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CISG CASE PRESENTATION

Germany 22 July 2004 Appellate Court Düsseldorf (Shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/040722g1.html]

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

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Case identification

DATE OF DECISION: 20040722 (22 July 2004)

JURISDICTION: Germany

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

JUDGE(S): Klein, Döinghaus, Krämer

CASE NUMBER/DOCKET NUMBER: 6 U 210/03

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

CASE HISTORY: 1st instance Landgericht Düsseldorf 28 August 2003 [partially amended]

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Shoes


Case abstract

GERMANY: Oberlandesgericht Düsseldorf, I-6 U 210/03, 22 July 2004

Abstract prepared by dr. Andrea Vincze [*]

The decision of the Oberlandesgericht [Appellate Court] of Düsseldorf does not contain a summary of the facts of the case, only references are provided. The case deals with the following issues concerning the CISG. The parties concluded a contract for the purchase of shoes. First, they simply agreed orally at a shoe fair and also discussed the possibility of subsequent deliveries as well. The legal dispute derived from misunderstandings concerning the latter. The exact intent of the parties could not be reproduced since they contradictory statements about what had been agreed upon at the shoe fair and in further correspondence between the parties. In the end, the Buyer failed to pay the price with regard to two installments, i.e., 1,193 pairs of shoes, stating that there was no agreement for the sale of these shoes. The Seller brought legal action against the Buyer requesting payment of the allegedly total contract price.

The Court ruled that:

-     The Defendant Buyer's failure to pay at the due date substantiates a claim for damages under Art. 61(1)(b) CISG without a special notice about the consequences of non-payment. Payment, in the instant case, was due in June 2002 pursuant to Art. 58(1) and (3) CISG. Since the Plaintiff Seller performed the contract, the Buyer was not entitled to withhold the price.
 
-     Where there are subsequent deliveries problems can arise with regard to each installment. Seller's legal representative sent a notice on 11 June 2002, dispatch of which cannot be objected to since Art. 27 CISG follows the dispatch theory, therefore only receipt of the latter can be disputed [no exact details provided in the text of the decision on the contents of the notice]. The notice concerned delay in the payment for the first two installments; the legal dispute involves 1,193 pairs of shoes concerning which the question was whether Buyer was obliged to take delivery at all.
 
-     Seller presented its claim for interest before the Appellate Court which is admissible under Art. 78 CISG [no further details provided on the issue of claiming interest].
 
-     Seller is not entitled to damages based on the cover sale according to Art. 75 CISG because Seller failed to prove in an appropriate manner that the contract was avoided. For a damages claim to be admissible under Art. 75, avoidance of this contract would be required pursuant to Art. 64(1), however, the required preconditions for avoidance are not present. Seller failed to give a notice of avoidance as required by Art. 26 CISG. It is a fact that, as the cover sales took place at the beginning of April 2002 and Buyer's latest communications on the issue was dated 19 March 2002, Buyer, at that point of time, should have already known that Seller intended to take the appropriate steps and to avoid the contract. However, the exact details of what happened could not be substantiated by the Court.
 
-     The Court expressed the opinion that the requirements for avoidance were not fulfilled. As regards the remaining 1,193 pairs of shoes which forms a part of Buyer's original order for 3,497 pairs of shoes, payment of the price did not become due under Art. 58(1), sentence one, CISG because Seller undoubtedly failed to deliver the goods. Seller did not even fix an additional period for Buyer concerning the payment of the price and taking delivery of the goods (citing Art. 64(1)(b) CISG).
 
-     Under the CISG, Buyer's failure to perform its contractual obligations did not qualify as a fundamental breach which would have excluded the possibility of fixing an additional period to perform because in case of a regular sale of goods contract, as is the case here, where perishable goods or goods requiring special care during storing or transporting are not involved, neither frustration of the obligation of taking delivery nor failure to pay the price substantiates fundamental breach.
 
-     Nor was Buyer entitled to deny performance or declare avoidance of the contract pursuant to Art. 72(1) and (2). In order to be entitled to the latter, it is necessary that the party in breach shall have denied performance of its contractual obligations in a serious, express and unambiguous manner. In the instant case, even the Seller agreed that such conduct was not carried out by Buyer.


FOOTNOTES

[*] 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. Currently, she is a Ph.D. candidate at that 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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 26 ; 64 ; 74 ; 75 [Also cited: Articles 27 ; 58 ; 59 ; 61(1) ; 71 ; 72(1) ; 73 ; 78 ] [Also relevant: Articles 25 ; 63 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): set-off];

26A1 [Effective declaration of avoidance: notice to other party required];

64A1 ; 64A21 [Seller's right to avoid contract (grounds for avoidance): fundamental breach; Buyer does not pay or take delivery within an additional period set by the seller under art. 63];

74C [Damages (other issues): attorneys' fees]

75A [Damages established by substitute transaction: substitute transaction after avoidance]

Descriptors: Scope of Convention ; Set-off ; Avoidance ; Damages ; Cover transactions ; Collection costs

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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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1002&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/916.pdf>; Internationales Handelsrecht (1/2005) 29-31; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1002&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Düsseldorf

22 July 2004 [I-6 U 210/03]

Translation [*] by Jan Henning Berg [**]

Edited by Institut für ausländisches und internationales
Privat- und Wirtschaftsrecht der Universität Heidelberg
Daniel Nagel, editor
[***]

JUDGMENT

Upon appeal filed by Plaintiff [Seller], the judgment rendered on 28 August 2003 by the District Court of Düsseldorf, 6th Chamber on Commercial Matters is partially amended.

Defendant [Buyer] is ordered to pay [Seller] EUR 3,472.31 plus 3% interest on EUR 1,297 from 8 August 2002 until 31 December 2003 and 2.5% interest since 1 January 2004. The residual part of [Seller]'s action is dismissed

The additional appellate requests are dismissed.

The costs of the proceedings before the Court of First Instance are to be borne by [Seller] at 72% and by [Buyer] at 28%. The costs of the appellate proceedings are to be borne by [Seller] at 87% and by [Buyer] at 13%.

The judgment is provisionally enforceable.

REASONING OF THE COURT

[Seller]'s appeal is only justified to a minor extent. In addition to the sum awarded by the Court of First Instance, the action is justified with respect to the further amount of EUR 1,297 plus interest.

1. [International jurisdiction of German courts]

The international jurisdiction of German courts follows from [Buyer] having submitted a plea in defense of the substantive claims without objection to the jurisdiction and [Seller]'s submission of a plea in defense of [Buyer]'s counterclaim, which the latter raised as a set-off. Arts. 24(1), 66(1), 76(1) Council Regulation (EC) No. 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Brussels I Regulation).

2. [Seller's claim for damages]

According to Arts. 61(1)(b) and 74 CISG, [Seller] is entitled to claim damages of EUR 1,287 from [Buyer] for attorneys' fees that [Seller] incurred.

The legal relationship between [Seller] and [Buyer] is governed by the CISG, a finding that neither party has contested. According to the CISG, if the buyer fails to pay at the time of maturity, the seller is automatically entitled -- without the requirement of a reminder -- to its remedies following non-performance, including a claim for damages pursuant to Art. 61(1)(b) CISG, cf. Art. 59 CISG (Schlechtriem/Hager, Kommentar zum CISG, 3rd. ed. 2000, Art. 59 para. 2).

In this case:

   -    [Buyer] was obliged to pay the purchase price in June 2000 under Art. 58(1), (3) CISG, because [Seller] delivered the goods in accordance with the contract. In addition, [Buyer] had no right to withhold its performance.
 
   -    It is evident that [Buyer] could not rely on the rights under Arts. 71 and 73 CISG. Insofar as [Buyer] argued during the proceedings in the First Instance and might continue to argue in the present appellate proceedings - even though it neither challenges the judgment by the District Court (Landgericht) nor the underlying reasoning -- that it had not been obliged to pay prior to the settlement of a "guarantee matter from the previous season", the District Court (Landgericht) has already and correctly indicated the procedural irrelevance of this argument by [Buyer].
 
   -    Moreover, [Buyer]'s submissions cannot be followed as [Buyer] has not made any statement with respect to [Seller]'s submissions regarding the talks in March 2002 at the shoe fair in Düsseldorf, Germany.
 
   -    Furthermore, the uncontested content of [Buyer]'s fax of 6 June 2002 (exhibit accompanying [Seller]'s memorandum of 17 July 2003 = p. 139 GA), namely, the suggestion of a settlement, cannot be reconciled as such with the agreement which it asserted.

[Seller] also suffered the asserted loss.

The German attorney, who was instructed by [Seller] following [Buyer]'s non-performance despite maturity of the claim, was entitled to submit an invoice under the German law on attorneys' fees and demand a full 10/10 expense charge.

The expense charge of 118(1) No. 1 BRAGO [*] is distinguished from the so-called advisory fee of 20 BRAGO by the fact that the former accrues if it becomes necessary during the client's presentation of his case to communicate the legal position to the opposing party in order to achieve the desired legal outcome. The attorney's reminding letter of 11 June 2002 has the character of such outbound correspondence particularly because the CISG embraces the 'theory of dispatch' (Absendetheorie). See Art. 27 CISG, for all declarations other than those concerning the conclusion of a contract. However, [Buyer] has merely challenged the receipt of the letter but not also its dispatch.

There will also be no offset of the expense charge with the litigation charge accrued in this dispute under 118(2)(1) BRAGO -- which would in any event only be partially offset because of the different values of the claims. For such a set-off, the initial, extra-procedural instruction of an attorney needs to be connected with his instruction for acting in court; both aspects of the attorney's work must relate to the same dispute matter and thus connect both components to a single factual unit. This is the case if the matter in dispute (Streitgegenstand) roughly remains identical (OLG [*] Düsseldorf AnwBl [*] 1990, 629). There is no such identity of matters in dispute in the present case. In case of a contract for successive deliveries -- as in the present case --, specific legal problems may arise out of each single partial delivery. This has happened in the present case. In relation to the partial deliveries referred to in the reminding letter, the problem of a delayed payment was at stake; in relation to the delivery of 1,193 pairs of shoes being subject to the present proceedings, however, the issue is whether [Buyer] was at all obliged to accept this delivery and make payment. Correspondingly, the reminder dispatched by the attorney only refers to the former two partial deliveries.

The Court may hold the amount of the framework charge as justified without need to obtain an expert opinion by the bar association. 12(2) BRAGO only refers to the action of an attorney to claim fees but not to the client's action for damages against a third party. The application of the maximum fee in the present case is justified. The attorney had to operate in the field of the international sale of goods which can even today not be regarded as a standard area of law. Because of the continuous partial deliveries by [Seller] to [Buyer], which were effected under a variety of orders throughout a couple of years, the attorney needed to make a considerable effort in organizing the documents of the dispute. The result of the attorney's effort is demonstrated in the reminding letter. It must also be considered that [Seller]'s attorney had to entertain correspondence with its client in a foreign language.

[Seller]'s damages claim has not expired due to the set-off declared by [Buyer] by way of precaution.

The admissibility of a set-off and its substantive requirements cannot be considered autonomously under the CISG, but under the applicable domestic law according to the leading doctrine and preceding jurisprudence of the Court (cf. Schlechtriem/Ferrari, Art. 4 para. 39 with further references). The relevant domestic law determined according to conflict-of-laws provisions cannot be established according to Art. 3(2) of the Hague Convention 1955 in the present case. Apart from the fact that Germany -- other than Italy -- did not accede to this Convention, it is overridden by the CISG (Schlechtriem/Ferrari, vor Arts. 1-6, para. 34 with further references). According to the non-unified German private international law, the domestic substantive law applicable to the opposing claim under the contract -- the damages claim -- governs admissibility, substantive requirements and effects of a set-off. In the present case this will be Italian law being the law applicable at the seller's domicile (Arts. 32(1) No. 4, 28(1)(1) and 28(2), 35(1) EGBGB [*]).

Italian law requires two opposite claims for a set-off . As can also be seen from the parties' submissions, further requirements apply only in case that the existence of the opposing claim has not been challenged from the outset (cf. Kindler, IPRax [*] 1996, 16 (20 et seq.)).

[Buyer] has not coherently substantiated the existence of its counterclaim based on unjustified enrichment due to excessive payment of [Seller] following the grant of discounts. A respective agreement on discounts between the parties has not sufficiently been proved. [Seller]'s submission that there had been an agreement with [Buyer] to grant the latter a discount of 5% in case of payment within ten days after the date of the invoice -- which explains the addition of "5% discount" on the order form (exhibit to [Seller]'s action) -- remained uncontested by [Buyer] even during the appellate proceedings. Thus, failing payment within the required time frame, [Buyer] is not entitled to any discount. Furthermore, the previous submissions made by [Buyer] in relation to the discount were unsubstantiated (memorandum of 18 February 2003, pp. 4 et seq. and memorandum of 22 May 2003, pp. 3 et seq.).

3. [Seller's interest claim]

The interest claim, which has been properly extended by [Seller] during the proceedings in the Second Instance ( 264 No. 2, 525(1) ZPO [*]), is justified on the merits according to Art. 78 CISG but only in the amount stated in the judgment.

The amount of interest to be awarded must be determined according to the applicable domestic law. As has been said, the domestic law applicable to this contract is Italian law. It provides in Art. 1284(1) Codice civile for an interest rate of 3% since 2002 and 2.5% since 2004.

Any further claim for interest cannot be claimed by [Seller], in particular not as damages (Arts. 74(1), 61(1)(b), 78 final clause CISG). [Seller] failed to make any submissions both in relation to a loss suffered in the form of lost investment interest and in relation to a necessary conclusion of a loan.

4. [No claim in favor of Seller following substitute transactions]

[Seller] is not entitled to a claim for damages in the amount of EUR 18,102.52 under Art. 75 CISG on the basis of a substitute transaction. [Seller]'s submissions in this respect are incoherent and thus not able to give rise to a claim against [Buyer] even if it was assumed that a contract for the sale of the corresponding goods had been concluded. According to Art. 75 CISG, such a claim would have required the avoidance of the contract, in this case pursuant to Art. 64(1) CISG. However, the requirements for the avoidance of the present contract have not been fulfilled.

[Seller] has not made a declaration of avoidance of the contract, neither expressly nor impliedly, as is required under Art. 26 CISG. Due to the fact that the cover sales had already commenced by the beginning of April 2002 (the first invoices are dated 3 April 2002) and the last previous communication by [Buyer] was that of 19 March 2002 (exhibit to [Seller]'s action), [Seller] would need to have shown during this time a specific conduct so that [Buyer] could assume that [Seller] had a definite intention to rid itself from the part of the contract which had not been executed so far. No indications to that effect have been submitted. [Seller]'s submissions in its letter of 24 April 2003 (bottom p. 5) deal with the asserted contract conclusion but not with any declaration of avoidance by [Seller].

Moreover, in the opinion of the Court -- and without this aspect even being essential after all -- the further requirements for an avoidance of the contract are not fulfilled. In relation to the "remaining" 1,193 pairs of shoes from the order asserted by [Buyer] as no. 1348, which included a total of 3,497 pairs of shoes, the corresponding purchase price has not become mature pursuant to Art. 58(1) CISG. This is because it is undisputed that [Seller] neither made the goods nor the respective documents available to [Buyer]. Additionally, [Seller] has not fixed an additional period of time (Nachfrist) of reasonable length for performance by the [Buyer] of its obligation to make payment of the purchase price and to accept the goods (Art. 64(1)(b) CISG). [Buyer]'s non-performance of obligations arising out of the contract does also not amount to a "fundamental breach of contract" in terms of the CISG, a circumstance which would have rendered the fixing of an additional period of time unnecessary. In case of the usual sales contract concerning non-perishable goods and without peculiarities of storage or transport, neither a breach of the obligation to accept the goods nor a breach of the obligation to make payment of the purchase price automatically constitutes a fundamental breach of contract. No exceptional case is apparent here. The mere fact that the contract concerned fashionable shoes for children does not give rise to such urgency that the setting of an additional period would have been an unreasonable burden. Finally, [Buyer] cannot be accused of a general denial to perform its obligations under Art. 72(1) and (3) CISG. This requires that a debtor both seriously and expressly or unambiguously deny its obligations under the contract. According to [Seller]'s submissions, such conduct on the part of [Buyer] is not apparent. [Seller]'s submissions on appeal concerning the events at the shoe fair in March 2002 prove no more than that the parties had been in dispute about the further performance of the contract for successive delivery. No definitive "last word" by [Buyer] can be assumed. As can be seen from [Seller]'s subsequent fax of 18 March 2002, it only attributed some limited relevance to these events as well. [Buyer]'s response by fax dated 19 March 2002 does not address the goods referred to above, but concerns a different partial delivery. Further declarations of [Buyer] prior to the commencement of cover sales cannot be extracted from the content of the file.

5. [Ancillary decisions]

The decision on costs is based on 92(1)(1) ZPO [*], the decision on provisional enforceability follows from 708 No. 10, 713 ZPO.

There is no reason to allow further appeal on legal grounds.

The gravamen of both parties is below EUR 20,000. The value of the appellate proceedings is fixed at EUR 20,696.52 ( 19(3) GKG [*]).


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Italy is referred to as [Seller] and Defendant of Germany is referred to as [Buyer]. Amounts in the uniform European currency (Euro) are indicated as [EUR].

Translator's note on other abbreviations: AnwBl = Anwaltsblatt [German law journal]; BRAGO = Bundesrechtsanwaltsgebührenordnung [former German statute on attorneys' fees]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the conflict of laws]; GKG = Gerichtskostengesetz [German statute on court fees]; IPRax = Praxis des Internationalen Privat- und Verfahrensrechts [German Law Journal]; OLG = Oberlandesgericht [German Appellate Court]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].

** Jan Henning Berg has been a law student at the University of Osnabrück, Germany and at King's College London. He participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.

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

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