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Germany 2 February 2004 Appellate Court Zweibrücken (Milling equipment case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040202g1.html]

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

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Case identification

DATE OF DECISION: 20040202 (2 February 2004)


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

JUDGE(S): Dr. Neumüller (Vors. Richter am Oberlandesgericht), Burger (Richter am Obrlandesgericht), Müller (Richter am Amtsgericht)


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

CASE HISTORY: 1st instance Landgericht Frankenthal 14 November 2002

SELLER'S COUNTRY: Germany (defendant)

BUYER'S COUNTRY: Iran (plaintiff)

GOODS INVOLVED: Milling equipment

Case abstract

GERMANY: Oberlandesgericht Zweibrücken [cited as 7 February 2004]

Case law on UNCITRAL texts (CLOUT) abstract no. 596

Reproduced with permission of UNCITRAL

Abstract prepared by Klaus Bitterich

An Iranian company, the plaintiff, and the defendant German company entered into protracted negotiations for purchasing used components for the construction of a milling facility in Iran. According to the information contained in a pro forma invoice and in a letter of credit used to process the transaction, the plaintiff ordered 12 "double-roll mills" of the type "M" and other similar components, such as filter elements of the type "B" all coming from a certain German manufacturer.

In a subsequent letter the defendant confirmed a change in the specifications of the mills upon request of the plaintiff. Because of this change, the defendant could not deliver the "M" or "B" products of the German manufacturer but had to resort to Russian-made parts, a fact he did not disclose to the plaintiff. The plaintiff stored the goods delivered by the defendant in their original packages until a new building for the milling facility was completed. In the course of constructing the milling facility a few years later, the plaintiff discovered that the double-roll mills were originally made by a Russian company and that other "components" were made by a Turkish company. Furthermore, it became obvious that a part of the control unit was not compatible with other parts and therefore did not work. Relying on these facts, the plaintiff claimed the partial repayment of the price.

The defendant rejected the contention that the parties reached an agreement under which the defendant promised to deliver the double-roll mills and the other components with the specifications contained in the pro forma invoice. Furthermore, the defendant referred to the fact that the plaintiff inspected the goods before shipping and accepted delivery of one of the mills without any objections before the others were delivered. These circumstances, according to the defendant, were to be regarded as an alteration of the contract and therefore the defendant maintained that he delivered the goods in conformity with the contract.

The Regional Court held that the plaintiff did not prove that it had standing in the dispute and dismissed the claim. The Regional Court of Appeal reversed the judgement and instead decided on the merits. The Court held that the CISG is applicable pursuant to article 1(1)(b) because under German private international law the contract is governed by German law and therefore, as a part of it, by the CISG.

The Court rejected the claim of non-conformity of the control unit device because the plaintiff failed to give notice as required by article 39 CISG. The fact that the goods had to be stored for several years could not be considered as a reasonable excuse for the failure to give the required notice, because the plaintiff did not disclose the need to store the goods to the seller. Therefore, the plaintiff's intention to store the goods right after delivery did not become part of the basis of the legal relationship between the parties and the requirements for an exemption under article 44 CISG were not fulfilled.

As for the delivery of Russian and Turkish components, the Court ruled that the plaintiff was entitled to damages pursuant to articles 74, 45(1)(b) and 35 CISG. The Court held that the information given in the pro forma invoice and in the letter of credit had to be taken into account when determining the specifications of the subject of the sales contract. The specifications mentioned in these documents were regarded by the Court as a sufficient proof of the agreement reached by the parties on the requirements of the products made by the said German manufacturer. With regard to the double-roll mills the Court also relied on the letter of the defendant to the plaintiff wherein he confirmed the delivery of the "M" type with the specifications requested by the plaintiff. As the defendant failed to disclose the different origin of the goods to the plaintiff, the Court found that there was neither an express amendment of the contract nor an implied one, as the plaintiff apparently lacked the technical skills to discover the origin of the components in the course of the examination of the double-roll mills before their shipping or when taking delivery of the first mill. Finally, the defendant was not entitled to rely on the plaintiff's failure to give notice of the wrong delivery as required by article 39 CISG because the defendant knew of the Russian and Turkish origin of the mills and the other components which he did not disclosed to the plaintiff (art. 40 CISG).

Therefore, the Regional Court remanded the case to the lower court to determine the claim for damages and required it to obtain an expert opinion to determine the difference between the value of components as specified in the contract and the components delivered by the seller.

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Classification of issues present

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


Key CISG provisions at issue: Articles 6 ; 39 ; 40 ; 44 ; 74 ; 79 [Also cited: Articles 35 ; 45(1)(b) ]

Classification of issues using UNCITRAL classification code numbers:

6B [Agreements to apply Convention (choice of law of Contracting State = choice of law of Convention): "the mere fact that the parties were not aware of the applicability of the CISG and therefore cited the provisions of national German law" insufficient to rebut this];

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

40B [Seller's knowledge of non-conformity (seller fails to disclose known non-conformity); seller loses right to rely on articles 38 and 39];

44A [Excuse for failure to notify pursuant to art. 39(1)];

74A [General rules for measuring damages: loss suffered as consequence of breach]'

79B [Impediments excusing party from damages]

Descriptors: Choice of law ; Lack of conformity notice, timeliness ; Lack of conformity known to seller ; Excuse ; Damages ; Exemptions or impediments

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Editorial remarks

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Citations to other abstracts, case texts and commentaries




Original language (German): cisg-online.ch website <http://www.cisg-online.ch/cisg/urteile/877.pdf>

Translation (English): Text presented below


English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 10 Art. 40 para. 4

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Case text (English translation)

Translation by Joan Felice Hofmann [*]
Institut für ausländisches und internationales Privat-und
Wirtschaftsrecht, Ruprecht-Karls-Universität Heidelberg

Appellate Court (Oberlandesgricht) Zweibrücken

2 February 2004 [7 U 4/03] [**]


The Plaintiff is a trading company under the local law in Iran that is domiciled in Iran. It seeks partial repayment in the amount of Deutsche Mark [DM] 513,300 of the price that it had paid for a used milling equipment bought from the Defendant [Seller] because, instead of the agreed upon equipment of the German producer B...-M..., the [Seller] delivered goods of inferior quality of Turkish and Russian origin.

Alternatively, the Plaintiff seeks payment of DM 500,000 matching with the restitution of the rejected goods. The Frankenthal Landgericht [District Court] dismissed the claim in its judgment of 14 September 2002 that is appealed against. [The District Court held that there was insufficient evidence to conclude that the present Plaintiff is the party that contracted with the [Seller]. There was also an insufficient demonstration by the [Seller] to conclude on the type of equipment that was due.

With respect to the latter, the [Seller] cannot rely on the written documents produced by it because these undisputedly served for the purpose of obtaining the import license and because they were outdated at the time of delivery. The Plaintiff upholds its demand on appeal. [For purposes of this presentation, the Plaintiff will hereafter be referred to as Buyer] The parties are still in dispute about other aspects of the judgment appealed against.

The [Seller], domiciled in N. (Germany), trades, inter alia, in machines for mills. [Seller] has done business since 1994 with the Company S... T... A... S... K... of Iran. That company showed interest in purchasing used milling equipment. A so-called "pro forma invoice" of 11 October 1994 was given to the potential buyer. The "pro forma invoice" served for presentation at the bank and to the Iranian public authorities in order to prepare the import into the Iran [...]. On 1 November 1996, the [Seller] became aware that the letter of credit was granted which is necessary for the import into Iran. Afterward, the contracting parties started particular contract negotiations about the specific content of the contract; the parties made different submissions on the contract negotiations. Salesman Y..., domiciled in Iran and his counterparty, Witness K..., acting as a negotiator in Germany, conducted the negotiations.

By the end of 1997, the equipment was delivered in several partial shipments. The [Seller] provided a certificate of origin of the CCI Palatinate dated 11 September 1997 [...]. The certificate of origin was consistent with the invoice, however, it merely concerned one partial shipment that is not at issue. The [Seller] also compiled a "packing list" of 11 September 1997 [...] that - apart from the absence of two filters that are at issue in the present proceedings as well as one of twelve mills - is consistent with the invoice. It is undisputed that the contracting party asked for a packing list that was consistent with the invoice since this would be required to render the import possible.

The equipment was carried by truck to the party with whom the [Seller] contracted into the Iran. The equipment was packed in parts in boxes and was partially transported on the bed of a truck covered only with a tarpaulin. After the arrival of the delivery, the contracting party of the [Seller] complained of the size of one of the delivered filters; therefore a reduction of DM 12,500 was agreed. After a transport accident on the first delivery and a repeat order of the [Buyer] the [Seller] delivered certain additional equipment. In June 1999, the contracting parties met for a concluding discussion in N... As a result, the Iranian purchaser effected a final payment on agreement of the final settlement of all corresponding rights.

The [Buyer] submits that due to a needed construction of a new building, the components were placed in storage in their original packing, and that the wrong delivery could not be revealed by consulting an expert until 2000 when the equipment was installed. The [Buyer] alleges that [Seller] willfully deceived and consequently is obligated to pay back a part of the purchase price in the amount of the reduced value that amounts only to 1/5 of the corresponding amount of the purchase price.




1. The appeal is admissible. [Buyer submitted claims regarding the serviceability of the control system and the origin of mills, the plan sifters and the filters. The court discussed these claims separately.]

[Buyer's claim regarding the serviceability of the control system]

The claim [regarding the serviceability of the control system] is dismissed on the merits because the [Buyer] did not timely give notice of the lack of conformity (Article 39 CISG) nor, with respect to this claim of the [Buyer], can [Buyer] rely upon (Article 40 CISG). [...]

2. [...]

3. The [Buyer]'s rights arising out the sales contract are governed by the United Nations Conventions on Contracts for International Sale of Goods according to Article 1(1)(b) of the Convention. In accordance with the opinion of the District Court, it generally can be assumed that German law applies pursuant to Articles 27, 28 EGBGB [*]. On that basis, the parties acted during the proceedings, with the [Buyer] explicitly referring thereto (cf. Palandt, BGB [*] 63th ed., Art. 27 EGBGB para. 7). However, in any event, the law of the seller's place of business applies (cf. Palandt, see above, Art. 28 EGBGB para.8).

Therefore German law applies; that, however, refers back to the CISG, which is a part thereof and applies as the lex specialis (cf. BGH [*] NJW [*] 1999, pp.1259, 1260). The parties neither agreed to exclude the application of the CISG pursuant to Article 6 CISG nor replaced it by the application of the BGB [*] or the HGB [*]; the mere fact that the parties were not aware of the applicability of the CISG and therefore cited the provisions of national German Law - as the [Buyer] did - is not to be considered as sufficient (cf. BGH NJW 1997 pp. 3309, 3310; NJW, 1986 pp. 1429, 1430).

4. On that basis, however the [Buyer]īs claim is unfounded as far as it is based on the submission that the delivered control system "Libatronik" did not go together with the delivered "B... Bagging Caroussel" and could not be used for it. [...]. In that respect, the [Buyer] cannot rely on the non-conformity according to Article 39 CISG because [Buyer] did not give notice of the alleged lack of conformity within the time required. The [Buyer] did not give notice of the lack of conformity of the delivery by the end of 1997 until after the equipment was installed in March 2000; [Buyer] did not make more detailed submissions as concerns the "pre-trial correspondence" that was mentioned in its written submissions.

The [Buyer]'s claim is also not admissible by virtue of Article 40 CISG on the basis that the [Seller] acted in bad faith. The alleged serviceability of the control system is unrelated to the [Buyer]'s further allegation that instead of the agreed upon German quality goods, goods of inferior quality of Turkish and Russian origin were delivered. More than a simple lack of conformity cannot be educed from the [Buyer]'s short submissions. Also, on the basis of these submissions, there are no indications that the [Seller] acted in bad faith with regard to the foregoing within the meaning of Article 40 CISG.

The [Buyer]'s claim is also not admissible by virtue of Article 44 CISG. [Buyer] has no reasonable excuse for its failure to give the required notice.

According to that provision, a buyer's conduct, although not in itself correct and in accordance with the rules, is excusable if in the circumstances of the specific case it deserves to be accorded a degree of understanding and leniency (Schlechtriem, CISG, 3rd ed., Art. 44 para. 5) These prerequisites do not seem to be fulfilled. The mere fact, now submitted by the [Buyer], that the equipment was stored over years and that therefore the installment was delayed seems not to be sufficient for the purposes of Article 44 CISG. This extraordinary circumstance cannot be taken into account because, according to the [Buyer]'s submissions, it was not mentioned during the negotiations of the parties and therefore did not become the basis of the mutual contractual relationship.

As mentioned above, the [Buyer]'s claim regarding the serviceability of the control system is dismissed by partial judgment.

[Buyer's claim regarding the origin of the mills, the plan sifters and the filters]

6. Concerning the other goods that were complained about, the [Buyer] is entitled to damages according to Articles. 74, 45(1)( b), 35 CISG. Those goods that were delivered by the [Seller] were not in conformity with the contract because the equipment was not equipment of the producer M... and B... but products of Russian and Turkish manufacturing.

The [Seller] did not contest that the delivery was of Russian (milling equipment) resp. Turkish origin (other equipment). In this stage of the proceedings, in particular on the basis of the result of the court's taking of evidence, it is certain that the parties had agreed upon equipment of the manufacturer named by the [Buyer] and that such equipment was due.



On the basis of the parties' further submissions and the taking of evidence, it is certain that the [Buyer]'s original submissions are correct and that the parties had agreed on the delivery of equipment as denominated by the [Buyer]. This was not denied by the [Seller], in terms of the so-called plan sifter [...]. Up to now, the [Seller] failed to show concretely what kind of other agreement would have been made - although the court had advised [Seller] to do so [...]. By merely pointing (correctly) to the fact that even in the pro forma invoice, the filter was not identified with "B..." but with H-M..., the [Seller] cannot rebut the [Buyer]'s submissions, according to which such a classification stands for a B...-product. Nor does the [Seller]'s submission reveal that the three plan sifters that were delivered in addition after a transport accident constituted a modification of the subject of the contract.

Concerning the twelve double roll mills [...], the [Seller] insisted on the submission of an ulterior content of the contract by submitting particulars. However, [Seller] failed to show the exact different origin of the machines the parties should have agreed and in which manner they did so. But it only relied on that the [Seller] would have noticed the de facto delivered goods on the occasion of loading and would have endorsed them as in conformity with the contract; the [Seller] especially refers to the fact that a single first roll mill was sent on probation and was also not rejected.

On the basis of the result of the hearing of evidence and further circumstances, the court considers relevant that the submitted statement is rebutted as being incorrect. The [Buyer] may rely on the [Seller]'s letter of 25 February 1997; it is noted that the model of the twelve "M... double roll mills was changed from "GN" with sliding contact bearing into "HN" with roller bearing; it is added explicitly that the other conditions remain unchanged.

In accordance with that, all witnesses heard by the court have reinforced that the delivery of M...-rolls was exclusively under discussion - also as far as members of staff that were appointed as witnesses by the [Seller]; none of the witnesses described arrangements according to which Turkish or Russian components were due. The [Seller]'s authorized representative, C... H..., stated that M...-Products were sold. The [Seller]'s employee, D, reinforced that he showed the roller mills to the [Buyer]'s managing director S... Z... M... He could not imagine that his employer would deliver Turkish or Russian products. The retired master craftsman of installment and former employee of the firm M..., the witness S.... stated the same, as did the witness S...; upon the managing director's inquiry, he accompanied him in an early stage of the negotiations because the managing director set value to products of that make. Accordingly, he could advise Mr. Z... to buy from the [Seller] after mills of that model of excellent quality were shown in a former presentation at the [Seller]'s place.



Subsequent to the taking of evidence, the [Seller] argued that the delivered roller mills with high-power roller bearing were never produced by the firm M... that it had ceased production already in 1976, and that this was well known to the [Buyer]'s managing director. However, there are many imitations of roller mills in the market and the brand was due to the cessation of production no longer trademarked. Also, this pleading cannot constitute the subject of the contract such as submitted by the [Seller].

On the basis of the above mentioned result of the taking of evidence, the court acts on the assumption that the parties understood by the M...-mills as desired by the [Buyer], a German product of the so-denominated former manufacturer and by no means a Russian product. The cessation of production already in 1976 would not oppose such conclusion because it is undisputed that the [Seller] deals with used and partially ten-year old machines that are apparently useful for the purposes of its customers anyhow, after the machines are overhauled and refurbished by it. The [Seller] itself did not submit that it was disclosed to the [Buyer] that the equipment was available only as a foreign imitation. It cannot be discerned from its submission that this is an evident circumstance among experts, that it can be expected to be known also by a customer such as the [Buyer]; the mere allegation of such knowledge cannot substitute such a submission, above all, this would contravene other circumstances. By the letter of 30 January 1997, henceforth submitted by the [Buyer] [...], the [Seller] expressed that the "remaining machines" (thus the roller mills were meant as well) were currently disassembled abroad and that due to the "change of order from GN to HN" the delivery would be delayed; neither the [Buyer]'s wishes of special equipment provides for an informative basis for an modification of the entire subject of the contract nor does the aforementioned confirmation of the modification of 25 February 1997 [...].


The modification of the subject of the contract does not arise out of the fact that the delivered millings were viewed by the [Seller] before they were loaded and that in particular a single item of equipment was delivered before the remaining delivery. The [Seller] itself did not submit that the modification of the origin of the equipment was disclosed to the [Buyer]. Furthermore, its managing director stated during the hearing of 10 November 2003 that - in order to avoid difficulties with the import licenses - the type plates were usually demounted before delivery. Accordingly, the [Seller] did not assert that this first delivery was expected to be a kind of delivery on probation; whereby the [Buyer] would agree to this modified subject of contract. The [Seller] did not submit that the parties agreed on an inspection and evaluation of the first delivery for the purposes of Article 35(2)(c) CISG. From the [Buyer]'s point of view, the course of delivery was a rather coincidental circumstance of the liquidation that did not point to a modification of the agreement. This impression was affirmed by the [Seller]'s letter of 30 January 1997 [...], according to which the delivery would be delayed due to the modification of the order and the consequently necessary disassembling of machines abroad.

Neither is the specialized knowledge of the [Seller]'s managing director, S... Z... of further assistance in order to substantiate his approval to the origin of the delivered mills. The witness S... indeed has shown his conviction that an expert could easily distinguish an M...-product from the items of equipment that were delivered by the [Seller] and that the [Buyer]'s managing director Z... was such an expert. However, further details of the witness's descriptions show that the various items of equipment differ in subtleties that are obvious for the witness who was familiar intensively over years with the M...-mills. These subtleties could be revealed only when the equipment is actually used and not by simply inspecting the equipment. The witness told that one of the delivered machines had a different regulator that caused problems when the equipment was in use. He pointed to certain construction details that would exclude that the equipment was a firm M... product when he was shown pictures that have been submitted with the statement of claim. He reported as well that he conducted maintenance work on the delivered machines that was much more difficult and complex than maintenance work on real M.... equipment. It is the court's opinion that this shows that the allegation that the machines are distinguishable is based upon the witness' special skills as a long-lasting M...-employee. Such skills cannot simply be taken for granted. This is true even for an expert operator of mills like the [Buyer]'s managing director. [...] Consequently, it is not sufficient in order to establish a declaration of the other party that the delivered machines are accepted also as a Russian M...-imitation when they merely were presented.

[7.] Concerning the mills, the [Seller] cannot invoke that the failure to perform his contractual obligations was due to an impediment for which relief can be accorded pursuant to Article 79 CISG. The exemption does not arise out of the [Seller]'s submissions (mentioned above) on the availability of M....-mills with roller bearings. It is undisputed that the machines with which the [Seller] deals are usually overhauled and refurbished by it. Consequently, it is conceivable that [Seller] can deliver machines with such equipment components that are not offered by the original producer. These submissions are not consistent with the above-mentioned contractual documents according to which the [Seller] agreed to deliver such mills as asked for by the [Buyer]. At any rate, the [Seller] bears the burden of proof for the impediment it is alleging (Schlechtriem loc. cit. Art. 79 para.51) and the [Seller] did not offer such evidence for its disputed statement.

[8.] Concerning the mills, the plan sifters and the filters, the buyer did not lose its right pursuant to Article 39 CISG. The [Seller] is not entitled to rely on Article 39 CISG according to Article 40 CISG because the lack of conformity of the delivered goods relates to facts [Seller] knew or could not have been unaware and which it did not disclose to the buyer.

It is obvious that the prerequisites of Article 40 CISG are fulfilled as far as the plan sifters and the filters are concerned. The parties had agreed upon the delivery of components of the sort "B..."; the [Seller] did not bring forward any facts that could cast doubts on either the existence or the [Seller]'s knowledge of such an agreement. Henceforth, it is not conceivable that the [Seller] violated its contractual obligations other than willfully and contrary to its duty to disclose. A simple confusion is not to be considered due to the manifestness of the lack of conformity. [...] The [Seller] did not disclose the lack of conformity by delivering the components to the [Buyer] after they have been loaded in presence of the [Buyer]'s representatives. Concerning these components, the [Buyer] itself did not argue that the deviation was noticeable. According to the [Seller]'s defense, the court assumes that the delivered equipment did not have type plates.

Concerning the twelve mills, the court considers the prerequisites of Article 40 CISG as fulfilled as well. Here as well, the possibility that the lack of conformity is based upon a simple confusion is not to be considered. The [Seller] argues that it acted on the assumption that it was allowed to deliver Russian mills. The prerequisites according to Article 40 CISG are also fulfilled if the seller "ignores clues" of lack of conformity (Schlechtriem loc.cit. Article 40 para.4).

A misdemeanor of the [Seller] in that sense arises already out of the conclusions on the content of the contractual agreements. The [Seller] noticed that the [Buyer] set value on the delivery of mills of the sort M... According to the content of the letter of 25 February 1997 by which the agreed upon modification of the subject of the contract was confirmed, [Seller] accommodated this request. [Seller] never talked expressly about the impediment, that it is now alleging, and the consequently different determination of the subject matter of the contract neither to the [Buyer] nor to one of the acting agents, Y... and K... If [Seller] felt entitled to deliver Russian mills anyhow, it defied concerns that it could not and should not have ignored.

The [Seller] did also not disclose the lack of conformity of the delivered mills. The presence of the [Buyer]'s agents at the loading and the subsequent delivery is not such a disclosure. Again, we may refer to the remarks concerning the content of the contract according to which the deviation of the delivery was not noticeable offhand. [Seller] may have bargained for the possibility that the origins of the mills would be noted in the context of the delivery; [Seller] may have assumed that difficulties with the processing of the contract arising out thereof would be solved in one or the other way. However [Seller] put up with that the deviation would not be noticed by the [Buyer] which is shown by omitting any express hint.

[9.] Also the agreements of the parties on the final payments made by 1999 do not unsettle the [Buyer]'s claim. The [Seller] does not argue that the, now disputed, origin of the machines was a subject of the former negotiations. It cannot be assumed the parties intended to cut off such rights that were even not known and that are for instance based upon a behavior as described by Article 40 CISG. [...]


[10.] Concerning the mills, the plan sifters and the filters, the [Buyer] is entitled to damages for breach of contract by the [Seller] of a sum equal to its losses. The [Buyer] consequently is authorized to claim damages equal to the difference in the value of the goods as contracted and the value of the defective goods received (cf. Schlechtriem loc. cit. Art.74 para.15). The [Buyer] did so.

[A decision on the exact amount of the claim will be made after an expert is heard.]



[11.] [....]

Burger Dr. Neumüller
(Presiding Judge)


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

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

Translator's note on other abbreviations. BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; CCI = Chamber of Commerce and Industry; EGBGB = Einführungsgesetz zum BGB [Introduction Code to the German Civil Code]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [German law journal].

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