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CISG CASE PRESENTATION

Germany 20 December 2004 Appellate Court Stuttgart (Decorative paper case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/041220g1.html]

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

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Case identification

DATE OF DECISION: 20041220 (20 December 2004)

JURISDICTION: Germany

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

JUDGE(S): Dr. Würthwein, Dr. Schmidt, Grew

CASE NUMBER/DOCKET NUMBER: 5 U 108/05

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

CASE HISTORY: 1st instance Landgericht Ravensburg (8 O 206/03) 9 March 2004

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Decorative poster paper


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 39(2) [Also cited: Articles 38 ; 53 ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

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

39B [Requirement to notify seller of lack of conformity: cut-off period of two years]

Descriptors: Scope of Convention ; Set-off ; Lack of conformity notice, timeliness

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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=1020&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch website <http://www.cisg-online.ch/cisg/urteile/997.pdf>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1020&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

Court of Appeals (Oberlandesgericht) Stuttgart

20 December 2004 [5 U 108/04]

Translation [*] by Daniel Fritz [**]

Edited by Todd Fox [***]

HOLDING

1. The appeal of the [Buyer] against the decision of the District Court of Ravensburg -- Chamber for commercial matters -- of 9 March 2004, docket number: 8 O 206/2003 KfH 2, is dismissed.

2. The [Buyer] bears the costs of the appellate proceedings.

3. The judgment is preliminarily enforceable.

REASONS

I. The parties are in dispute over payment for the delivery of decorative poster paper and the opportunity to raise counterclaims arising out of an agency contract.

[Seller], a public limited company under Italian law, manufactures decorative poster paper; [Buyer] distributes decorative poster paper. In 2000, [Seller] delivered to [Buyer] goods worth 186,422.14. These deliveries are the subject of the present legal action. On 22 February 1996, the parties also agreed to an agency contract. According to that contract, [Buyer] was appointed -- with one exception -- [Seller]'s exclusive agent for Germany. Different commissions were stipulated for different products. [Seller] has figured an outstanding commission payment in favor of [Buyer] from this agency contract.

On 26 March 2002, [Buyer] asked [Seller] to calculate and communicate outstanding commission payments; [Buyer] asserts that [Seller] has yet to provide a sufficient accounting of such commission payments. The agency contract provides that the governing law shall be German commercial law and that the court in Milan/Italy shall have jurisdiction.

[Seller] contends that the goods were in conformity with the contract and that the claim for commission payment calculated by [Buyer] was not valid. Moreover, [Seller] asserts that the court lacks international jurisdiction to decide the set-off claim.

[Buyer] contends that the goods did not conform to the contract. [Buyer] asserts that it is entitled to commission payments from the agency contract in an amount higher than the amount claimed by [Seller] in its lawsuit, and with which [Buyer] claims a set-off. Furthermore, [Buyer] claims it has a right of retention because of the lack of an accounting on the part of [Seller] regarding the commission amount.

Concerning the further facts, the court refers to the pleadings of the parties in the first instance as well as the facts in the previous decision (Bl. 101/102 d.A.) ( 540(1) ZPO [*]).

The District Court decided fully in favor of [Seller] and reasoned that [Seller]'s claim for the purchase price arises out of Art. 53 CISG and that the conformity of the goods could no longer be challenged. The District Court left open the question of jurisdiction due to a lack of substantiation of [Buyer]'s claim for commission payments.

In its proper appeal [Buyer] in essence asserts that the judgment was surprising since no evidence was taken and that the parties did not agree to prohibit set-offs, but rather they agreed to a set-off. Furthermore, [Buyer] asserts that the District Court overlooked the right of retention. [Buyer] claims it is entitled to commission payments in the amount of 765,000.00, of which it has only received 424,750.00. The outstanding sum of 399,249.60 should be subject to set-off against [Seller]'s claim.

[Buyer] requests that the decision of the District Court of Ravensburg be reversed and that [Seller]'s claim be dismissed. [Seller], in turn, requests that [Buyer]'s appeal be denied.

II. [Buyer]'s appeal is admissible but unfounded

1. Jurisdiction

The Appellate Court must also examine international jurisdiction; 513(2) ZPO [*] is not concerned with the issue of international jurisdiction (BGH [*] NJW [*] 2003, 426). The legal action is governed by the European regulation (EG) No. 44/2001 (EuGVVO [*]), here specifically Arts. 2(1), 60(1). Under this regulation, jurisdiction is proper where the defendant has its residence, or for juridical persons under Art. 60(1) where the official seat of business is located. Since [Buyer] has its seat in Leutkirch, the German courts are competent to hear the case.

2. [Sellers]'s claim

      2.1 According to Art. 1(1)(a) CISG, the contract for the delivery of decorative poster paper is governed by the CISG, since both parties have their place of business in Contracting States.

[Seller] is entitled to payment from [Buyer] according to Art. 53 CISG. [Buyer] is no longer claiming non-conformity of the goods at the appellate level. In any event, [Buyer] failed to comply with its duty to examine the goods under Art. 38 CISG, its notice given after two years was not timely under Art. 39(2) CISG, and the claim is furthermore unsubstantiated.

      2.2 Moreover, [Seller]'s claim is not extinguished due to a set-off because [Buyer]'s reliance on the right of set-off is inadmissible.

Italian law governs the requirements for admissibility of [Buyer]'s set-off claim. Since the CISG contains no rules concerning the issue of a set-off, the question is to be settled in conformity with the law applicable by virtue of the rules of private international law (Ferrari, in Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, 3rd ed., Art. 4, para. 39). Decisive is therefore the proper law of the contract for the sale of decorative poster paper. Pursuant to Art. 28(2) EGBGB [*], the usual residence of the seller, as the party executing the characteristic performance, controls; here, the place of business of [Seller] is in Italy. Consequently, Italian law governs the contract.

Italian law recognizes three forms of set-off (see Kindler, Einfuehrung in das italienische Recht, 14, 3. paras. 15-18):

   -    Legally determined set-off by operation of law (compensazione legale, Art. 1243(1) Codice civile [*]);
   -    Judge-made set-off (compensazione guizidale, Art. 1243(2) Codice civile), and
   -    Set-off based on consent (compensazione voluntaria, Art. 1252 Codice civile).

None of these forms is applicable in the present case:

A set-off based on consent is ruled out since [seller] does not consent to a set-off and protests against it.

The legally determined set-off requires mutuality (reciprocità), similarity (omogneità), recoverability (esigibilità) and that the case be ripe for decision (liquidità). The last mentioned requirement means that the claim must be ascertained with regard to the basis of the claim and the amount. Here, the parties are in dispute about the transactions as well as about the pertinent amount of commission payment due. [Seller]'s denial regarding the asserted right of commission payment is not clearly unfounded.

The fact that the case is not ripe for decision cannot be substituted by a judge-made set-off. This form of set-off requires that the counterclaim be easily and quickly ascertainable. To take evidence concerning the transactions that were arranged by the [Buyer], the extent of the deliveries, and the determination of the commissions would be quite time consuming (possibly requiring that witnesses be heard in Italy by way of judicial assistance). Thus, the requirements of a judge made set-off are not fulfilled.

Consequently, [Buyer] may not proceed under any of the variations of set-offs in Italian law and therefore [Buyer]'s set-off claim is inadmissible. The court can leave open the question whether the [Buyer]'s claim exists at all.

It is also not necessary to decide whether the court is competent to hear the dispute concerning the set-off claim and whether the agreement concerning the jurisdiction of a court in Milan over the agency contract is exclusive. The reason is that the contract does not contain an express provision concerning to what extent the agreement on jurisdiction also governs the issue of a set-off. In this regard, the content of the contract would have to be determined through interpretation, in the course of which it would be necessary to consider the fact that the parties chose German commercial law to govern (see BGH NJW 1993, 1399). Contrary to this view of the German Supreme Court, it has been asserted in the legal literature that a "typical" jurisdiction clause in case of doubt does not exclude the right to submit a set-off claim (on the controversy, see Geimer, in Geimer/Schütze, Europ. Zivilverfahrensrecht, 2nd ed., Art. 23 EuGVVO [*], para. 193; Kroppholler, Europ. Zivilprozessrecht, 4th ed., Art. 23 EuGVVO, para. 99 et seq.). Since the set-off is already excluded by Italian law, this court does not have to delve into this controversy.

For the same reason, this court need not decide the question of whether a set-off claim requires separate international jurisdiction or whether the admissibility of set-off claims is governed by the lex fori, here German law (cf. for the controversy BGHZ [*] 149, 120). Therefore, this court can also leave open the question of how far Art. 6 Nr. 3 EuGVO is to be applied by analogy to non-interconnected claims and whether the European Court in its decision of 13 July 1995 (NJW [*] 1996, 42) has denied this or has left this question open (see Geimer, supra Art. 6, para. 72 et seq.).

      2.3 Right of retention

[Buyer] cannot assert a right of retention. The court considers a right of retention pursuant to 87c HGB [*]. The CISG is not concerned with the right of retention. Whether such a right exists at all is governed by the law applicable by virtue of the rules of private international law (Magnus in Staudinger, Kommentar zum BGB mit Einführungsgesetzen, Art. 4 CISG, para. 47a, Ferrari in Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, 3rd ed., Art. 4, para. 39. Accordingly, the proper law of the sales contract is decisive, which pursuant to Art. 32(2) No. 2 EGBGB [*] also governs the right of retention (Heldrich in Palandt, Kommentar zum BGB, 63rd ed., Art. 32 EGBGB, para. 6 [*]). A general right of retention corresponding to 273 BGB [*] does not exist in Italian law. Only under exceptional circumstances, not given here, is a right of retention conceivable under Italian law (Kindler, Einführung in das italienische Recht, 14, para. 66). Since a right of retention cannot be asserted under the proper law, it can also not be asserted against the claim governed by the CISG, irrespective of whether such a claim exists.

Moreover, according to the German provision in 273 BGB, such a right of retention could not be asserted because there is not a sufficient connection between the claims from the deliveries and those from the agency contract. (Heinrichs in Palandt, Komentar zum BGB, 63rd ed., 273, para. 9).

      2.4 [Seller] is entitled to interest pursuant to Art. 78 CISG together with the rules of Italian law. The interest claim is conclusively established and undisputed in both legal grounds and amount.

3. The court's order on costs is based on 97(1) ZPO [*]; the decision on the preliminary enforcement on 708 No. 10, 711 ZPO.

This decision is not subject to judicial review since the issue lacks fundamental significance, 543(2) ZPO.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellee of Italy is referred to as [Seller] and Defendant-Appellant of Germany is referred to as [Buyer].

Translator's note on abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; BGHZ = Entscheidungen des Bundesgerichtshofes in Zivilsachen [Official Reporter of Decisions of the German Federal Supreme Court on Civil Matters]; Codice civile = Italian Civil Code; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuch [German Code on Private International Law]; EuGVÜ = Europäisches Gerichtsstands- und Vollstreckungsübereinkomen, 1968 [Convention of 27 September 1968 on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters]; EuGVVO = Verordnung über die gerichtliche Zuständigkeit und die Anerkennung und vollstreckung von Entscheidungen in Zivil- und Handelssachen [Council Regulation on Jurisdiction and the Recognition of Judgments in Civil and Commercial Matters, 44/2001/EC]; HGB = Handelgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [German law journal]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Daniel Fritz is a graduate of the University of Potsdam, currently studying for the LL.M. degree at the University of Stellenbosch.

*** Todd Fox received his J.D. from Rutgers University and his LL.M. summa cum laude from the University of Freiburg, Germany. A member of the Bar of the State of Pennsylvania, he is an Associate of the Institute of International Commercial Law.

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