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CISG CASE PRESENTATION

Germany 29 November 2005 District Court München (Frozen vegetable case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051129g1.html]

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

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Case identification

DATE OF DECISION: 20051129 (29 November 2005)

JURISDICTION: Germany

TRIBUNAL: LG München [LG = Landgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 5 HKO 10734/02

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Spain (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Frozen vegetables


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 26 ; 35 ; 38 ; 39 ; 49 [Also cited: Articles 53 ; 67 ]

Classification of issues using UNCITRAL classification code numbers:

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

26A [Notification of avoidance: effective declaration of avoidance required];

35A ; 35B1 [Conformity of goods to contract: quality, quantity and description required by contract; Requirements implied by law: fitness for purpose for goods of same description[;

38A [Buyer's obligation to examine goods];

39A11 [Requirement to notify seller of lack of conformity: degree of specificity required];

49A1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contrac]

Descriptors: Fundamental breach ; Avoidance ; Conformity of goods ; Examination of goods ; Lack of conformity notice, specificity

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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/1567.pdf>; see also Recht der Internationalen Wirtschaft (2007) 146

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

District Court (Landgericht) München

29 November 2005 [5 HK O 10734/02]

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

JUDGMENT

   (1)   The [Seller]'s claim is dismissed.
 
   (2)   The [Seller] has to bear the costs of the proceedings.
 
   (3)   The judgment is provisionally enforceable against payment of a security deposit of 105% of the amount to be enforced.
 
   (4)   The value of the claim amounts to 11,884.14 EUR.

FACTS

The [Seller] claims payment of the purchase price for the delivery of sliced peppers and pepper pieces.

According to a contract of 31 May 2005, the [Buyer] ordered a truck load of yellow pepper slices (5 to 7 mm) IQF (individually quick frozen) at a price of 103 Pesatas [Ptas] per kilogram. Furthermore, the [Buyer] ordered a pallet of yellow pepper pieces (30 x 30 mm) IQF at a price of 300 Ptas per kilogram ex Murcia/Spain according to a contract of 1 June 2001 (exhibit K 2).

On 15 June 2001, both the pepper slices and the pepper pieces were handed over by the [Seller] to the carrier designated by the [Buyer]. The [Seller] sent invoice No. 01 604 on 18 June 2001 (exhibit K 4) which recited the purchase price of 2,227,590.00 Ptas, (approx. 13,388.09 EUR).

According to the contract of 1 June 2001, the [Buyer] additionally ordered a pallet of red pepper pieces (30 x 30 mm) IQF, which were handed over to the same carrier on 18 June 2001.The [Seller] sent invoice No 01 609 on 18 June 2001 with respect to this delivery (exhibit K 6). It amounted to 216.000,00 Ptas. The [Buyer] paid for the pepper pieces 216,000.00 Ptas each on 18 February 2002; hence the [Buyer] paid 2,802.14 EUR of the total amount of 14,686/28 EUR.

On 19 June 2001, the carrier delivered the yellow pepper slices directly to a customer of the [Buyer]. This customer gave notice of certain defects of the pepper slices to the [Buyer] on 19 June 2001 (exhibit B 3). The [Buyer] hence informed the [Seller] on the very same day via e-mail (exhibit B 5) as follows: [Translator's note: all e-mails are presented in their original version as they have been sent in English.]

"Hello

a.m. truck arrived at our client in halle and was complaint and rejected.
colour: yellow glassy
up to 36% Broken pieces, crumble
clices lower 3 cm
rotten parts
ice crystal, blocks

our client can not take over this product
awaiting your answer, what we should do with this loading.

our client expect a new date for a replacement."

An employee of the [Buyer] sent the following e-mail to an employee of the [Seller] on 9 July 2001 at 7:47 am (exhibit B8):

" with reference to your fax we will inform you again, that our client has complaint the product because the goods are not according grade a standard.

If you are in the opinion that you has sent a correct product we have the possibilities to order an survayor who can control the delivered lot of pepper.

In the meantime we have got the information form M that you will collect the pepper and take it back.

Please inform us when you will take over, that we can inform the cold-store."

The goods that were delivered were stored in a cold storage of Company A in Halle. The [Seller] collected the sliced yellow peppers there on 13 August 2001 and had them redelivered to this cold storage on 14 August 2001.

The [Seller] tried to deliver the goods to a third party but failed to reach an agreement. The [Seller] informed the [Buyer] via fax on 7 November 2001 (exhibit B 15) that it would no longer collect the goods but inform its insurance agency. The [Buyer] finally sold the yellow sliced peppers to Company S at a price of 6,265.81 EUR.

The [Buyer] paid 6,310.20 EUR for the delivery of the goods from Spain to Germany and EUR 3,408.50 net to the storage company for the storage time between 19 June 2001 and the time the goods were finally sold, i.e., at the end of December 2001 (exhibit B 20).

In advance of the sale, the [Buyer] sent a sample to Company S, which caused additional expenses in the amount of 80.00 EUR (exhibit B 21). The price of the delivery of the sliced peppers to Company S amounted to 300.00 EUR net. The storage company charged additional 82.67 EUR for the storage time between December 2001 and the final collection of the goods on 15 January 2001 (exhibit B 22). The attorney of the [Buyer] declared a set-off alternatively with reference to these damages in a letter of 1 July 2002.

The [Seller] generally stated that it was entitled to claim the purchase price on the basis of the contract of sale as it had delivered goods which were in accordance with the stipulations of the contract in respect to their quantity, quality and type. Witness J had examined the quality of these goods prior to the actual handing over and had not been able to detect any lack of conformity. The employee of the [Seller] had only agreed to re-collect the goods in case there actually was a lack of conformity. The assay effected after the collection of the goods had only shown an icing of the sliced peppers and the cardboard boxes which was probably caused by an inadequate storage. The [Buyer] would not be entitled to rely on a lack of conformity as it had failed to examine the goods and to give a timely notice. The e-mail of 19 June 2001 would not fulfill the requirements of Art. 39(1) CISG as it had been too general.

The [Seller] hence requests that the [Buyer] be held liable to pay 11,884.14 EUR plus 5.5% interest with respect to 10,585.95 EUR since 17 July 2001 and with respect to 1,298.19 EUR since 19 July 2001.

The [Buyer] requests the dismissal of the claim.

The [Buyer] states in general that the sliced peppers had already been icy, sticky, glassy and old at the time they were handed over and that 36% had been broken. The slices had additionally been shorter than 3 cm. The goods had been taken over by the storage company at minus 19.5 Celsius and had been kept at that temperature during the whole transport. At the time they were delivered to a customer of the [Buyer] the temperature had still been at minus 19.5 Celsius. It was impossible that the slices had broken during transport; the same applied to the length of the slices. The [Seller] would additionally not be entitled to claim the payment of the purchase price as it had agreed to re-collect the goods and thus the claim for payment had elapsed due to the agreed redhibitory action. The [Buyer] was not only entitled to claim damages in respect to the expenses it had incurred but also with respect to lost profit in the amount of 3,615.91 EUR - i.e., the difference between the initial purchase price and the sale price.

The Court has heard Witnesses S, H and K according to its decision on proof of 17 December 2002 (report page 49/51) and of 7 August 2003 (report page 90/91) and has taken notice of the written statement of Witness B according to its decision on proof of 28 August 2003 (report page 94).

Furthermore, the District Court of Albacete (Spain) and the District Court of Murcia (Spain) heard Witness M and Witness S, respectively, according to the decision on proof of 17 December 2002 (report page 49 to 51).

The Court additionally obtained the expert opinion of Expert R during the oral proceedings on 3 April 2003 and the written expert opinion of Expert M according to its decision on proof of 11 April 2005 (report page 180 to 182) which was changed on 11 July 2005 (report page 188/189).

Reference is made to the protocols of the oral proceedings of 3 April 2003 (report page 74 to 79) and of 16 October 2003 (report page 103 to 111), to the written statement of Witness R (report page 95 to 100), to the translations of the statements of Witness S (report page 138 to 152) and Witness M (report page 171 to 179) and to the written expert opinion of Expert M (report page 193 to 196).

The Court has decided to deliver a separate decision in respect to the counterclaim of the [Buyer] for payment of 11,012.37 EUR plus interest according to its decision of 8 November 2005 (report page 204).

In addition, reference is made to the written statements of the parties and their appendixes as well as the protocols of the oral proceedings of 17 October 2002 (report page 34 to 36), of 3 April 2003 (report page 74 to 79) of 16 October 2003 (report page 103 to 111) and of 8 November 2005 (report page 202 to 205).

REASONING

The [Seller]'s claim is admissible but not justified. The [Seller] is not entitled to claim the purchase price according to Art. 53 CISG.

1. The legal assessment of the contract in dispute has to be made according to the stipulations of the Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG), as in the present case pepper slices and hence goods are being sold and both parties are domiciled in different states - Spain and Germany - which are Contracting States to this Convention.

2. The [Buyer] has successfully declared the avoidance of the contract according to Art. 49(1) in conjunction with Art. 26.

      a. The e-mail of 9 July represents a sufficient declaration of avoidance. The [Buyer] declared in this e-mail that the [Seller] should inform the [Buyer] when it intended to pick up the pepper slices so that the [Buyer] would be able to inform the storage company. This declaration is sufficient in conjunction with the other declarations of the [Buyer] as it is obvious that the [Buyer] wanted to avoid the contract. If the [Buyer] asks the [Seller] to name the date for picking up the goods one has to assume that the [Buyer] wants to initiate a reverse transaction - which is exactly the result of an avoidance of the contract.

Apart from this, an avoidance of the contract can also be assumed on the basis of the mutual declarations of the parties. As the goods - as will be shown below - have actually shown a lack of conformity, the requirement which was set by the [Seller] in respect to an avoidance has been fulfilled.

      b. The [Buyer] has been entitled to declare the contract avoided as the requirements of Art. 49(1)(a) CISG have been met. According to this provision the buyer may declare the contract avoided if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract.

            (1) The pepper slices which have been delivered have not been in conformity with the contract in the sense of Art 35(2)(a) CISG. The hearing of evidence has shown that a fundamental amount of the pepper slices have been broken and sticky at the time of the passing of the risk, i.e., on 15 June 2001.

                  (a) Witness H explained the breakage of the goods on the basis of a checklist, which she herself compiled and which was already brought forward on 3 April 2002. This list showed that an average of 36% of the pepper slices had been broken. H also explained how she noticed the stickiness. She stated that, after having weighed the goods, she had done a visual examination which revealed the stickiness as she had been unable to separate the pepper slices.

The Court does not doubt these statements. The witness appears trustworthy. The statement itself is trustworthy. Witness H has no personal direct economic interest with respect to the outcome of this legal dispute. It has especially to be taken into account that her employer has not been obliged to pay the [Buyer] for the goods as the [Buyer] has not claimed the payment of the purchase price -- as it had not been possible to claim damages or lost profit otherwise.

The witness has furthermore written down her test results in respect to the breakage and the stickiness in a close temporal connection to the incoming goods control.

There is no reason to assume that these test results are not based on real facts. It has furthermore to be taken into account that the witness expressly pointed out that she could not remember the exact quantity. There was no tendency to favor any party. Witness H expressly stated that she was not able to tell when and where the goods had started to defrost, even though her own notes (exhibit B 3) contained the comment "yellow, glassy" which could be seen as a sign of defrosting. She additionally stated that there were only a few rotten parts and peeling defects which would not amount to a lack of conformity.

The presence of stickiness and breakage of the pepper slices would hinder a qualification as fit for purpose if the parties had contractually agreed on a quality stated as "5 to 7 mm IQF"

Expert M clarified in his expert opinion of 28 July 2005 that IQF pepper slices should neither be broken nor sticky. This is comprehensible even if the expert has not made any further explanations. This is due to the fact that Expert R explained during the oral proceedings of 3 April 2003 that broken goods could not be sold regularly but could only be used for ready made meals or soups. In addition, Witness H explained that sticky pepper slices would be unfit for further processing as it would be impossible to separate the slices.

                  (b) The hearing of evidence furthermore showed that this lack of conformity had already been present at the time of the passing of the risk, i.e., at the time the goods had been handed over to the carrier. According to Art 67(1) CISG the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer. This requirement was fulfilled on 15 June 2001 in Albacete/Spain where the goods were handed over to the carrier in the present case.

The Court rules out the possibility that the stickiness or the breakage had occurred during transport.

Witness K (testifying on behalf of the carrier) stated that the cooling system of its truck had been running continuously during his delivery from Albacete to the place of destination and that the cooling unit had been set at minus 25 Celsius. He had not reloaded the cargo, consisting of 33 pallets, during his delivery. Witness K further stated that he had checked the temperature of three pallets in Albacete himself with a digital measuring device, which had shown a temperature of minus 22 Celsius.

The Court is convinced that these statements are correct. The witness appears trustworthy. The statement itself is trustworthy. Witness K has no personal direct economic interest with respect to the outcome of this legal dispute, especially if one takes into account that he has been fully paid for the carriage by the [Buyer]. It has furthermore to be taken into account that witness K himself stated that the goods had been examined outside the truck on the yard. This has not been contested by any of the parties. Therefore, one has to assume that the witness did not show any tendency to favor any party.

The statements of the witnesses that have been heard in Spain cannot alter the belief of the Court that the lack of conformity had already been present at the time of the handing over of the goods to the carrier.

Witness M could not make any statements with respect to the age of the goods or the size of the pepper slices or the breakage of the goods as he has not seen anything or could not remember anything in that respect according to his own statements. The temperature of the goods at the time of the loading of the truck as stated by the carrier has been generally confirmed by Witness M. The fact that Witness M metered the temperature at minus 19 Celsius does not question the results of the measurements of the carrier. This is due to the fact that Witness M metered the temperature of pallets different to those which have been selected by the carrier. Additionally, if one takes into account that the actual measurements took place a long time before the corresponding statements have been made, such differences are not unusual and cannot challenge the validity of the core of the statements.

Witness S stated that she had neither seen the goods at the time they had been picked up from the cold storage of the [Seller] in Alcanterila (Murcia) nor at the time they had been handed over to the carrier, as she had not been present. She could only confirm that the cold chain had not been interrupted during the initial processing of the goods. She, however, stated that the goods had been transferred to different storage rooms, but could not remember any details in response to the question whether there had been an interruption of the cold chain during storage or transport or whether there had been a confusion of the goods.

The integrity of the statement of Witness K that the cold chain had not been interrupted during the transport from Spain to Germany is further strengthened by the assumptions of Expert L who has been initially mandated. He stated that goods which have been quick frozen at minus 40 Celsius start to get sticky at minus 15 Celsius. If the goods still show minus 19 Celsius at the time of their arrival in Germany - which has been confirmed during the proceedings by Witness H - it is impossible that the stickiness evolved during a transport of two to three days. The cooling system of a truck is not capable of refreezing goods to minus 19 Celsius which have been defrosted to more than minus 15 Celsius. It is hence impossible that the quality check on yard caused the stickiness.

This has been affirmed by Witness M who clearly stated that it was impossible that the goods had defrosted during the quality check.

Expert M confirmed in his written expert opinion that the goods must already have been defective at the time they were loaded onto the truck in Spain. The Court does not doubt this assumption of the expert, who has based his expert opinion on correct and undisputed initial expert opinions. Doubts as to the professional competence of Expert M have not been brought forward neither by any party nor by the Court.

The Court is hence convinced that the lack of conformity - at least with respect to the breakage and the stickiness - was already present at the time of the passing of the risk to the [Buyer] on 15 June 2001 (typing error in the original judgment) and thus has neither been caused during transport nor due to an inadequate storage. The latter has to be excluded as Witness H has noticed the stickiness and the breakage on 19 June 2001 which is prior to their actual storage.

            (2) The [Buyer] has given timely notice of this lack of conformity via e-mail on 19 June 2001 in the sense of Art 39(1) CISG. According to this provision, the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. The e-mail of the [Buyer] of 19 June 2001 fulfills these requirements. The buyer has to sufficiently specify the nature of the lack of conformity in order to enable the seller to react adequately to this notice. The [Buyer] has stated that the color of the pepper slices had been "yellow and glassy", that 36% of the goods had been broken, that their length had been at less than 3 cm and that they had been sticky and icy. These notions clearly show what kind of lack of conformity is given notice of. The [Buyer] obviously employed technical terms, which the [Seller] could understand as it is a manufacturer of quick frozen food. Therefore the [Buyer] not only gave notice of a general lack of conformity of the goods but also sufficiently specified the nature of the lack of conformity.

The fact that the nature of the lack of conformity has sufficiently been specified can also be seen from the fact that the [Seller] examined the goods after it had received the e-mail. This very reaction is a possible way of reacting after receiving a sufficient notice of non-conformity.

The notice does not have to be made according to a specific form. Hence an e-mail in English is an admissible way of giving notice.

The fact that the goods have not been examined by the [Buyer] itself but by a customer of the [Buyer] can be neglected. It is true that Art. 38(1) CISG imposes a duty upon the buyer to examine the goods. However, it does not have to be decided whether the [Buyer] is entitled to rely on an examination effected by a third party as the leading doctrine assumes that a prior examination is not to be seen as an requirement for an effective notice. If the buyer gives timely notice of the lack of conformity of the goods in the sense of Art 39(1) CISG, it is irrelevant whether the examination has taken place within reasonable time and in a reasonable form (cf. Magnus, in: Staudinger, BGB [*], 13th ed. 2005, Wiener UN-Kaufrecht, Rn. 15 with respect to Art. 38 CISG w.f.r.).

            (3) The breach of the duty to deliver goods which are of the quantity, quality and description required by the contract in the sense of Art. 35(1) CISG amounts to a fundamental breach of contract. The lack of conformity has to be seen as serious, as it cannot be corrected within reasonable time and with reasonable effort and as the [Buyer] cannot use the goods in the way as stipulated in the contract.

Goods which show a breakage with respect to more than a third and which cannot be processed by the customer of the [Buyer] show a fundamental lack of conformity. It is impossible to correct the stickiness and the breakage. The difference of the quality of the goods from the quality agreed on in the contract is fundamental.

The [Buyer] cannot be reasonably requested to sell the goods at a lower price. The present case cannot be compared to cases where goods which show a small difference in conformity have to be accepted by a buyer as long as he can resell them at a lower price and is thus only entitled to legal remedies such as a reduction in price or a claim for damages (cf. BGHZ 132, 290, 298; OLG Frankfurt, NJW 1994, 1013 et seq.; Magnus, in: Staudinger, BGB [*], loco citato, Rn. 14 with respect to Art 49 CISG).

Apart from this, the requirement with respect to the avoidance of the contract as set by the [Seller] is fulfilled. (as shown above, see 1 a). The avoidance of the contract has hence effectively been declared and the reverse transaction thus has to be effected. The claim for the payment of the purchase price therefore has to be dismissed.

The decision on costs is based on 91(1) S.1. ZPO [*]. The [Seller] has to bear the costs of the proceedings as its claim is dismissed. The decision on the provisional enforceability is based on 709 S. 1 and 2 ZPO. The decision on the value of the claim is made in respect to the purchase price which has been claimed by the [Seller]. The set-off which has been declared alternatively by the [Buyer] cannot be added to the value of the claim, as due to the dismissal of the claim it was not possible to decide on the set-off.


FOOTNOTES

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

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].

** Daniel Nagel has been a law student at Heidelberg University since October 2002 and an exchange student at Leeds University in 2004/2005.

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