Main 29 January 2004 *

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/80], CLOUT abstract no. 820

Reproduced with permission of UNCITRAL

Abstract prepared by Ulrich Magnus, National Correspondent, and Klaus Bitterich

The German defendant bought frozen pork from a Belgian company. The frozen meat arrived in Germany in several deliveries, the latest on 4 June 1999. About the same time, it was made public that Belgian pork could be contaminated by dioxin.

Therefore, in that same month of June, a German regulation entered into force, declaring Belgian pork not marketable, unless the seller presented a certificate proving the pork to be free of dioxin. Shortly afterwards, the Belgian government took similar measures and declared pork meat not marketable if the animals were slaughtered on or before 23 July 1999. The defendant refused to pay for the goods, claiming that the pork had been seized by the German customs authorities, as the defendant could not present the required certificate. The claimant, on behalf of the seller, brought an action for payment primarily arguing that the defendant had taken over the goods before the suspicion of the contamination arose.

The court dismissed the claim. It ruled that a suspicion of a health-threatening condition of the goods had to be regarded as a lack of conformity, even if the suspicion arose after the passing of risk, pursuant to articles 36 and 67 (1) CISG, as long as the facts on which the suspicion was based were existent before that time. In that case, according to the court, it did not matter if those facts were known or unknown at the time of the passing of risk. As the precautionary measures taken by the Belgian government were concerned with products coming from animals slaughtered on or before 23 July 1999, the pork sold to the defendant fell within the scope of application of those measures. There was evident suspicion that the pork might be contaminated because of facts pre-existing the passing of risk, thus the court concluded that the pork did not conform to the contract.

The court left the question undecided whether the pork was in fact contaminated. As the suspicion on the harmful conditions of the goods was already a lack of conformity, the burden of proof shifted to the claimant contrary to the general rule of burden of proof pursuant to article 36 CISG. Though the court admitted that generally the seller was not liable for conformity of the goods with public regulations in the country of destination, the court found that the case was an exception to the general rule. The reasons for that exception were that the specific government measures were based on events in the country of origin of the goods and, in particular, on the specific type of goods.

__________________

* For the Bundesgerichtshof decision on this case, VII ZR 67/04, 2 March 2005, please see case 774 CLOUT 74.

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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 35 ; 36 ; 38 ; 39 ; 50 ; 67(1) ; 74

Classification of issues using UNCITRAL classification code numbers:

35A ; 35B [Conformity of goods: quality, quantity and description required by contract; Requirements imposed by law];

36A [Time for assessing conformity of goods: conformity determined at time when risk passes to buyer[;

38A [Buyer's obligation to examine goods: time for examining goods];

39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time

50A [Buyer's right to reduce price for non-conforming goods]

67A [Risk when contract involves carriage of goods: risk passes on handing goods over to first carrier];

74A1 [General rules for measuring damages (loss suffered as consequence of breach): includes loss of profit]

Descriptors: Conformity of goods ; Examination of goods ; Notice of lack of conformity, timeliness ; Passage of risk ; Reduction of price, remedy of ; Damages ; Profits, loss of

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=970&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/822.pdf>; Internationales Handelsrecht (May/June 2004) 113-115

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. 35 paras. 14, 17 Art. 36 para. 5; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 205

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Court of Appeal (Oberlandesgericht) Frankfurt on the Main,
29 January 2004

Translation [*] by Albert Henke [**]

IN THE NAME OF THE PEOPLE

JUDGMENT

In the litigation [...]

The Regional Court of Appeal in Frankfurt on the Main/ 3d Civil Senate
By the judges of the Regional Court of Appeal ...
After the hearing dated 18 November 2003
Has pronounced the following judgment:

The appeal of the Plaintiff [Seller's assignee] against the judgment dated 18 March 2003 - 8 O 57/ 01 - of the Landgericht [Regional Court, hereinafter "Court of First Instance"] Giessen / 8th Chamber for Civil Law Affairs / 2d Chamber for Commercial Affairs is rejected.

The [Seller's assignee] bears the expenses of the appeal proceedings.

The judgment is temporarily executable.

The [Seller's assignee] is allowed to prevent the execution of the Defendant-Appellee [Buyer] against a bail of 9,000.- Euros, unless the [Buyer] previously gives bail for the same amount. The bail can consist in a written guarantee - valid for an unlimited period, without conditions and irrevocable -- issued by a bank authorized to operate in Germany.

The claim of the [Seller] amounts to 47,658.92 Euros.

A revision is not admissible.

THE FACTS

The [Seller's assignee] has claimed from the [Buyer], on the basis of a ceded right, the payment for the supply of pork, that the [Buyer] had purchased from the Belgian wholesale Firm A.

On 16 December 1999, (Firm A. hereinafter [Seller]) ceded to [Seller's assignee] its rights to the purchase price. The [Seller's assignee] is a credit insurance firm (page 91 of the proceedings documentation).

In April 1999, the [Buyer] had ordered from [Seller] frozen pork of different type and quality. The goods were collected by the [Buyer] on 15 April, 27 April and 7 May 1999 and - on the same dates - they were invoiced by the [Seller] to the [Buyer]. The invoice total amounted to Deutsche Mark [DM] 128,212.75 (pages 12, 15 and 18 of the documentation). A certificate was attached to each invoice stating that the pork was fit for (human) consumption. The certificates did not say anything about the dioxin content of the meat. The [Buyer] resold this meat to Firm B. in O1, who in turn sold it to another firm, Firm C., in O2-O3. The pork arrived there by 4 June 1999. Approximately at the same time, it became known that there was a risk that Belgian pork might be contaminated by dioxin. Therefore, on 11 June 1999 an ordinance was issued and entered into force in the Federal Republic of Germany to protect consumers from contaminated Belgian pork; its circulation was prohibited unless a certificate of safety was exhibited. In this context, the European Community also issued instructions about the need of certificates stating that pork was safe from dioxin and was fit for (human) consumption. With a second partial payment the [Buyer] had paid DM 35,000.00 toward the purchase price. The remaining amount is the object of this claim. Before the proceedings, the [Buyer] had asserted - showing certificates - that the pork in O1-O3 had been confiscated and finally destroyed, because it could not be proved that it was free from dioxin.

The [Seller's assignee] alleges that:

   -    The delivery was not contaminated by dioxin; and has questioned the authenticity of the certificates submitted by the [Buyer].
   -    When the suspicion about dioxin emerged, the goods had already been delivered to the [Buyer]'s customer.
   -    No confiscation or storage of the meat had taken place by the end of June 1999.
   -    The [Seller] had tried in vain - after a suitable reprimand to the [Buyer] - to get samples from the delivered goods, in order to have them tested by an official laboratory and to get a certificate stating the lack of dioxin.
   -    By phone, no such certificates had been asked for.
   -    The meat was not destroyed.
   -    The [Buyer] had not examined it on time.

The [Seller's assignee] has applied to have the Court sentence the [Buyer] to pay to the [Seller's assignee] 47,658.92 Euros (= 93,212.75 DM) plus 5 % interest since 26 June1999.

The [Buyer] has applied to have the Court reject the claim. The [Buyer] asserted that:

   -    On 4 June 1999, Belgium had prohibited the circulation of live pigs and their meat.
   -    (Belgium) had assumed a suspicion of dioxin contamination for meat that was shipped to Germany before 30 July 1999 and that pork products produced from animals slaughtered prior to 23 July 1999 should be confiscated until their safety had been proved.
   -    The pork that was purchased had been transferred to a Customs warehouse, and - by the end of June 1999 - a confirmation of its safety from dioxin contamination was required for its Customs clearance in O2-O3.
   -    On 1 July 1999, a communication from O2-O3 arrived informing that sales were prohibited concerning the supply of products that were object of the litigation.
   -    Thereafter, the [Buyer] phoned the [Seller] charging that the [Seller] had not cared about (any) safety certification, so that the goods were not safe for consumption and thus faulty.
   -    Since also in the following time - notwithstanding demands by phone and by writing - the certification had not been presented, the meat was destroyed.
   -    The certificates confirming this (destruction) were authentic.

As a remedy, the [Buyer] has a right to be compensated for damages due to the violation of the participation duty of the [Seller]. This (violation) caused a loss in profit of 10,330.28 DM.

The Court of First Instance obtained evidence through interrogation of witnesses Z1, Z2 and Z3. The Court rejected the [Seller's] claim because the goods did not correspond to the contract, in the sense of article 35 CISG; therefore, the [Buyer] was entitled to oppose the payment claim with the right to reduce the price (article 50 CISG). The prerequisites existed for a reduction to "zero" because an inability to eliminate suspicion of food contamination would make its resale impossible. Certainly the time of passage of risk is decisive, but a corresponding responsibility for would (still) exist, if the non-conformity with the contract emerged only after that time, because the pork was suspected to have been possibly already contaminated with dioxin at the time risk passed.

The Belgian Government also proceeded from this assumption, a fact that was confirmed by the required official report. Also a suspicion emerging afterwards, would give reasons for a fault, if this (suspicion) is based on facts that existed before the passage of risk, but that were not yet noticed. The seller would be responsible for that.

The [Buyer] had satisfied the examination and notice duties imposed by articles 38, 39 CISG. All witnesses substantially confirmed that the [Buyer], at the latest at the beginning of July 1999, had asked the [Seller] unsuccessfully for a certificate concerning the dioxin safety of the food.

Against the judgment that was delivered on 10 April 2003, the [Seller's assignee] has appealed on 29 April 2003 and has justified its (appeal) on 23 June 2003 after (obtaining) an extension of the appeal term until 10 July 2003. The [Seller's assignee] pursues further its application before (the Court of) First Instance and contends that the decision of the Federal Court of Justice of Germany (BGH [*], [cited in] NJW [*] 1969, page 1171), on which the Court of First Instance had based its judgment, would not be applicable, because in that case a suspicion of salmonellae was already noticed prior to the sale.

The [Seller's assignee] alleges that, in the present case, the dioxin contamination of the pork that was sold was not provable. The unsaleability of the pork was not due to a concretely verified fault, but to an authority measure in the end-user's country, that did not fall into the (sphere of) risk of the [Seller]. Evaluating the dioxin suspicion in an inadmissible manner, reference was made to an ordinance issued by the Belgian Government on 29 July 1999 - (thus) a long time after the period in question. The Belgian Government had underestimated at first the dangerousness of the dioxin contamination. Where a feedback control was possible, safety certificates were issued, if the slaughtered animals did not come from factories under surveillance of the authorities. The evidence obtained by the Court of First Instance did not make a difference between the statements of the witnesses concerning the possibility of a remedy.

The [Seller's assignee] applies to the Appellate Court to change the contested judgment and to sentence the [Buyer] to pay to the [Seller's assignee] 47,658.92 Euros plus 5% interest in addition to the bank-rate.

The [Buyer] applies to reject the appeal. The [Buyer] defends the disputed judgment and refers additionally - with respect to the criticized lack of proof - to a fax message of witness Z1 (page 289 of the documentation).

REASONS FOR THE JUDGMENT

The appeal of the [Seller's assignee] is admissible and allowable; in particular, it was formally and timely correct and justified; but in this matter it is without success.

The Court of First Instance rejected the claim, stating at the outset that the facts of the case were to be judged pursuant to the rules of the Uniform UN International Sales Code (CISG).

Further, the Court of First Instance denied correctly that the delivered goods conformed to the contract at the time of passage of risk (articles 36 and 67(1) CISG). The contention of the [Seller's assignee] that the Court of First Instance misapplied the decision of the Federal Court of Justice (BGH [*]) (cited in) NJW [*] 1969, at page 1171, to the present case, is not effective. The decision of the Federal Court of Justice deals with the question of a fault in the case of a suspicion of injurious conditions for health that is based on concrete facts - confirming that situation. In addition thereto, the Federal Court of Justice recognized in its decision (cited in) NJW 1972, page 1464, that a fault is to be assumed even if the suspicion of contamination arises after risk has passed - as in the present case, but is based on facts that existed before the passage of risk, though these were not (yet) known. In its decision (cited in) NJW 1989, pages 218 et seq., the Federal Court of Justice confirms this, stating further that a suspicion did not yet constitute a fault of the goods, if afterwards it came out that (the suspicion) was unfounded. Applying this jurisprudence to the present case, one must assume that - at the time of passage of risk - the delivered goods did not correspond to the agreement. The facts that justify the suspicion result from the measures of the Belgian Government which - due to the discovered dioxin contamination - ordered the confiscation of products derived from animals slaughtered through 23 July 1999, until their safety was proved (see the newsletter summary of the Federal Association of Meat Products Industries at page 110 of the documentation).

The goods that were delivered here are such products. Since the existence of such a suspicion of dioxin contamination meant already a fault, according to the above cited jurisprudence of the Federal Court of Justice, the [Seller] had to prove that the suspicion was unfounded; this, in deviation from the principle applicable to allocation of the burden of proof as per article 36 CISG (see Staudinger-Magnus, Rz. 23 et seq.).

The [Seller's assignee] objects furthermore that the [Seller] would not be liable for whether the merchandise complied with the public regulations in the end-user's country - an aspect not correctly noticed by the Court of First Instance. Also this contention does not fit. The opinion of the [Seller's assignee] is principally well right (see: Staudinger-Magnus, Rz. 34 concerning art. 35 CISG, and BGHZ [*], vol. no.129, page 75 et seq.); that case however concerned security and standardization rules.

In any event, in this Court's opinion, the present case is different. Since the health precaution measures taken in O2-O3 were triggered by events that emerged in the [Seller]'s country, causing among others, measures of the European Commission, according to which the sale of Belgian beef and pork should have been prohibited in the entire European Community. The most decisive regulations here in O2-O3 were in reaction to this.

But if the product itself is the reason for issuing precautionary public health rules, also in the [Seller]'s country, then - according to the opinion of this Court - the principle, cited by the [Seller's assignee], that this would discharge the [Seller], is not valid.

Nor does the objection of the [Seller's assignee] fit that the Court of First Instance - in an inadmissible way - had based its consideration of a dioxin suspicion as a fault, on the much later issued ordinance of the Belgian Government of 29 July 1999. Because that ordinance was just the consequence of the preceding events which had moved the Belgian Government to action. The fact that such a far-reaching ordinance was issued, that blocked - to a large extent - the meat trade through confiscations, is strong evidence for an existing dioxin contamination, also at the moment of the supplies carried out in the present case. This (consideration) is valid also if the problem in Belgium had been underestimated at first.

In the end, neither the appeal nor the appreciation of the evidence leads to a different assessment of the facts and of the legal situation. The Court of First Instance saw correctly that all witnesses had spoken about the fact that, at the beginning of July 1999, the [Buyer] had asked the supplier for a certificate about the safety from dioxin of the supplied goods.

Witness Z1 declared that (witness) Z3 had "of course" promised such a certificate. Witness Z2 said that they had received evasive answers. Witness Z3 declared that at that time it was impossible for him to release such a declaration, since the veterinarian controllers had instructions from Brussels, neither to release certificates of dioxin safety, nor to sign such. The [Seller's assignee] concludes from this circumstance, that there had been - at that time - contradicting statements concerning the possibility of an alternative remedy through the [Seller].

The statement of witness Z3 is, in any event, objectively wrong - as far as the remedy is concerned. Because the Belgian Government has committed itself not before the session of the standing Veterinarian Committee in Brussels on 29 July 1999, to issue "by 31 August only certificates on the basis of (really) executed analyses and no longer on the basis of the assumption of unsuspected factories" (see the communication of the Federal Ministry for Health dated 30 July 1999, page 151 of the documentation). Until then, the procedure had been that a declaration could be released on the basis of a feedback control, that means: when it was proved that the animals or the products derived from animals did not come from factories under public surveillance (see: the declaration of the Belgian Delegation in the Veterinarian Committee on 29 July 1999 [page 156 of the documentation]). That means that witness Z3 at the beginning of July 1999 was able, in any case, to get a safety certificate, if there were the conditions for a feedback control.

A participation duty of the [Buyer] as asserted by the [Seller's assignee], might have been taken into consideration only, if the [Seller] previously had tried unsuccessfully to get a safety certificate in this way. The [Seller's assignee] does not assert that this - from the very beginning - would have been impossible, but even the [Seller's assignee] itself mentions this possibility in the reasons of the appeal (see page 5 = page 263 of the proceedings documentation).

Since the [Seller] did not assert to have - unsuccessfully - undertaken such attempts, the [Seller's assignee] cannot accuse the [Buyer] of having violated a participation duty, because the [Buyer], in that respect, was not compelled in this case to participate, as explained above.

That the dioxin safety of the delivered goods is not provable, is at the [Seller]'s responsibility.

The [Seller's assignee] bears the costs of the, consequently, unsuccessful appeal, in accordance with § 97 paragraph 1, ZPO [*].

The decision on the possibility of a temporary execution of the judgment is based on §§ 708 item 10, 711, 108 ZPO.

The revision was not to be admitted, because the prerequisites of § 543, paragraph 2, ZPO are not given.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purpose of this translation, the Plaintiff-Appellant is referred to as [Seller's assignee], Firm A of Belgium is referred to as [Seller], and the Defendant-Appellee of Germany is referred to as [Buyer].

Translator's notes on abbreviations: BGH = Bundesgerichtshof [Federal Court of Justice (Supreme Court) of Germany]; BGHZ = Bundesgerichtshof in Zivilsachen [Official Reporter for decisions by the Federal Court of Justice]; NJW = Neue Juristische Wochenschrift [German law journal]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Albert Henke, Research Fellow - Institute of Civil Procedure, Università degli Studi, Milano - Associate Expert UNCITRAL.

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