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CISG CASE PRESENTATION

Germany 21 April 2004 Appellate Court Düsseldorf [15 U 88/03] (Mobile car phones case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040421g3.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20040421 (21 April 2004)

JURISDICTION: Germany

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

JUDGE(S): Schüßler, Peters, Hesper

CASE NUMBER/DOCKET NUMBER: 15 U 88/03

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

CASE HISTORY: 1st instance Landgericht Düsseldorf (32 O 157/01) 18 February 2003 [reversed]

SELLER'S COUNTRY: Germany (defendant)

BUYER'S COUNTRY: Israel (plaintiff)

GOODS INVOLVED: Mobile car phones


Case abstract

GERMANY: OLG Düsseldorf [I-15U 88/03], 21 April 2004

Abstract [*] prepared by Andrea Vincze [**]

Background
The Prior Ruling
The Appeal
Appellate Ruling
-    Applicable law
-    Avoidance for fundamental breach
-    Applicability of Seller's General Conditions
-    The language issue and related issues

BACKGROUND

Plaintiff [Buyer] is an Israeli firm; Defendant [Seller] is a German firm. Buyer requested the Court to order Seller to repay the price of mobile phones contracted for between the parties. Buyer had avoided the contract because of late delivery.

THE PRIOR RULING

The Landgericht [LG or Court of First Instance] rejected the original claim on the ground that Buyer was not entitled to request repayment of the price under Articles 326 I and 346 of the Bürgerliches Gesetzbuch [BGB or German Civil Code] because it was questionable whether the delivery was late. It was not evident whether, pursuant to the contract, delivery should have taken place by 3 July 2000 at the latest because the acceptance of the offer contained only the term "as soon as possible". Because Seller's employee in his e-mail of 30 June 2000 had promised that delivery would take place "next Monday", delivery became due then. But this does not release Buyer from the obligation to set an additional period (Nachfrist) including the reservation to reject performance. The latter would be enforceable under Seller's General Conditions of Sale (Art. III 1) application of which was accepted by the parties. Rejection of performance because of losing interest in performance does not come into question pursuant to Art. 326(2) BGB because Buyer's statements in the preliminary contract were not included into the contract and therefore Seller was expressly forced to be late with performing the contract. Not even the requirements of Art. 361 and 376 were met because there is no evidence of a fixed delivery date in the written documents. Since Buyer communicated its withdrawal too early and rejected taking delivery of the goods, Seller became entitled to mitigate its loss by the means of a cover sale.

THE APPEAL

Buyer appealed against this decision but reduced the amount claimed to Euro 5,000.

Buyer stated that it is of special importance that in the e-mail of 30 June 2000 delivery was expressly promised to take place "next Monday". Furthermore, the LG failed to consider that Seller had admitted in its e-mail of 20 July 2000 that it mistakenly requested damages in the amount of Deutsche Mark [DM] 15,000 and also stated that, as a sign of its good faith, it was also ready to comply with the price difference of DM 1,860. The latter statement qualifies as an acknowledgement. Therefore, the appeal is founded at least in that amount. The LG also failed to consider that Seller's presentation of the facts of the case, to the effect that a minimal price of DM 50 per piece was to be agreed upon, is disputed between the parties. Seller stated that it had informed Buyer only in its e-mail of 7 July 2000 that the goods were to be sold at a lower price, while it requested repayment of the whole advance payment already in the e-mail of 5 July 2000. Seller failed to provide evidence on whether such minimal price was agreed upon. In addition, Seller's whole statement of facts was late because the Answer to the Claim dated 21 March 2002 was received by the Court only on 22 August 2002. The LG failed to consider the objection to the latter late communication, did not reject Seller's claim in spite of the fact that it did not submit the Answer to the Claim within the time limit and the Court also failed to order in integrum restitutio on the latter grounds.

Seller relies upon the original decision and states that its e-mail of 20 July 2000 included neither a promise to comply with the debt nor acknowledgement of debt.

APPELLATE RULING

The Oberlandesgericht [OLG or Appellate Court] found the appeal admissible and well-founded.

Buyer is entitled to claim repayment of the advance payment in the amount of Euro 5,000 pursuant to Art. 81(2) CISG since it lawfully declared avoidance of the contract in its e-mail of 5 July 2000 and, in case of avoidance, the party that had previously partially performed the contract, the Buyer in the instant case, is entitled to claim return of what has already been performed.

The OLG reverses the decision of the LG, holding that Buyer's claim of repayment is not governed by the German Civil Code [BGB] because the CISG is the primary applicable law.

- Applicable law

The CISG would not be applicable based on Art. 1(1)(a) because Israel became a Contracting State on 1 February 2003 which was after the conclusion of the contract. Instead, applicability of the CISG is derived from Art. 1(1)(b) because the rules of private international law lead to the application of German law and Germany is a Contracting State to the Convention.

It is not disputed by the parties that they had agreed upon application of German law and since Germany did not make any reservation under Art. 95 CISG, Art. 1(1)(b) is applicable. Application of the latter provision would be excluded only when German private international law provisions would cause disadvantage to a State that had made reservations. When ratifying the CISG, Israel did not make any reservation. As Germany abrogated the ULIS at the time of ratification pursuant to Art. 99(2) CISG, according to German law only the CISG is applicable in the instant case.

- Avoidance for fundamental breach

The OLG ruled that avoidance of the contract was lawful by means of e-mail [the original text of the decision contains the expression "fax" which seems to be contrary to what has been stated in other parts of the judgment] on 5 July 2000. In that Buyer avoided the contract because of late delivery (using the expression "cancel") and rightly communicated its avoidance pursuant to Art. 49(1)(a) CISG. The avoidance was lawful and effective because Seller had breached one of its contractual obligations and that breach was fundamental in the light of Art. 25 CISG.

The OLG explains that under Art. 33(a) CISG the goods must be delivered by the date included in the contract, Art. 33(b) refers to a certain delivery period and Art. 33(c) to a certain date after conclusion of the contract. Breach of the latter obligation qualifies as fundamental in the light of Art. 25 CISG if the parties had agreed upon a fixed delivery date and if both parties are clearly aware of the fact that delivery should take place at that certain date. Also with regard to a longer delivery period, non-compliance with the delivery date can qualify as fundamental if it is of special importance for the business and even without expressly agreeing upon it. That was the case here, too.

It was also questioned whether the parties had expressly agreed upon a delivery by 3 July 2000, as Buyer stated, and whether Seller had known that timely delivery was necessary because of the fact that Buyer had already sold the goods to its own customers.

   -    In its acceptance of the offer, Seller agreed to deliver the mobile phones not only "as soon as possible", which had already been agreed upon by the parties in the previous telephone conversations. Seller further agreed in the acceptance of the offer to deliver and hand over the goods immediately after Buyer's payment had arrived. It is not disputed between the parties that, in spite of the latter promise, delivery had to take place not only after the whole amount of the contract price had arrived but already when 20 percent of the contract price would be received. The latter 20 percent was received by Seller on 29 June 2000. Therefore, under these circumstances, Seller was aware that Buyer needed immediate delivery. The fact that Seller was indeed aware of the latter is also shown by the behavior of one of its employees, Mr. Goldenstein. He apologized for the delay in his e-mail on 30 June 2000 (using the word "delay") and stated that they had indeed agreed on delivering the goods earlier. He also promised to deliver the goods to Spedition Hellmann next Monday (3 July 2000).
   -    Under these circumstances, a fundamental breach has occurred because, in spite of what had been agreed upon in the acceptance of the offer, Seller failed to deliver the mobile phones to Spedition Hellmann, the company which was to deliver the goods to Buyer, immediately after having received the specified payment. Furthermore, although being already late with performance and with avoidance by Mr. "G" in his e-mail of 30 June 2000 having already taken place, delivery to Spedition Hellmann did not take place prior to the next Monday (3 July 2000) either. Even if there are a few days between the delivery date originally agreed upon and the later substitute date ("next Monday"), non-compliance with the second delivery date led to fundamental breach because Buyer could rightly expect the goods to be delivered as soon as possible.
   -    Even if the promise to deliver the goods immediately after the payment arrived would be regarded as not having special importance in connection with the contract, breach of contract by Seller would be evident and that would entitle Buyer to avoid the contract under Art. 49(1)(b) CISG. Even if the parties had not agreed upon a specific delivery date, Seller was obliged to deliver the goods to Spedition Hellmann because of the above mentioned reasons. Buyer did not fix an additional period under Art. 47 CISG. Since Seller was aware that Buyer needed immediate delivery, yet it was late with performance on 30 June 2000 and promised to deliver on 3 July 2000, it was not necessary for Buyer to fix a Nachfrist because Seller itself had acknowledged late delivery and set a new date for delivery.

- Applicability of Seller's General Conditions

Seller cannot refer to the fact that under Art. III 1 of its General Conditions of Sale, the buyer is not released from the obligation to set a Nachfrist including the reservation to reject performance in cases of failing to comply with delivery dates and dates concerning avoidance of the contract because the delivery date or period needs to be fixed expressly and in writing but in the instant case this requirement was not met. Firstly, because the General Conditions of Sale were not effectively included into the contract and secondly because based on the provisions of Art. 8 CISG even if the General Conditions had been effectively included into the contract, different regulations on the preconditions of fixing Nachfrist with the reservation to reject performance would be surprising in the light of Art. 3 AGBG [German Unfair Contract Terms Act].

To the question whether the General Conditions were effectively included into the contract, the OLG bases its ruling on the CISG instead of the AGBG.

It stood beyond doubt that inclusion of the General Conditions of Sale into the contract pursuant to the provision of Art. 14 CISG shall be judged by taking Art. 8 CISG into account. Under the latter, General Conditions of Sale can become part of the contract if the parties expressly agree upon their application and exact contents.

Such an agreement was not made in the instant case. Therefore, inclusion of the General Conditions of Sale comes into question under Art. 19 CISG as well if acceptance of the offer with modifications and additions is not objected to by the other party and such counter-offer is accepted by the other party. Buyer communicated its offer to Seller on 28 June 2000 which was accepted by Seller on the same day. In its acceptance of the offer Seller made reference to its General Conditions of Sale which, therefore, qualifies as a counter-offer pursuant to Art. 19 CISG. It can be alleged that this counter-offer was accepted by Buyer due to the fact that Buyer subsequently urged delivery of the goods.

Nevertheless, the Seller's General Conditions of Sale were not effectively included into the contract because reference to the application of the General Conditions and its text which was sent to Buyer were in the German language whereas the language of the contract was English.

- The language issue and related issues

The OLG argued that in practice there is an acknowledged criterion that in order to be applicable, the other party should be aware of the contents of General Conditions of Sale. The OLG referred to a decision of Oberlandesgericht Düsseldorf (6U 86/00 of 15 February 2001) which dealt with the latter issue.

The OLG concluded that precondition of including General Conditions of Sale into a contract is that the recipient of the offer be aware of the intent of the offering party that the latter wished to include the General Conditions into the contract. Therefore, the party wishing to apply the General Conditions must send the text of the General Conditions or arrange for any other possibility to read them. It is against the principle of good faith in international trade and the general duty to cooperate and inform the other party required to seek information concerning the General Conditions of Sale which were not sent to it if it was to bear risks and disadvantages of such unknown General Conditions.

Therefore these General Conditions of Sale were not effectively included into the contract in spite of the fact that the text was actually sent to Buyer but it could not reasonably find out the exact contents of it.

Buyer, however, failed to prove why it did not have the opportunity to become aware of the contents of the General Conditions of Sale. It only argued that the text was not readable but since the fact that all communications between the parties were via e-mail is not disputed by the parties, the Court did not see why the General Conditions dispatched in e-mail could not be readable. To the contrary, bad readability of the General Conditions sent to the LG was due to the fact that Buyer sent it by fax to the legal representative. Yet, even if the Buyer would not have been able to read the General Conditions, effective inclusion would not be excluded. This case is not the same as where the General Conditions were not at all communicated to the other party. Since the General Conditions were sent to Buyer, the latter was aware that these should be applicable to the contract. If Buyer was not able to read the General Conditions in parts, under the principles of good faith, cooperation and the duty to inform the other party require that Seller be notified about the existence of General Conditions of Sale, whereupon Seller could have been sent a better copy, which could have been done also immediately by e-mail.

Inclusion of the General Conditions of Sale is also contested by the fact that reference to its application was printed with small letters in German language on the acceptance of the offer and text of the General Conditions were also sent in German, whereas the language of the contract was English.

The question about which language should have been used in order to make the reference about the application of the General Conditions effective and in which language the General Conditions should have been sent cannot be answered beyond any doubt. The OLG refers to one opinion according to which General Conditions which are not in the language of contracting or the language of the other party do not become parts of the contract, but the Court also referred to another opinion according to which it is sufficient to use any globally known language (e.g., English) when referring to the application of the German-language General Conditions of Sale. The Court also refers to the requirement that the General Conditions of Sale must be in a language understood by the other party and the offer should clearly refer to its application.

In the instant case, the language of contract was English which is evident from the communication via e-mail and also from the acceptance of the offer, which has a German title but the agreement about terms of delivery and transportation is in English, yet the requirement to deliver as soon as possible is in German language. The General Conditions would be included if the employee dealing with the contract could have spoken German. Since the reason for requiring explicit reference to the application of the General Conditions and sending the text to the other party is the protection of that party from unknown conditions, the latter cannot refer to the fact that the General Conditions were in a language other than the language of contracting, if one of its responsible employees speaks that language.

Seller failed to provide evidence on the latter and it cannot be substantiated by circumstances of contracting either. Correspondence with Buyer's responsible employee, Witness "N" was carried out in English. Whether Buyer's responsible staff spoke German is not evident from the letters of 28 July 2000 and 6 August 2000 by Buyer's General Manager, Mr. "R.F." and not even from the letter by Buyer's employee "M.W." dated 15 July 2000 which are all written in English. Buyer did state at the oral hearings that its employee, Mrs. "W." does speak German and that she translated the whole correspondence for General Manager Mr "F.", however, she had become an employee only after the conclusion of the contract.

Since the staff employed at the time of the conclusion of the contract did not speak German and the language of contracting was English, the General Conditions of Sale did not become part of the contract.

Moreover, the OLG concluded that even if the General Conditions had been included into the contract, under Art. III.1, Buyer was not obliged to set a Nachfrist with the reservation to reject performance lacking written agreement on a specific delivery date because such an obligation would have been surprising in the light of Art. 3 AGBG.

Such a surprising clause is present where there is controversy in the course of contracting or if there is a significant deviation from dispositive law. As, in the instant case, delivery "as soon as possible" was agreed upon, and under the circumstances which are to be taken into account pursuant to Art. 8 CISG, Seller could foresee the significance of prompt delivery, such a clause was unusual and surprising because by requiring Buyer to fix a Nachfrist, avoidance of the contract in case of late performance becomes difficult. In addition, this provision includes a significant deviation from the dispositive regulations of the CISG which when supporting application of trade usages in international trade, do not make a reservation to reject performance the precondition of the effective fixing of a Nachfrist.

Buyer's original claim is not discontinued because of Seller's set-off claim in connection with the cover transaction. Since, pursuant to Art. 49(1)(a) CISG, Buyer lawfully avoided the contract based on fundamental breach by the other party, Seller is not entitled to rely on Art. 75 CISG.

It is true that Seller carried out its cover transaction immediately after the avoidance. Nevertheless, Seller is not entitled to claim the difference between the contract price and the price in the cover transaction. Buyer did not commit a breach of contract by declaring the contract avoided. Therefore, Seller is not entitled to claim damages under Arts. 74 and 75 CISG.


FOOTNOTES

* For the purposes of this abstract, the Israeli Plaintiff is referred to as [Buyer]; the German Defendant is referred to as [Seller]. Amounts in European currency are indicated as [Euro], amounts in previous German currency (Deutsche Mark) are referred to as [DM].

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [Civil Code of Germany]; AGBG = Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen [German Unfair Contract Terms Act] ; LG = Landgericht [District Court]; OLG = Oberlandesgericht [Provincial Court of Appeal]

** Dr. Andrea Vincze is a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, in 2002. She is a Ph.D. candidate at the same university, working on her research project on international commercial arbitration and ICSID arbitration. She has also dealt with cross-border and Internet-related copyright issues.

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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 ; 7 ; 8 ; 19 ; 25 ; 33 ; 47 ; 49 ; 81(2) [Also cited: Articles 6 ; 14 ; 74 ; 75 ; 95 ; 99(2) ]

Classification of issues using UNCITRAL classification code numbers:

4A [Issues covered by Convention: inclusion of standard terms and conditions];

7A33 [Application of good faith standards];

8C [Intent: interpretation in light of surrounding circumstances];

19C [Offer and acceptance (acceptance with modifications): modifications that are material];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

33B [Time for delivery: contract (circumstances) provide period of time for delivery];

47A2 ; 47B11 [Buyer's right to fix additional period for performance: basis for avoidance for delay in delivery; Buyer's remedies during peried: seller states (indicates) that he will not comply with notice];

49A [Buyer's right to avoid contract: grounds for avoidance];

81C [Effect of avoidance on obligations: restitution of benefits received]

Descriptors: Scope of Convention ; Good faith ; Intent ; Standard terms and conditions ; Language issues ; Acceptance of offer ; Delivery ; Fundamental breach ; Avoidance ; Nachfrist ; Restitution

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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/915.pdf>; Internationales Handelsrecht (1/2005) 24-29

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

German: Sauthoff, Internationales Handelsrecht (1/2005) 21-24

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Case text (English translation)

Appellate Court (Oberlandesgericht) Düsseldorf

21 April 2004 [15 U 88/03]

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

JUDGMENT

  1. The judgment of the District Court Düsseldorf of 18 February 2003 is reversed. It is changed to:

    "The [Seller] has to pay EUR 2,556.46 (= 5,000 DM) plus 5 % interest above the base interest rate since 12 October 2000."

  2. Each party has to bear its own costs in respect to the proceedings before the Court of First Instance.

  3. The [Seller] has to bear the costs of the appellate proceedings.

  4. The value of the appeal is changed to EUR 5,112.92 (claim 2,556.46; set-off 2,556.46).

FACTS

The Plaintiff [Buyer] requests repayment of the remaining deposit that was paid to the Defendant [Seller] for a delivery of car phones. The [Buyer] declared avoidance of the contract because of late delivery.

Reference is made to the judgment of the Court of First Instance.

JUDGMENT OF THE COURT OF FIRST INSTANCE

In respect to the facts:

      The Court of First Instance dismissed the claim. It held that the [Buyer] would not be entitled to claim repayment of the deposit according to 326 (1), 346 BGB a.F. [*] as the delay could already be doubted. It would not be obvious that it had been agreed that the delivery should be effected without undue delay, until 30 July 2000 at the latest, as the order confirmation only contained the term "prompt".

Insofar as an employee of the [Seller] sent an e-mail on 30 June 2000 to the [Buyer] in which the [Seller] promised delivery "next Monday", the delivery could be regarded as being due. However, this would not exempt the [Buyer] from setting a period of grace and threatening to avoid the contract.

Pursuant to Section III.1 of the General Terms and Conditions of the [Seller], a party that intends to declare the contract avoided, had to set an additional period of time under penalty of a declaration of avoidance [Ablehungsandrohung].

A declaration of avoidance due to a loss of interest according to 326 (2) BGB a.F. would not be possible due to the fact that the declaration which might have been made by the [Buyer] prior to the contract had not been included in the contract and thus an explicit setting of a period of grace would have been necessary. The requirements of 361 BGB and 376 HGB [*] had additionally not been met as a fixed time of delivery could not be derived from the relevant documents. As the [Buyer] had declared the avoidance of the contract too early and as it had refused to accept the delivered goods, the [Seller] would have been entitled to mitigate its loss by effecting a cover sale.

The [Buyer] appealed in due time and form. It requests repayment only in the amount of 5,000 Euro.

Position of the [Buyer]

The [Buyer] emphasizes the District Court's advice according to which, it was particularly relevant that, by e-mail of 30 June 2000, delivery was expressly promised for "next Monday". Furthermore, the [Buyer] alleges that the [Seller] had admitted (e-mail of 20 July 2000) that it had wrongfully announced to reimburse DM 15,000 and declared that it would be willing to pay DM 1,860 as a sign of good will. This constituted an acknowledgement. Hence, the appeal would at least be justified in this respect. The [Buyer] also alleges that:

   -    The District Court had disregarded the fact that [Buyer] had objected to the [Seller]'s submissions that it had incurred losses in the amount of DM 50 per unit;
 
   -    According to its own submission, the [Seller] had not informed the [Buyer] until 7 July 2000 by e-mail that the goods had been sold for a lower price per unit, whereas the [Buyer] had already demanded repayment in full in its e-mail of 5 July 2000.
 
   -    The [Seller] had failed to prove that it had actually suffered the alleged losses. Furthermore, the submissions of the [Seller] had been belated, as the statement of defense of 21 March 2002 had not been sent to the Court of First Instance until 22 August 2002. The Court of First Instance had wrongfully neglected [Buyer]'s submission that the statement of defense had been belated and had failed to answer [Buyer]'s request to dismiss the request of the [Seller] for restitutio in integrum.

Position of the [Seller]

The [Seller] refers to the judgment of the Court of First Instance. It alleges that the e-mail of 20 July 2000 would neither constitute a promise nor the acknowledgement of a debt. In addition, this submission would be belated as the [Buyer] had referred to this e-mail for the first time in the aftermath of the oral hearings on 16 January 2003. A firm deal would not have been present.

REASONING

The [Buyer]'s appeal is admissible and justified.

1. The [Seller] has to restitute the deposit in the amount the [Buyer] is claiming on appeal, Euro 5,000 pursuant to Article 81(2) CISG because the [Buyer] effectively declared the contract avoided by its e-mail of 5 July 2000 and due to the fact that a party that has partially performed its contractual duties -- such as the payment of the deposit in the present case -- is entitled to demand restitution in case of a declaration of avoidance.

     a) Contrary to the District Court's opinion, the [Buyer]'s right to demand restitution cannot be assessed according to German civil law due to the fact that the prevailing provisions of the CISG apply to contracts for the sale of goods between parties that have their places of business in different countries.

The CISG is not applicable according to Article 1(1)(a) CISG because Israel became Contracting State by 1 February 2003 and therefore after the conclusion of the contract. However, the CISG applies according to Article 1(1)(b) CISG because the rules of private international law lead to the application of German law and therefore to the law of a Contracting State (cf. Staudinger / Magnus, CISG, <1999>, Article 1 margin number 101).

It is undisputed that the parties have agreed on the application of German law. Therefore German law applies according to Article 27 para.1 EGBGB [*]. Although Germany declared a reservation according to CISG Article 95 CISG on Article 1(1)(b) CISG, this does not lead to the inapplicability of the CISG. Article 1(1)(b) CISG only cannot be applied if the (German) code on the conflict of laws leads to the disadvantage of a State that has declared an Article 95 reservation (Staudinger / Magnus, loc. cit., Article 1 margin number 111). At the time of the conclusion of the contract, Israel had not ratified the CISG under reservation. Since, pursuant to Article 99(2) CISG, Germany, when ratifying the CISG, denounced the Hague Sales Convention which had also been ratified by Israel, the CISG applies according to German law.

     b) As a consequence of its declaration of avoidance, the [Buyer] is entitled to demand restitution for the payment of the deposit pursuant to Article 81(2) CISG.

The objections raised by the [Seller] are precluded as the statement of defense has been sent belated. The period of time for the submission of a statement of defense does not constitute a deadline which would allow for a restitutio in integrum. Therefore it has not been necessary to answer the request of the [Buyer]. It is irrelevant in this respect whether the Court of First Instance could have rejected this submission as belated according to 296 (1) ZPO [*]. The admission of belated submissions - which has been effected tacitly by the Court of First Instance - can only be challenged on the basis of 296 (3) ZPO, the requirements of which have not been met in the present case, as the admission serves for the establishment of the truth even if it led to a delay of the proceedings (Zöller / Greger, ZPO, 24th edition 2003, 296 margin number 335 with further references). Nevertheless the objections of the [Seller] are finally not justified.

The [Buyer] effectively declared the contract avoided by its fax of 5 July 2000. The [Buyer] terminated the contract because of the late delivery and thereby declared the avoidance in the sense of Article 49(1) CISG. The [Buyer] had the right to declare the contract avoided because the [Seller] failed to perform its obligation under the contract and because this breach of contract amounted to a fundamental breach pursuant to Article 25 CISG.

          aa) According to Article 33(a) CISG, the seller must deliver the goods on the date fixed by the contract or, according to Article 33(b) CISG within a period of time determinable from the contract or, according to Article 33(c) CISG, within a reasonable time after the conclusion of the contract. The breach of such a duty is fundamental pursuant to Article 25 CISG if the parties have agreed that delivery shall be at a fixed date and both parties obviously suppose that the existence of the contract imperatively depends on timely delivery. However, if the delivery date is exceeded by far, this can amount to a fundamental breach even in the absence of an explicit agreement if the time of delivery is essential (Schlechtriem, CISG, 3rd ed. 2000, Article 49 margin number 5; Staudinger / Magnus, loc.cit., Article 49 margin numbers. 10 et seq.) . This is the case here.

It is of no relevance whether the parties, as argued by the [Buyer], expressly agreed on delivery by 3 July 2000 and whether the [Seller] knew that timely delivery was required because the [Buyer] had already resold the mobile phones to one of its customers. it arises out of the undisputed circumstances of the conclusion of the contract to which due consideration is to be given when interpreting the statements of the parties according to Article 8 CISG, that the parties have agreed on an immediate delivery of the mobile phones.

The [Seller] not only assured to effect the delivery "promptly" in its order confirmation which is undisputedly in accordance with the agreement made during the preceding telephone conversations. In addition, in the order confirmation, the [Seller] even assured that it would dispatch and release the goods immediately after it had received payment. It is undisputed that the goods should be dispatched, contrary to the wording of the order confirmation not after the receipt of the whole payment, but after the receipt of 20% of the purchase price. The [Seller] already received the partial payment on 29 June 2000. Therefore, it has been obvious to the [Seller] that immediate delivery was of fundamental importance to the [Buyer]. The fact that the [Seller] was aware of that can especially be discerned from the behavior of Mr. Goldstein acting for the [Seller]. It was Mr. Goldstein who apologized for the delay by e-mail of 30 June 2000 and confirmed that they had agreed to have the goods delivered earlier. At the same time he promised to deliver the goods to the forwarding agent Hellman next Monday.

Due to these circumstances, it is a fundamental breach of the contract that the [Seller], contrary to the promise contained in the order confirmation, did not, immediately after the receipt of the deposit on 29 June 2000, deliver the mobile phones to the forwarding agent H... that should transfer the goods to the [Buyer]. It is also a fundamental breach because the delivery was not even made until the following Monday (3 July 2000) as announced by e-mail of 30 June 2000 although the delivery had already been delayed. Even if there were only some days between the original duty to deliver to the forwarding agent H... and the alternatively announced date, the failure to comply with the dates leads to a fundamental breach of the contract because, according to the circumstances, the [Buyer] was entitled to expect the goods "promptly".

Even if the promise to deliver the goods immediately after the receipt of the deposit is not of utmost importance to the contract, the [Seller] would have committed a fundamental breach of contract that entitled the [Buyer] to declare the avoided according to Article 49(1)(b) CISG. Even if the parties did not expressly agree on an exact delivery date, the [Seller] was, according to what was said above, under the obligation to deliver the goods to H... after it had received the deposit. It did not fulfill this obligation. The [Buyer] did indeed not fix an additional period of time according to Article 47 CISG. Since the [Seller] yet knew, due to the mentioned circumstances, that a prompt delivery was essential for the [Buyer] and since it admitted the delay on 30 June 2000 in full awareness of the fact that the [Buyer] did not need to set an additional period of time because the e-mail of 20 June 2000 constitutes a self-reminder of the [Seller] combined with the fixing of a period of time.

          bb) The [Seller] cannot rely on Section III.1 of its General Terms and Conditions according to which the buyer has to fix an additional period of time under penalty of avoidance of the contract unless the date or period was referred to expressly in writing as binding; [Seller] cannot allege that such a written promise has not been present. On the one hand, the General Terms and Conditions have not been effectively included in the contract (1); on the other hand, an interpretation of the agreements of the parties in the sense of Article 8 CISG leads to the conclusion that even if the General Terms and Conditions had been effectively included in the contract, the respective clause would have to be qualified as "surprising" in the sense of 3 AGBG a.F. [*] (2)

               (1) The question whether the General Terms and Conditions have been effectively included in the contract is not governed by the AGBG but by the CISG.

It is undisputed that the inclusion of General Terms and Conditions is governed by Articles 14 et seq. CISG in accordance with the rules of interpretation set forth in Article 8 CISG (Schlechtriem, loc. cit. Intro to Articles 14-24 margin number 9; Piltz NJW [*] 1996, p. 2768, p. 2770). According to these provisions, General Terms and Conditions become part of the contract if the parties expressly agree on the content and that the General Terms and Conditions should govern their contractual relationship.

Such an agreement has not been reached in the case at hand. The General Terms and Conditions could also be included according to Article 19 CISG if the acceptance contains additional or different terms and if this counter-offer is accepted. The [Buyer] made an offer to the [Seller] by its order of 28 June 2000. The [Seller] accepted the same day by its order confirmation. The [Seller] referred to its General Terms and Conditions in its sales confirmation and therefore made a counter-offer pursuant to Article 19 CISG. This, in turn, was accepted by the [Buyer] by pushing for delivery afterwards.

Nevertheless, the General Terms and Conditions have not effectively been included in the contract because the reference that the General Terms and Conditions should be applicable was in German and the transmitted General Terms and Conditions were written in German while the contract language was English.

It is accepted by legal practice that the other party must have the possibility to easily take note of the General Terms and Conditions. The Appellate Court Düsseldorf has appropriately found in its judgment of 15 February 2001 (6 U 86/00):

"It has not yet been decided what requirements have to be met concerning the knowledge of the General Terms and Conditions in respect to the CISG. There is no case law available, neither from the German Supreme Court nor from any Appellate Court. The District Court Kehl mentioned in a claim for interest that General Terms and Conditions are not included in the contract as long as they have not been sent to the other party. But it did not give further reasons. In the end, the decision was based on other considerations (AG [*] Kehl NJW-RR 1996, pp. 565, 566). Piltz is of the opinion that the party that wants to introduce the General Terms and Conditions has to inform the other party about the content of the General Terms and Conditions, making them available in such a way that the other party knows their contents (NJW 1996, pp. 2768, 2777). Schlechtriem (Article 14 CISG margin number 16), Magnus (Staudinger / Magnus, Article 14 CISG margin number 41) and Lüderitz / Fenge (Soergel / Lüderitz / Fenge, Article 14 CISG margin number 10) demand a clear reference that the General Terms and Conditions should be applicable to the contract and that the addressee is in a position to take notice of the content of the Terms and Conditions in a reasonable manner. According to Magnus (loc. cit.), it is sufficient if the party that introduces the terms and conditions refers to them as long as they are available in the location where the contract is concluded and if the parties are present at the time of the conclusion of the contract. However, it is not sufficient if the conditions are only shown but not handed over to the other party. Lindacher (Wolf / Horn / Lindacher, 4th ed., Annex 2 AGBG margin number 76) differentiates whether the addressee really agrees with the general application of the proposed General Terms and Conditions while he does not mention the possibility to take note. The requirements for the inclusion according to the provisions of the Act on General Terms and Conditions (AGBG [*]) are disputed as well. While Piltz speaks of 'apparently higher demands for inclusion ... than according to German law, that is not harmonized' (NJW 1996 2768, 2770); Achilles says that the 'partially stricter requirements in respect to inclusion and announcement of the internal law (of German law; 2 AGBG)' would not be applicable (Achilles, Article 14 CISG margin number 6). Schlechtriem suggests the guideline that 'the results on the basis of Article 8 CISG do not deviate significantly from those required for the inclusion of General Terms and Conditions for non-merchants according to 2 AGBG' (Schlechtriem, Intro to Articles 14-24 margin number 9). Lindacher assumes that 'the rules that are to be established by concretizing general principles of the conclusion of contracts should be and would be coherent with those of the German law on General Terms and Conditions for commerce between two merchants to a large extent ' (Wolf / Lindacher / Horn, Annex 2 AGBG margin number. 76).

"For the purposes of the German Act on General Terms and Conditions (AGBG), the German Supreme Court differentiates between commerce among merchants and commerce among non-merchants. For the purposes of the commerce among merchants, it considers as sufficient if the central statement of the contract refers to the General Terms and Conditions. It considers as irrelevant whether they are attached to the letter or are known in all its particulars to the addressee. Rather, it would be reasonable to demand that a merchant acquires unknown General Terms and Conditions and takes note thereof (cf. BGH [*] NJW [*] 1976, 1886, 1887; BGH NJW 1982, 1749, 1750; Palandt / Heinrichs, 2 AGBG margin number 26). For the purposes of commerce among non-merchants, the party that introduces the General Terms and Conditions, generally has to make the full text of the Terms and Conditions available to the other party in order to enable it to take note of them without much ado. Even an explicit offer to provide them on demand is not sufficient (cf. BGH NJW-RR, 1999, 1246, 1247 on the inclusion of VOB/B, Vergabe- und Vertragsverordnung von Bauleistungen, Regulation on placing and contracts in construction matters; Palandt / Heinrichs, 2 AGBG margin number 9).

"The case-law mentioned above cannot be applied to the CISG off-hand. In order to apply the rules for merchants (Wolf / Lindacher /Horn tend to do so) it may be argued that in this respect the general rules on the conclusion of a contract (offer and acceptance) are applied and not the special provisions of 2 AGBG. If, accordingly, it is sufficient that there is the possibility to demand for the General Terms and Conditions, this could be the case for the purposes of the CISG as well. However, German law on commerce among merchants, that is not unified as opposed to the CISG, makes higher demands on the other party's responsibility and diligence, whereas the CISG neither distinguishes between merchants and non-merchants nor between contracts of either civil or commercial character (Article 1(3) CISG). Therefore, if the rules for merchants would be applied to the international sale of goods, non-merchants would face the higher demands of diligence as well. However, this nevertheless does not justify the application of the case law on the commerce among non-merchants (cf. Schlechtriem, Intro to Articles. 14-24 margin number 9). The case law is stamped by the consumer protective character of 2 AGBG, which the CISG does not have.

"Finally, the issue can only be solved by an autonomous interpretation of the CISG. In consideration of all aspects, the ability of the addressee to request the General Terms and Conditions that were referred to by the other party and thus to take note of the content of them is not sufficient. The main purpose of the CISG is to have provisions that are clear and simple for parties involved in the international sale of goods. This aim is challenged if General Terms and Conditions are accepted generously. A party that introduces its General Terms and Conditions might try to alter the rules of the CISG in its own favor on the basis its own legal system. Furthermore, the CISG does not contain any provisions on the control of the content of General Terms and Conditions but refers to national law (Article 4(a) CISG); cf. Schlechtriem, Intro to Articles 14-24 margin number 1); Schlechtriem / Schwenzer, Article 35 CISG margin number 42). In case of doubt, the law of the seller's place of business applies (Article 28 paras.1 and 2 EGBGB [*]), even if criteria for interpretation are to be taken from the rules laid down in the CISG. However, this leads to fragmentation of the law -- a result that the CISG tries to prevent -- and the other party faces the danger of unmanageable adverse effects on its legal position. This is generally not objectionable in the face of the principle of party autonomy that applies to the CISG as well (Article 6 CISG). However, it is compatible with the aims of the Convention only, if the corresponding agreements of the parties' wills were expressed clearly and unequivocally. This requires that the party that has not introduced the General Terms and Conditions knows the content of them or that it can easily take note of them. This is not the case if he has to acquire the conditions (cf. Senat WM [*] 2000, 2192, 2194 [...]). Therefore, on the basis of an interpretation in favor of the Convention and considering legal certainty and clarity, the ease of international trade and the protection of the other party from hardly unmanageable adverse effects of its legal position, the standard that has to be applied, has to be more strict than the standard that applies to domestic commercial trade. ..."

The court adheres to the view mentioned above. The German Supreme Court has stated in its judgment of 31 October 2001 (VIII ZR 60/01, <www.jurisweb.de>, = NJW 2002, 370) that this view would be accurate. An effective inclusion of General Terms and Conditions requires that the recipient has the possibility to note the will of the offeror that he wants to include his conditions into the contract. Furthermore, for the purposes of uniform sales law, the party that has introduced the General Terms and Conditions can be expected to transmit the text to the other party or make it available otherwise. It would contradict the principle of good faith as well as the general obligation of cooperation and information of the parties to impose an obligation to inquire on the other party and to burden it with the risks and disadvantages of the unknown terms and conditions of the party that has introduced them (BGH [*] see above, page 3 f.)

Upon these considerations, the Terms and Conditions of the [Seller] have not effectively been included in the contract. Although it is undisputed that the [Seller] transmitted the Terms and Condition to the [Buyer], the [Buyer] could not reasonably take note of the content of the General Terms and Conditions.

Even if the Terms and Conditions were not readable in parts it would be possible to take note of them. The [Buyer] has failed to make sufficient submissions in this respect. It is undisputed that the entire correspondence was effected by e-mail. Therefore bad readability is incomprehensible. The partial bad readability of the General Terms and Conditions that were handed over to the District Court might derive from the fact that the Terms and Conditions were sent by fax from the [Buyer] to the [Buyer]'s representative. But, even if the Terms and Conditions were difficult to read, this would not be an obstacle to the effective inclusion of the General Terms and Conditions. This case is not comparable to the case where the General Terms and Conditions have not been made available at all because the [Buyer] knew, due to the transmission, that they should be important for the contract. If the General Terms and Conditions were not readable in parts, he was, in consideration of the principle of good faith and the general duty of cooperation and information of the parties, obliged to point it out to the [Seller] in order to provide an opportunity to transmit a copy that is readable. This would have been possible without further delay by e-mail.

However, the fact that the reference to the application of the General Terms and Conditions was in fine-print and in German and that the General Terms and Conditions have been transmitted in German, while the contract language was English, militates against the effective inclusion.

There are different views on the issue of the proper choice of language for the reference to General Terms and Conditions and the proper language of the General Terms and Conditions themselves. According to one authority, General Terms and Conditions that are not in the contract language or in the native language of the other party (Piltz, Neue Entwicklungen im UN-Kaufrecht, NJW 2003, 2056, 2059) are not included in the contract (AG Kehl, NJW-RR 1996, 565, 566; Piltz, Neue Entwicklungen im UN-Kaufrecht, NJW 1996, 2768, 1771; arguably also OLG Celle, OLGR 1999, 360; on the whole discussion, Schlechtriem, loc.cit., Article 14 margin number 16 fn.102). According to another authority, it is sufficient if the reference to General Terms and Conditions that are in German is in a universal language (English) (OLG [*] Karlsruhe, December 11 February 1993, U 61/92, <www.jurisweb.de> S.1 0 DWiR 1994, 70; OLG Koblenz, December 10 January 1992, 5 U 534/91, <www.jurisweb.de> S.3 = IPRax 1004, 46). Some authors demand that the language of the General Terms and Conditions be comprehensible to the recipient and for the offer to refer in a clear manner to their application (Staudinger / Magnus, loc.cit., Article 14 margin number 41).

Acting on the presumption that the recipient should have the possibility to take note in a reasonable manner, the dominant issue is whether he could understand the reference that the General Terms and Conditions should be applied and, whether he could understand the transmitted General Terms and Conditions. If there are doubts, these have to be resolved to the disadvantages of the party that has introduced the General Terms and Conditions

The contract language was English. This can not only be discerned from the e-mails that were sent, but also from the order confirmation that in fact had a German headline, but the agreements concerning the transport and the carrier were written in English, even though the reference concerning the delivery "schnellstmöglich" [prompt] was in German. The General Terms and Conditions would have been effectively included if the assistants, who executed the contract would have been able to speak German. In consideration of the fact that the reason to request an express hint to and the transmission of the General Terms and Conditions is to protect the contractual partner from unknown conditions, the addressee cannot rely on the fact that a language different from the contract language is used if the responsible assistants are able to speak the language in which the General Terms and Conditions are written.

This has neither been shown by the [Seller] nor can it be inferred from the circumstances of the execution of the contract. The correspondence by e-mail was entirely effected in English by witness N..., who conducted the negotiations on behalf of the [Buyer]. That some responsible assistants of the [Buyer] were able to speak German, can neither be inferred from the letters of 28 June 2000 and 6 August 2000 by the managing director of the [Buyer], Mr. R... F..., nor from the letter of 15 July 2000 of the assistant M... W... of the [Buyer], which have been written in German. The [Buyer]'s submissions, made after the court's instructions on the effective inclusion of General Terms and Conditions, that the employee Mrs. W... indeed speaks German and has translated the correspondence for the managing director Mr. F... is undisputed. However, she joined the company after the conclusion of the contract.

Since the employees who were acting on behalf of the company at the time of the negotiations were not able to speak German and the contract language was English, the General Terms and Conditions were, according to all authorities, not effectively included in the contract although they were transmitted by the [Seller].

               (2) Even if one assumed that the General Terms and Conditions had been effectively included in the contract, the [Seller] would not be entitled to rely on item III.1, namely, that the [Buyer] would have been obliged to set a grace period and to threaten that it would declare the contract avoided due to the fact that a firm date for the delivery had not been agreed on, as this clause has to be qualified as surprising in the sense of 3 AGBG a.F. [*].

A clause can be qualified as unusual in the sense of 3 AGBG [*] if the clause contradicts the content of the contractual negotiations or fundamentally deviates from dispositive law (Palandt / Heinrichs, BGB, 61st edition 2002, 3 AGBG margin number 2 with further references). As a prompt delivery has been promised in the present case and as the importance of a prompt delivery has been obvious according to the circumstances that have to be taken into account according to Article 8 CISG, the clause can be qualified as unusual and surprising, as it impedes the possibility to avoid the contract by requesting the setting of a grace period plus the announcement of the declaration of avoidance. Furthermore this clause constitutes a fundamental deviation from the dispositive law of the CISG, which, based on the usages of international trade, has not included the announcement to declare the contract avoided as a requirement for the effective setting of an additional period of time.

          cc) Since the [Buyer] has only received repayment in the amount of 13,140.- Deutsche Mark [DM] (6,718.38 ) from the deposit in the amount of 28,140.- DM (14,387.75 ), the [Seller] has to pay 15,000.- DM (7,669.38 ) of which the [Buyer] is claiming only 5,000.- on appeal.

The claim for payment of DM 1,860 (= EUR 951) is based on the independent promise of debt, as the [Seller] has undisputedly confirmed in its e-mail of 20 July 2000 that it had wrongfully announced the repayment of DM 15,000 but would be willing to reimburse the difference as a sign of goodwill. It is true that the e-mail erroneously stated that this difference would amount to DM 1,680. However the [Seller] has confirmed a credit of 1,860 on the very same day and referred to the aforementioned e-mail.

The [Seller] cannot argue that the [Buyer] would not be entitled to base its claim on this promise as it had not referred thereto until 16 January 2003. This is due to the fact that the [Buyer] has referred to the promise to reimburse the DM 15,000 prior to the oral proceedings via mail on 20 July 2000 and has submitted the credit voucher as an attachment to its statement of claim. Even though the [Buyer] has not expressly referred to this credit in its statement of claim, the coherence was obvious due to the reference to the e-mail of 20 July 2000. The submissions made in the appeal can hence not be qualified as new in the sense of 531 ZPO [*].

The credit has to be interpreted from a legal point of view as an independent promise of debt in the sense of 780, 781 BGB [*]. Whether such a promise constitutes a new obligation has to be assessed individually. This can be assumed if the promise is based on a separate intent of the debtor which is independent from its contractual and legal duties (Palandt / Sprau, BGB, 62nd edition 2003, 780 margin number 4.) In the present case, such an independent promise can be assumed on the basis that the credit does not refer to any reason but merely to an adjustment of a difference. This adjustment should - according to the e-mail of 20 July 200 - be made as an act of goodwill, as erroneously the reimbursement of DM 15,000 had been promised. The fact that the [Seller] assumed responsibility for this promise confirms that the credit can be seen as an independent obligation. It cannot be assumed that the [Buyer] should forfeit its right to claim further damages by accepting this reimbursement.

As this promise only constituted a legal advantage for the [Buyer], it is sufficient to base the assumption of an acceptance on the fact that there have not been any objections by the [Buyer] (Palandt / Heinrichs, loco citato, 151 margin number 2).

The claim of interest can be based on 286, 288 BGB a.F. [*]

2. The [Buyer]'s claim is not extinguished by an impliedly declared set-off with a claim for compensation because of a cover purchase. Since the [Buyer] has effectively declared the avoidance of the contract according to Article 49(1)(a) CISG, the [Seller] cannot rely on Article 75 CISG.

The [Seller] in fact made a cover purchase immediately after the avoidance of the contract. However, it does not have a right to claim damages in the amount of the difference between the agreed price of the contract and the price of the cover purchase because the [Buyer] did not breach the contract when declaring the avoidance of the contract. The [Seller] therefore cannot claim damages according to Articles 74, 75 CISG. A breach of contract by the other party is a prerequisite to the claim for damages according to Article 74 CISG based on the calculation of Article 75 CISG (Staudinger Magnus, loc. cit., Article 74 margin number 8)

3. The decision on costs is based on 91, 269 III ZPO [*], the decision on the provisional enforceability is based on 708 Nr. 10, 711, 713 ZPO.

There is no reason to admit further appeal (Revision)

The value of the appeal amounts to EUR 10.0000 (claim EUR 5.000, set-off EUR 5.000)

Judges: Schüssler, Peters, Hesper


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Israel is referred to as [Buyer]; 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 abbreviations: AG = Amtsgericht [Lower Court]; AGBG = Gezetz sur Regelung des Rechts der Allgemeinen Geschäftsbedingungen [Act on General Terms and Conditions (today 305 et seq. German Civil Code)]; BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; EGBGB = Einführungsgesetz zum Bürgerliches Gesetzbuch [Introduction Code to the German Civil Code]; NJW = Neue Juristische Wochenschrift [German law journal]; OLG = Oberlandesgericht [Appellate Court]; WM = Wertpapier-Mitteilungen [German law journal].

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

*** Ph.D. candidate Daniel Nagel has studied law at the University of Heidelberg and at the University of Leeds.

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