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CISG CASE PRESENTATION

Germany 19 October 2006 Appellate Court München (Auto case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/061019g1.html]

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

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Case identification

DATE OF DECISION: 20061019 (19 October 2006)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 23 U 2421/05

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

CASE HISTORY: 1st instance Landgericht München (13 HKO 2273/04) 15 February 2005 [reversed in part]

SELLER'S COUNTRY: Singapore (defendant)

BUYER'S COUNTRY: Germany (plaintiff)

GOODS INVOLVED: Autos


IHR headnote

Reproduced from Internationales Handelsrecht (1/2007) 30

"If general business terms and conditions explicitly exclude the inapplicability of the Uniform Law on the International Sale of Goods (ULIS) and of the Uniform Law on the Formation of Contracts for the International sale of Goods (ULF), the applicability of the CISG is unaffected.

"If the contract price falls due upon a written notice of the seller, the seller may fix an additional period of time for the payment in that notice, if the buyer is given a sufficiently long time to fulfill its obligation."

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Case abstract

GERMANY: Oberlandesgericht München 19 October 2006

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/80], CLOUT abstract no. 826

Reproduced with permission of UNCITRAL

Abstract prepared by Ulrich Magnus, National Correspondent, and Jan Lüsing

The claimant, a car importer based in Singapore, was in business contacts with the defendant, a car exporter from Germany. Between July 2002 and October 2003 the claimant made several collective orders of several cars. The defendant confirmed each order separately. The general terms and conditions of the defendant contained a choice of law clause according to which German law was applicable, to the exclusion of the Uniform Law in the International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contract for the International Sale of Goods (ULF). According to the parties' agreement, the buyer was obliged to pay a deposit while the remaining purchase price should become payable only when the seller would give notice that the shipment was ready and specified the chassis number of the particular car. Though the buyer made several payments, it nevertheless came in arrears with the payment of the due purchase price of several cars.

In April 2003, the seller notified the buyer that additional cars of the second order were ready and fixed an additional period of time for the due payment. However, that notification concerned only part of the purchase price due at that time. Though the buyer had made additional payments, only the purchase price of the cars of the first order had been paid completely by October 2003. In October 2003, the seller finally declared all contracts avoided and demanded damages for loss of profit. The buyer filed an action at the regional court demanding restitution of the payments made. In response, the seller counter-claimed that it was entitled to set-off the buyer's claim to repayment against its claim for damages. The court dismissed the claimant's claim as being entirely off-set.

The appellate court reversed the lower court's judgment and granted the buyer's claim partially. The appellate court stated that the CISG was applicable to the case as the exclusion of the ULIS and the ULF by the seller's general terms and conditions did not mean an exclusion of the CISG. The court noted that in particular in international trade, it was required the explicit decision of the users of the terms and conditions to exclude the CISG.

The appellate court viewed the buyer as entitled to restitution of its payments pursuant to article 81 (2) CISG. However, the court held that that entitlement was partially off-set by the defendant's counterclaim. The defendant was entitled to declare one of the purchase contracts partially avoided with regard to some cars pursuant to article 64 (1) (b) CISG and to demand damages for loss of profit under articles 61 (1) (b), and 74 CISG. For those cars, the defendant had fixed an additional period of time for payment pursuant to article 63 CISG. The court noted that, in principle, the seller could fix an additional period of time for payment in the same notice by which the purchase price became due, if the additional period was sufficiently long for the buyer to fulfil its obligation. Moreover, the court noted that a period of six months between the fixing of the additional period of time and the declaration of contract avoidance did not forfeit the right to declare the contract avoided.

However, the court held that the partial non-payment to the seller could not be regarded as a fundamental breach of contract under article 25 CISG in respect to all contracts concluded between the parties, as they had not concluded a frame agreement, but rather several separate contracts for the sale of individual cars. Therefore, the buyer's non-payment of a particular contract(s) did not entitle the seller to avoid the other contracts.

With regard to the other orders, the court denied the set-off, for different reasons. In one case, the buyer had fully paid the purchase price, in another the price had not become due, as the seller had not notified the buyer, so that no breach of obligation by the buyer (article 61 (1) CISG) occurred and no entitlement to avoidance of the contract was given (article 64 CISG). For another order, the court held that no contract had been concluded, because the confirmation was not sufficiently definite pursuant to article 14 CISG.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 6 ; 14 ; 25 ; 55 ; 58 ; 61 ; 62 ; 63 ; 64 ; 74 ; 81

Classification of issues using UNCITRAL classification code numbers:

6B [Agreements to apply Convention: Choice of German law, ULIS and ULF excluded, not an exclusion of CISG];

14A12 [Criteria for an offer (basic criterion: intention to be bound in case of acceptance): definited of key conditions (determination of quantity and price)];

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

55A [Enforceability of agreements that do not make provision for the price];

58A [Time for payment: buyer to pay when goods placed at buyer's disposition];

61A [Remedies for breach of contract by buyer];

62A [Seller's right to compel performance: seller may compel performance of any of buyer's obligations];

63A [Seller's notice fixing additional final period for buyer's performance];

64A [Seller's right to avoid contract];

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

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

Descriptors: Choice of Law ; Offers ; Price ; Open-price contracts ; Fundamental breach ; avoidance ; Nachfrist ; Set-off ; Damages ; Restitution

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1394.pdf>; Internationales Handelsrecht (1/2007) 30-35

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

French: Claude Witz, Recueil Dalloz (23 October 2008) 2622

German: Piltz, IHR (1/2007) 35-36

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) München

19 October 2006 [23 U 2421/05]

Translation [*] by Kirstin Stadtländer [**]

Edited by Jan Henning Berg [***]

FINAL JUDGMENT

  1. In response to the appeal of Plaintiff [Buyer] the final judgment of the District Court (Landgericht) of Munich I of 15 February 2005 is quashed.

  2. Defendant [Seller] is ordered to pay [Buyer] the amount of 445,974.00 EURO plus interest at a rate of 5% above the prime lending rate since 9 October 2003.

  3. The remainder of [Buyer]'s claim is rejected; the remainder of [Buyer]'s appeal is refused.

  4. The costs of the proceedings are imposed 18% on the [Buyer] and 82% on the [Seller].

  5. The judgment is preliminarily enforceable. The enforcement of the judgment can be averted by rendering bail in the amount of 110% of the sum enforceable under this judgment if the other party does not render a guarantee in the amount of 110 % of the sum to be enforced before the enforcement.

  6. Revision is not admitted.

FACTUAL BACKGROUND

I. [Buyer] has filed suit to require [Seller] to refund payments made on several orders of cars. [Seller] sets off against this claim with its claim for damages.

[Buyer], having its seat in Singapore, intended to sell in the Southeast Asia market, especially in Singapore, high quality cars produced by Daimler Chrysler, BMW and Porsche.

For this purpose, in July and September 2002, it ordered in total fifteen cars of the brands Mercedes and Mercedes-AMG from [Seller], who distributes such cars.

By e-mail of 25 July 2002 (exhibit GD 1), [Seller] confirmed an order from [Buyer] for two Mercedes SL 500 cars. According to this confirmation, the price for the cars should be the current list price on the day of delivery plus a premium of 4,000.00 EURO and transport costs of approximately 300.00 EURO per car. A prepayment of 8,500.00 EURO per car should be made. By e-mail of 2 December 2002 (exhibit GD 1), [Seller] gave notice that the two cars were ready for delivery.

By e-mail of 30 September 2002 (exhibit GD 2), [Buyer] further confirmed the order of:

   -    Five cars of the type SL...AMG with a premium of 5,000.00 EURO per car;
   -    Two cars of the types Mercedes SL 350 and SL 500; and
   -    Four cars of the type E...AMG with a premium of each 1,500.00 EURO; as well as
   -    One car of the type CL ... AMG with a premium of 3,000.00 EURO.

Time periods between November 2002 and May 2003 were stated as the probable date of delivery of these cars.

For the mentioned cars [Buyer] made prepayments in the amount of 32,000.00 EURO and 70,500.00 EURO on 3 October 2002 and on 4 November 2002.

Furthermore, [Buyer] made a payment of 82,731.00 EURO on 10 January 2003 and of a total of 241,859.00 EURO on 14 July 2003 as well as a further payment of 76,496.00 EURO on 11 September 2003.

[Seller] admits the receipt of 82,680.00 EURO, 251,849.00 EURO and 76,445.00 EURO. The difference between the sums of payment asserted by [Buyer] and the amounts received by [Seller] is due to the deduction of fees for international transfers by the involved banks.

On 14 November 2002 (exhibit GD 3), an employee of [Buyer], the witness Gol ..., sent [Seller] a writing in which it is inter alia stated: "As discussed on the phone, I am sending you our order of cars for the types of cars mentioned in the attachment." The attachment mentioned:

   -    Twenty cars of the brand Porsche Cayenne for the Indonesian market;
   -    Five for Singapore; as well as
   -    Another car without indication of the destination.

Characteristics of the fittings were mentioned. However, indications concerning the price, an additional premium and the prepayment to be made were missing.

By writing of 21 November 2002 (exhibit GD 3), [Seller] confirmed the order of 14 November 2002 and stated, as the price of the cars, the German list price as of the date of delivery plus a premium of 3,000.00 EURO as well as a prepayment to be made of 7,000.00 EURO per car. By writing of 4 December 2002, [Seller] requested [Buyer] to make the prepayment (exhibit GD 3/1). [Buyer], however, did not make the requested prepayment and informed [Seller] by e-mail of 3 August 2003 (exhibit GD 11) that its employee only expressed interest in the cars but that the number of cars had never been confirmed and that there was no contract concerning these cars.

In the mentioned writing of [Buyer] of 14 November 2002, [Buyer] further sent a list of other new cars urgently needed, among others, twelve cars of the type BMW 520 I, and asked when the cars of the mentioned types could be delivered and under what conditions. [Seller] indicated in the mentioned writing of 21 November 2002 (GD 3) that the price per car was the German list price on the day of delivery reduced by a discount of 3% and that a prepayment 5,000.00 EURO per car would be necessary.

[Seller] further confirmed to [Buyer] by writing of 28 August 2003 (exhibit GD 27) an order of six cars of the type Mercedes-Benz E 200 K at a price of 37,014.00 EURO. By writing of 8 April 2003 (exhibit GD 7), [Seller] informed [Buyer] that it had not received any of the announced payments. [Seller] further informed that two cars of the type SL 500, four cars of the type E 55 and three cars of the type SL 55 were ready to be collected. [Seller] requested [Buyer] to pay for the mentioned cars in accordance with the attached pro-forma invoice at the latest by 17 April 2003 and to make the prepayments for the twenty-six cars of the type Porsche Cayenne and the twelve cars of type BMW 520 i.

By e-mail of 5 August 2003 (exhibit GD 12), [Seller] requested [Buyer] to immediately transfer the amount of 134,594.00 EURO in addition to the payments already made up to then, as well as to issue a letter of credit in the amount of 686,647.00 EURO for the three cars of the type E 55 and the four cars of the type SL 55 and to make the prepayments for the twenty-six Porsche Cayenne cars, the twelve BMW 520i cars as well as the BMW M 3, in the total amount of 247,000.00 EURO.

On 29 September 2003, [Seller] informed [Buyer] by e-mail that [Seller]'s supplier had meanwhile sold the six Mercedes-Benz E 200 K as well as two SL 55 and two SL 350 cars due to insufficient payment. The AMG cars that were ordered were still available.

Prices in the total amount of 1,224,095.88 EURO plus prepayments in the amount of 247,000.00 EURO were due. The payments of 410,984.00 EURO were to be reduced from this amount, so that a sum of 1,060,111.00 EURO was to be paid.

By writing of 8 October 2003 (exhibit GD 15), [Seller] announced that until 15 October 2003 it was willing to send one BMW M 3 as well as two Mercedes-Benz SL 500 under the condition of complete payment of the price. If the payment was not received within this time-limit and the letter of credit could not be used, the cars would be used otherwise and the price difference would be invoiced as damages. [Seller] further declared that it rescinded all other sales contracts for an important reason and invoiced the difference between the purchase price and the sales price in the amount of 509,468.00 EURO as damages.

During the court proceedings, [Seller] calculated its damages with different amounts, at last with 709,809.58 EURO (p. 67 of the file, exhibit GD 27). [Seller] declared this claim of damages as a set-off against the [Buyer]'s claim for refund.

[Buyer]'s action in First Instance

[Buyer] was of the opinion that seven of the ordered cars had been completely paid and that it had not been in arrears. [Buyer] alleged that:

   -    Concrete offers of delivery by [Seller] had not taken place.
   -    As [Seller] had no right to rescind the contract, it could also not claim damages.
   -    In addition, only contracts for fifteen Mercedes-cars had been concluded; contracts for twenty-six Porsche Cayenne and twelve BMW 520 i had not been validly concluded.

[Buyer] had applied to the Court to order [Seller] to pay 545,586.00 EURO plus interest.

[Seller]'s response

[Seller] had requested the Court to reject the [Buyer]'s claim. [Seller] alleged that:

   -    Valid contracts of sale had been concluded for all of the cars mentioned.
   -    [Buyer] had not paid for any of the cars despite repeated invoices and requests for payment.
   -    [Seller] had therefore been entitled to declare rescission of the contracts.
   -    Due to the breach of contract committed by [Buyer], [Seller had suffered damages in the amount of 709,809.58 EURO.

Rulings of the Court of First Instance

The District Court indicated to [Seller] at the hearing of 9 November 2004 that the alleged damage had not yet been explained, nor had [Seller] provided sufficient proof for it. The Court then set 1 February 2005 as the date for the announcement of judgment and granted [Seller] a time-limit for additional submissions until 20 December 2004 without further specifications. [Seller] specified its damage by submission of 14 December 2004, referring to the folder presented as exhibit GD 27.

In addition, [Seller] referred to the factual findings of the challenged judgment concerning further assertions in the first instance (§ 540 (1) no. 1 ZPO [*].

The District Court neither gave [Buyer] the opportunity to declare itself concerning the explanations of damages in exhibit GD 27 nor did it reopen the hearings before its decision. By final judgment of 15 February 2005, the District Court rejected the [Buyer]'s claim, holding that [Seller] had been able to completely set-off against [Buyer]'s claim for refund with its claim for damages.

The District Court held that:

   -    [Buyer] undisputedly had ordered four cars each of the types SL 55, SL 500 and AMG E 55.
   -    [Buyer] had further ordered twenty-six cars of the type Porsche Cayenne.
   -    It could be concluded from the correspondence between the parties, especially from the e-mail of 29 September 2003 that [Buyer] had been requested to pay several times. [Seller] had therefore correctly declared the rescission of all contracts.
   -    By presenting the invoices of the purchases and the sales as well as invoices to new clients after the rescission [Seller] had proven the lost profit or reduced income for the respective cars. The Court referred to exhibit GD 27 in that respect.

POSITION OF THE PARTIES

Position of [Buyer]

Against this [Buyer] appeals. [Buyer] asserts that this was a surprising judgment as the District Court considered new submissions of [Seller] especially exhibit GD 27 in its judgment without reopening the hearings. [Buyer] did not even receive exhibit GD 27.

[Buyer] alleged that:

   -    It was legally wrong for the District Court to have considered the proof of the damage to be provided by this exhibit when it did not have any value as evidence.
   -    [Seller] had no basis for a set-off claim.
   -    The requirements for a claim of damages had not been met, as [Seller] was not entitled to avoid the contract. The District Court did not determine a fundamental breach according to Art. 74 CISG.
   -    The claimed damage had been contested. [Seller] did not provide proof for it.
   -    There had not been a contract concerning the twenty-six Porsche Cayenne cars, as the confirmation of [Seller] had to be considered as an offer and [Buyer] had not accepted it.

[Buyer] applies to the Court to order [Seller] to pay 545,586.00 EURO plus interest at a rate of 5% above the prime lending rate since 9 October 2003.

Position of [Seller]

[Seller] requests rejection of the [Buyer]'s appeal. [Seller] alleges that:

   -    The provisions of the CISG are not applicable to this legal relationship as they were excluded by [Seller]'s General Conditions which the Chief Executive Officer of [Buyer] had received.
   -    Furthermore, [Buyer] did not effect full payment for any car. [Seller] had repeatedly requested [Buyer] to make the outstanding payments. [Buyer] had been set several time-limits.
   -    The asserted damage has been proven by the documents contained in exhibit GD 27. Alternatively, [Seller] would declare set-off with a lump-sum damage in the amount of 15% of the sum of the orders. The right to do this is contained in its General Conditions.
   -    A setting of an additional period of time for payment was not necessary as it was obvious that [Buyer] was neither willing nor able to perform.
   -    The asserted contracts, especially those concerning the twenty-six Porsche Cayenne cars, had been validly concluded.

The Court of Appeals has taken evidence by hearing witness Ha... on the basis of the resolution of taking evidence of 24 November 2005 (p. 182/184 of the file) and witness Go... on the basis of a decision according to § 273(2) ZPO [*] Code of Civil Procedure of 4 May 2006 (p. 244 of the file). Concerning the results of the taking of evidence, the Court refers to the protocol of the hearings of 16 March 2006 and 21 September 2006.

In addition, the Court refers to the protocol of the hearing of 29 September 2005 as well as to the submissions of the parties and the exhibits.

RULING OF THE APPELLATE COURT

II. The admissible appeal of [Buyer] is partially founded. Due to the set-off declared by [Seller], [Buyer] is only entitled to a claim of refund in the amount of 445,974.00 EURO.

The remand of the dispute to the District Court which [Buyer] alternatively requested could not be taken into consideration. Even though the District Court did deliver a surprising judgment by violating the principle of due process of law and the principles of taking evidence, the requirements for a remand according to § 538(2) no. 1 ZPO [*] are not met, as the necessary taking of evidence by hearing two witnesses was neither comprehensive nor complex.

The Court holds:

      1. Applicable law

      The provisions of the CISG are applicable to the legal relationship as Singapore, where [Buyer] is seated [like Germany, where Seller has its relevant place of business], is a Contracting State of the Convention. The provisions of the CISG have not been excluded by the General Conditions of [Seller]. Thus, it can remain open whether the General Conditions had at all become part of the contract. According to item IX of the General Conditions, German law is exclusively applicable, and the provisions of the Uniform Law in the International Sale of Goods [the 1964 Hague Sales Convention (ULIS)] as well as the Uniform Law on the Formation of Contracts for the International Sale of Goods [the 1964 Hague Formation Convention (ULF)] are excluded.

[Translator's note: ULIS and ULF were uniform law antecedents to the CISG that were in effect in Germany prior to the time Germany renounced them in favor of the CISG.]

[ULIS] and [ULF] were set aside according to Art. 5(1) of the UN Convention of 11 April 1980 on Contracts for the International Sale of Goods as well as by the modification of the Convention of 19 May 1956 on the Contract for the International Carriage of Goods by Road on 5 June 1989 (BGBl. [*] 1989 II, p. 586). But according to Art. 5(2) of this law the [ULIS and ULF] remain decisive for contracts which fall into the scope of [ULIS and ULF] if the contract was concluded before the day on which the CISG became effective for the Federal Republic of Germany. [ULIS] as well as [ULF] therefore did not completely lose relevance with the enforcement of the CISG on 1 January 1991. However, [Seller] only excluded [ULIS] and [ULF] in its General Conditions, but not expressly the CISG.

For the construction of the General Conditions of [Seller], German law is applicable if one assumes that the General Conditions became part of the contract.

On the one hand, in item IX of the General Conditions the application of German law is stipulated. On the other hand, German law is applicable according to Art. 28(2) EGBGB [*], as the characteristic performance is effected at the seat of the seller (Palandt-Heldrich; BGB [*], 65th edition, Art. 28(2) EGBGB para. 9). According to § 305(2) BGB [*], of the German Civil Code, doubts in the construction of general conditions go to the detriment of the user, which is [Seller] here. In the opinion of the Court, the express exclusion of the application of [ULIS] and the [ULF] cannot be construed to the effect that by the setting aside of these laws, the CISG should be excluded. As elaborated before, [ULIS] and [ULF] did not completely lose their relevance for old contracts. Especially in international commerce, it is not readily obvious for a foreign party to determine which provisions concerning the international sale of goods are applicable in Germany. It is therefore up to the user to expressly indicate that he also wants to exclude the applicability of the CISG. Legal expressions used in General Conditions are usually also understood according to their judicial meaning (BGHZ [*] 5, 365, 367).

      2. [Buyer]'s right to refund of payments

      [Buyer] is in general entitled to the refund of its payments according to Art. 81(2) CISG. It can remain open at this point whether [Seller] was entitled to rescind all of the contracts with [Buyer] or just to a partial avoidance, as [Buyer] did at least implicitly agree to the avoidance of all contracts and therefore at least a mutual termination of the contracts was reached.

[Seller] admits that it received 545,391.00 EURO from [Buyer]. In so far as [Buyer] claims the refund of a further 195.00 EURO which were paid on bank fees, this further claim is unfounded as [Buyer] did not prove it. The costs of a transfer always have to be paid by the debtor.

      3. [Seller]'s right to set-off claims for damages

      The right to refund of [Buyer] was extinguished in the amount of 99,417.00 EURO by the set-off declared by [Seller]. [Seller] is entitled to damages in that amount according to Art. 61(1)(b) CISG in connection with Art. 74 et seq. CISG. However, further rights to damages do not exist.

            a) The order of thirteen Mercedes and Mercedes AMG cars (five SL 55 AMG, four E 55 AMG, two SL 350 and two SL 500)

[Seller] is entitled to damages in the amount of 99,417.00 EURO due to the order of four E 55 AMG and three SL 55 AMG cars.

By its e-mail of 30 September 2002 (exhibit GD 2), [Buyer] in total ordered fourteen cars of the types Mercedes and Mercedes AMG. The order of a car of the type CL 55 was cancelled later, so that on the basis of the confirmation of [Seller] of 30 September 2002 (GD 2), a sales contract concerning thirteen cars was concluded.

The parties agreed that maturity was given after a notice of availability and the number of the car would be given by [Seller]. [Buyer] did not contest [Seller]'s assertions on this agreement of maturity, not even after a respective indication of the Court in its order of notification and indication of 24 November 2005.

As the parties did conclude an agreement on the maturity which is in conformity with Art. 6 CISG, Art. 58 CISG which stipulates a matching of performances is not applicable. [Buyer] was obliged to perform first, after the notification of the number of the car and the availability for delivery.

By writing of 8 April 2003 (GD 7), [Seller] set an additional period of time for the payment of nine cars until 17 April 2003. The price of the cars was already due at that time.

Concerning the two Mercedes Benz SL 350 [Seller] declared availability for delivery and notified the numbers of the cars by writing and pro-forma-invoices of 30 January 2003 (GD 5 and GD 27). The same is true for the two Mercedes Benz SL 500 cars numbered ...637 and ... 932 that were ordered as well on 30 September 2002.

By pro-forma invoice of 10 February 2003 (GD 6), [Seller] notified [Buyer] of the car numbers ...817 and ...583 of the two Mercedes AMG E 55 cars. By writing of 8 April 2003 (GD 7), [Seller] again transmitted the numbers of the cars mentioned above in item 3 a) of the types Mercedes Benz SL 500 with the car numbers ...554 and...873 and two cars of the type Mercedes AMG E 55 with the car numbers ...817 and ...583 as well as for the first time the numbers of two futher AMG E 55 cars with the car numbers ...130 and ...014 and three Mercedes AMG SL 55 cars with the car numbers ...455, ...924 and ...349, and declared its willingness to deliver and requested payment at the latest by 17 April 2003.

Furthermore, [Seller] sent to [Buyer] a pro-forma invoice dated 8 April 2003 (GD 7) for a further Mercedes AMG SL 55 with the car number ... 996.

Thus, at the time of the setting of the additional time for performance of 8 April 2003 (GD 7), the prices concerning the two Mercedes Benz SL 500 as well as the two E 55 AMG with the car numbers ...817 and ...583 had been due already.

Furthermore, the price for the two Mercedes Benz SL 350 was also due. The setting of the additional period of time in the writing of 8 April 2003, however, did not extend to these two cars.

Concerning two further cars of the type Mercedes AMG E 55 and three Mercedes AMG SL 55 which are mentioned in the writing of 8 April 2003, maturity of the claim was only triggered by the notice of availability contained in this writing. In so far it can remain open if a setting of a time limit can also be declared after the date of maturity (MuenchKomm HGB/Benicke, CISG Art. 47 para. 5 with further reference). Here, the maturity became effective at the same time like the setting of the time limit. It would be pure formalism if a seller had to produce separate writings to establish maturity in one and to set an additional period of time in the other which could be received by the debtor immediately after the other. The debtor does not suffer a detriment by a creation of maturity and a setting of an additional period of time in the same writing if a reasonable time limit for performance is set. This is the case here: concerning the prices that became due by the fax of 8 April 2003, a time limit for the payment of nine days remained. Furthermore, avoidance of contract was only declared on 8 October 2003.

[Buyer] violated its obligation to pay the price according to Art. 62 CISG. Alone for the two cars of the type Mercedes AMG E 55 mentioned in the writing of 8 April 2003 a price of 79,891.00 EURO for each as well as for two further cars of that type of 78,576.00 EURO each, was due. For the three SL 55 AMG, a price of 112,401.00 EURO each was due; thus for the seven cars mentioned in the writing of 8 April 2003, a total price of 654,137.00 EURO.

[Seller] therefore was entitled to the setting of an additional period of time for performance according to Art. 63 CISG. The declaration under Art. 63 CISG does not have to contain a threat of rejection. The writing of 8 April 2003, however, does express with sufficient clarity that the seller requests performance within the additional period of time and therefore meets the requirements of Art. 63 CISG (MuenchKomm HGB/Benicke, CISG Art. 47 Rn 5).

However, [Seller] must stick to the fact that it only set an additional period of time for the cars mentioned in the writing of 8 April 2003.

Of the payment in the amount of 251,849.00 EURO made on 14 July 2003, 81,732.00 EURO refer to the two cars of the type Mercedes Benz SL 500 ordered on 25 July 2002, so that for the further cars an amount of 170,117.00 EURO remained outstanding. Also, the further payment by [Buyer] of 11 September 2003 in the amount of 76,445.00 EURO concerning which [Buyer] did make determination of clearance on 12 September 2003 (K 17) was not sufficient to completely pay the outstanding amount.

As [Buyer] therefore also did not fulfil its obligation to pay the price in full after the setting of the time limit of 8 April 2003, Article 64(1)(b) CISG entitled [Seller] to declare avoidance of the contracts concerning which it had set an additional period of time for performance under Art. 64(1)(b) CISG by writing of 8 October 2003 and to request damages according to Art. 61(1)(b) CISG in connection with Art. 74 et seq. CISG.

Even though there was a period of six months between the setting of the additional period of time for performance and the declaration of avoidance of the contract, the avoidance was not forfeited as [Buyer] could not expect that [Seller] would not make use of its rights despite the complete payment of the price still being outstanding.

The obligation to pay damages, however, is restricted to the four cars of the type E 55 AMG and the three SL 55 mentioned in the writing of 8 April 2003. As outlined before, at the time of declaration of avoidance of contract by [Seller] on 8 October 2003, the two Mercedes Benz SL 500 with the car numbers ...554 and ...873 had already been paid completely.

Concerning the two cars Mercedes Benz SL 350 as well as the SL 55 AMG with the car number ...924 and the further E 55 AMG, [Seller] did not prove a setting of an additional period of time for performance. In the writing of 8 April 2003, these cars are not mentioned. The witness Ha... did confirm [Seller]'s assertion that [Seller] orally set [Buyer] further additional periods of time for performance. However, the Court in so far does not consider the statement of the witness Ha... to be credible. The witness could not even undertake the least helpful chronological order and also partly erred concerning the chronology of the events.

He did outline that [Buyer] had regularly been requested to pay until the declaration of avoidance of the contract. However, due to the vague declarations of the witness, the Court could neither acquire a picture about when these declarations would have been made nor whether they met the requirements of Art. 63 CISG concerning the content of such declarations. The Court therefore follows the statement of the witness Go... who elaborated that [Seller] did urge to payments during its visit in June 2003 but that there have not been any setting of additional periods of time to perform between June and October, but only the demand of [Seller] to stick to the agreement.

This is further supported by the fact that [Seller] still concluded another contract with [Buyer] for the delivery of six Mercedes 200 on 28 August 2003.

The Court considers the testimony of witness Go... to be credible. While the witness Ha... is still employed by [Seller], the witness Go...already stopped working for [Buyer] in June 2005 and does not have any visible interest of his own in the outcome of the dispute.

As no frame contract concerning the delivery of cars was asserted, but only individual sales contracts concerning cars, the missing payments for the above-mentioned cars do not constitute a fundamental breach of contract in the sense of Art. 25 CISG which could justify the avoidance of all contracts without the setting of an additional period of time for performance.

The price for the cars of the type E 55 AMG with the car numbers ...817 and ...583 agreed on with [Buyer] was each 85,576.00 EURO; for the two further cars of the type E 55 with the car numbers ...130 and ...014 each 86,891.00 EURO. For all four cars, the purchase price was each 75,388.50 EURO. This led to a lost profit for the two cars of each 10,187.50 EURO and for the two further ones of 11,502.50 EURO each; in total thus a damage of 43,380.00 EURO.

Concerning the five cars of the type SL 55 AMG, [Seller] only provided proof of damages for the four cars with the car numbers ...455, ...924, ...996 and ...349. The fifth car of this type is not mentioned in the calculation of damages of [Seller]. Also, there is no assertion concerning the meeting of the requirements for maturity at the time of the setting of the additional period of time for performance in so far. Concerning the car with the car number ...996, no additional period of time for performance was set so that [Seller] can only claim damages for three of the cars of the type SL 55 AMG. The damage is therefore calculated on the basis of the price agreed with [Buyer] for these three cars of 120,901.00 EURO each reduced by the purchase price paid by [Seller] in the amount of 102,222.00 EURO each; thus, a lost profit per car of 18,679.00 EURO. The total damage concerning these cars is therefore 56,037.00 EURO.

[Seller] did prove these damages to the Court's satisfaction by the statement of the witness Ha.... He outlined that he calculated the losses and profits mentioned in exhibit GD 27 with the help of his documents. The Court considers the statement of the witness Ha... to be credible in so far. There are no hints that he made a false statement concerning the calculation of the damages.

Even though the witness only had a vague memory concerning other issues of his hearing, his statement was convincing concerning the calculation of damages and logical in itself.

            b) Sales contract concerning two Mercedes Benz SL 500 cars with the numbers ...554 and ... 873

[Seller] does not have any claims concerning these cars he could set-off with. These cars have undisputedly been ordered by [Buyer] on 25 July 2002 (exhibit GD 1). [Seller] confirmed the order on the same day. On 2 December 2002, [Seller] communicated his willingness to deliver concerning these cars (GD 1 and GD 27). The price of 90,181.00 EURO as well as 91,231.00 EURO was thus due according to the agreement of the parties.

According to uncontested assertions of [Seller], there was also an agreement concerning the maturity of the price for these cars. The agreement provided that the price had to be paid in full upon the notification of the willingness to deliver and the information about the car numbers.

However, these two cars have been paid completely by [Buyer] so that there is no breach of contract on part of [Buyer].

Undisputedly, [Buyer] had made a prepayment on the total price of 181,412.00 EURO in the amount of 17,000.00 EURO so that at first a price of 164,412.00 EURO had still been outstanding. It is undisputed that on 14 January 2003 [Buyer], uncontestedly made a further payment of 82,680.00 EURO to [Seller] (exhibit K 7). At that time, only the price for these two mentioned cars was due. As [Buyer] did not make another determination of clearance, the payment was made on the due debt in accordance with § 366(2) German Civil Code.

Concerning the completion, German law is applicable under Art. 28(2) EGBGB [*] (see above) as the CISG does not contain a respective regulation. Thus, a further partial amount of 84,732.00 EURO remained outstanding. This amount was paid by [Buyer] by its payment of 251,849.00 EURO on 14 July 2003. Even though the prices for four cars of the type AMG E 55 and three cars of the type SL 55 were due at that time, the payment had to be set-off against the older debt first under § 366(2) BGB [*], as the payment was not sufficient to liquidate all payments due. The time of accrual is decisive. That was the time of the conclusion of the contract on 25 July 2002.

At the time of the declaration of avoidance of [Seller] on 8 October 2003 (exhibit GD 15), the price concerning these two cars had been paid completely. The requirements for an avoidance of contract were not met. In so far, a claim for damages according to Art. 61(1) CISG cannot be taken into consideration. Damages due to delay were not shown by [Seller].

The parties did not assert that they had concluded a frame contract. There are also no indications for that. Therefore, we are dealing with individual sales contracts, the legal fate of which must be evaluated separately.

[Buyer] can thus claim refund of the paid price, as the parties agree that the concluded contracts are not to be executed and thereby at least implicitly agreed on an avoidance of contract.

            c) Six cars of the type Mercedes E 200

The contract concerning the Mercedes E 200 cars was concluded through an order of [Buyer] and the confirmation of [Seller] both of 28 August 2003 (exhibit GD 27). By writing of 16 September 2003 (exhibit GD 13), [Seller] notified [Buyer] of the address where to collect these cars. However, [Seller] did not allege a notification of the car numbers. Thus, the requirement for maturity of the price agreed upon by the parties was not fulfilled. Consequently, there was no breach of contract by [Buyer] in the sense of Art. 61(1)(b) CISG which could entitle [Seller] to avoid the contract according to Art. 74 et seq. CISG. The setting of a time limit was not shown, either. The order of these cars only took place after the setting of a time limit of 8 April 2003. As elaborated, the statement of the witness Ha... cannot be used as evidence for further settings of time limits.

Moreover, there was no framework contract and the incomplete payment of the price of other cars did not make the setting of an additional period of time for performance dispensable.

            d) Two cars of the type BMW M 3 CSL

[Seller] asserted that the Director of Sales of [Buyer], the witness Go... had ordered the two cars of the type BMW M 3 CSL by phone in March 2003 (p. 161 of the file). [Buyer] contested the order of these two cars. Undisputedly, [Buyer], however, made a prepayment of 7,500.00 EURO each for the two cars. As [Buyer] did not submit any circumstances why it should have made a prepayment on a contract that had not been concluded, the Court considers the conclusion of a contract to be given.

However, [Seller] did not show the requirements for a claim of damages under Art. 61 in connection with Art. 74 et seq. CISG.

By writing of 25 September 2003 (exhibit GD 27), [Seller] invoiced [Buyer] the car with the car number JE ... 535 and informed about the car number by writing of its affiliated company GI... GmbH. In so far, it can remain open whether [Seller] had further been obliged to inform about its willingness to deliver or whether this notification was implicitly contained in the sending of the invoice. Against the assumption of the latter speaks the statement of the witness Ha... according to which one or both of the cars had only been ready at the end of 2003.

However, the witness Ha... could not credibly outline that an additional period of time for performance had also been set concerning these cars. Earlier settings of additional periods of time for performance are irrelevant as maturity did not take place before the notification of the car number on 25 September 2003. It is not proven and not visible through the documents that after this date and before the declaration of avoidance of contract of 8 October 2003 any additional period of time for performance was set by [Seller]. The setting of an additional period of time for performance had not been dispensable, either, as [Buyer] had not definitely and seriously rejected the payment of the price.

Therefore, the requirements for a claim of damages according to Art. 61(1)(b) CISG are not shown.

Concerning the second car of the brand BMW M3 CLS, [Seller] neither asserted that it had invoiced it nor that it had notified of its willingness to deliver and informed about the car number. Also, the calculation of damages (exhibit GD 27) does not contain a car number. The price for this car is thus not even due.

            e) Twelve cars of the brand BMW 520 i

A claim for damages of [Seller] for these twelve cars must be rejected due to the fact that the conclusion of a contract was not proven.

[Seller] asserts that [Buyer] had ordered these cars by writing of 14 November 2002 (exhibit GD 3). But this is not the case. The subject of the writing of 14 November 2002 states "Orders of cars Porsche Cayenne S right-hand drive vehicle (RHD)". It is further stated in the writing: "As discussed on the phone I am sending you our order for the types of cars mentioned in the attachment." In the following attachment, cars of the brand Porsche Cayenne are named. It is further stated: "in the following a list of further new cars urgently needed." As such twenty BMW X 3, twelve BMW 520 i as well as a VW Touareg 3.2 V 6 are named and it is asked when these would be deliverable and under which conditions. This does not constitute a binding order of BMW 520 i.

Besides, [Seller] obviously was of the same opinion concerning the twenty BMW X 3 and the unspecified number of VW Touaregs which are mentioned in the writing and did not request acceptance and payment of the price concerning these cars.

It is true that [Seller] did not only confirm the order of twenty-six Porsche Cayenne, but also of twelve BMW 520 i in its writing of 21 November 2002 (exhibit GD 3). However, this confirmation only constitutes the offer for a conclusion of a sales contract due to the lack of an offer by [Buyer]. [Seller] did not show that [Buyer] did in any way - even implicitly - accept this offer.

In addition, [Seller] did also not show that it notified of its willingness to deliver concerning these cars and informed about the car numbers, so that there would also not have been maturity of the price.

Therefore, [Seller] is not entitled to damages on this claim

            f) Twenty-six cars of the type Porsche Cayenne

            Concerning these twenty-six cars, [Seller] did not prove a valid conclusion of a contract. [Buyer] contested such a conclusion of a contract. It is true that there is an "order" of [Buyer] concerning these cars in the writing of 14 November 2002 (exhibit GD 3). In contrast to [Buyer]'s opinion, it cannot only be concluded from the writing that it was a non-binding question. On the contrary, [Buyer] itself speaks of an "order of cars" in this writing. However, in this writing of [Buyer], neither the price nor the premium to be paid to [Seller], nor the prepayments are mentioned. These dates can only be found in the confirmation of [Seller] of 21 November 2002 (exhibit GD 3). There, the German list price on the day of delivery plus a premium of 3,000.00 EURO as well as a prepayment of 7,000.00 EURO per car is requested for the cars.

It is possible to consider the usual price for a certain good as agreed upon under Art. 55 CISG even without an express or implicit agreement. But this requires that a valid conclusion of a contract took place (MuenchKomm HGB/Benicke, Art. 55 CISG, para. 3).

According to Art. 14 CISG, an offer is only able to be accepted if the proposal expressly or implicitly sets forth the price or enables the determination of the price. Thus, in general, a determination of the price by reference to a list price is possible. It can remain open if on the basis of the two previous contracts between the parties of 25 July 2002 and 30 September 2002 such a list price must generally be considered as silently agreed between them.

Part of the price should also be a premium in the amount of 3,000.00 EURO. Concerning this, [Seller] asserted it had been agreed in the contractual negotiations on the phone. This was contested by [Buyer]. [Seller] did not provide evidence that an agreement concerning the payable premium was reached on the phone before. It is true that the witness Ha... did confirm this. However, the Court was not convinced of the correctness of his statement.

The witness Ha...did not have any usable memory concerning the order of the Porsche Cayennes. This is understandable as the negotiations of the contract had not been led by him but by [Seller]'s Chief Executive Officer, Mister Voi... and the witness Ha... only asserted that he listened to these telephone conversations.

The negotiations of the price have been led by the other Chief Executive Officer of [Seller], Mister Doe..., according to the witness statement. It is true that the witness confirmed that the employee of [Buyer], Mister Go... accepted it when Mister Doe declared that the price of the delivery was the list price on the date of delivery plus 3,000.00 EURO. However, the statement of the witness Ha... concerning the conclusion of the sales contract for the Porsche Cayennes was extremely contradictory. First, the witness had stated that the order was placed at the beginning of winter 2003/2004. It had been parallel to the order of the six Mercedes E 200 K. In fact, these had already been ordered on 28 August 2003 (see above). Only after a respective question, the witness then declared that it is true that the confirmation of the order of the Porsche Cayennes took place at the end of 2002.

Furthermore, the witness did not outline that the telephone conversations concerning the price he had listened to had actually taken place before the order of 14 November 2002. It further speaks against this that [Buyer] elaborates that it is sending an order for cars "as talked about on the telephone" but does not at all mention an agreement on the price. Also, in its writing of 21 November 2002, [Seller] only thanks for the order of cars of 14 November 2002 and confirms it while stating the price. A hint that the price had been previously agreed on the phone is missing.

Contrary to that, witness Go... declared that, by the fax of 14 November 2002, he only intended to ask for the possibility of delivery with the mentioned fittings and under which conditions this would be possible. The question had been whether right-hand drive vehicles were deliverable. It is true that it was also mentioned that a considerably raised price was to be paid, about the amount of which was not discussed. It had been clear for them that after the receipt of the confirmation of order of [Seller], a contract was only concluded if [Buyer] would pay the requested prepayments. The Chief Executive Officer of [Buyer] did not make any assurances to [Seller].

The question whether [Buyer] did really receive an advancement invoice from [Seller] is not really relevant in the opinion of the Court - also not concerning the credibility of the witness Go.... Even if this was the case in contrast to the statement of the witness, the Court considers him as well as his statement to be credible. The witness remembered the case very well and delivered his statement in a coherent and conclusive manner.

As essential parts of the contract, namely the payable premium, had only been mentioned to [Buyer] in [Seller]'s writing of 21 November, this writing constitutes the offer to conclude a sales contract. However, this offer was not accepted by [Buyer], either implicitly or expressly.

In accordance with that, by writing of 2 December 2002 (exhibit GD 33), [Buyer] rejected [Seller]'s proposal to calculate the deposit of 17,000.00 EURO paid for the Mercedes Benz SL 500 on the deposit to be paid for the Porsche Cayennes by writing of 3 December 2002 (exhibit GD 34).

The writing of [Seller] of 6 February 2003 (exhibit GD 35) with the request to make the prepayment for the Porsche Cayennes in the amount of 182,000.00 EURO was not contested by [Buyer] with the hint that no contract had been concluded. However, [Buyer] did not make the requested prepayments. By writing of 3 August 2003 (exhibit GD 11), [Buyer] for the first time expressly contested [Seller]'s opinion that a binding contract had been concluded.

A statement of [Buyer] in the way that it agreed to the contractual conditions mentioned by [Seller] in its writing of 21 November 2002 is not given. Also an implicit acceptance of the contract is not given due to lack of a respective behavior of [Seller]. Therefore, [Seller] cannot claim damages for these cars. It can thus remain open whether in so far a setting of a time limit after maturity of the price was given or if it was dispensable due to the declaration of [Buyer] of 3 August 2003 that no contract had been concluded. It can further remain unanswered whether the damage asserted by [Seller] and contested by [Buyer] was actually suffered.

III. Procedural decisions

The procedural decisions are based on §§ 92, 708 No. 10, 711, 709(2) ZPO [*].

The requirements for the admission of the revision according to § 543(2) ZPO are not fulfilled. The Court applies principles of constant jurisdiction on the individual case and undertakes an interpretation of contractual agreements which has no further relevance than in this individual case.

The case neither has fundamental relevance nor does the enhancement of the law or the assurance of a consistent judicature require a decision of the court of revision.

Presiding Judge          Judge          Judge


FOOTNOTES

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

Translator's note on abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGBI = Bundesgesetzblatt [German Federal Law Gazette]; BGHZ = Entscheidungen des Bundesgerichtshofes in Zivilsachen [Official Reporter of Decisions of the German Federal; Supreme Court on Civil Matters]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

** Kirsten Stadtländer is a trainee lawyer at the Higher Regional Court of Düsseldorf. She obtained her law degree at Humboldt University Berlin and was a member of the team of Humboldt University at the 9th Willem C. Vis International Commercial Arbitration Moot 2001/02 and a coach of the team at the 10th Willem C. Vis International Commercial Arbitration Moot 2002/03.

*** Jan Henning Berg is a law student at the University of Osnabrück, Germany and participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück.

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Pace Law School Institute of International Commercial Law - Last updated January 8, 2009
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