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CISG CASE PRESENTATION

Austria 3 May 2007 Commercial Court Vienna (Poppy seed case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070503a3.html]

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Case identification

DATE OF DECISION: 20070503 (3 May 2007)

JURISDICTION: Austria

TRIBUNAL: Handelsgericht [Commercial Court] Wien

JUDGE(S): Oskar Strassegger

CASE NUMBER/DOCKET NUMBER: 43 Cg 34/05f

CASE NAME: Austrian case citations do not generally identify parties to proceedings

CASE HISTORY: 2d instance Oberlandesgericht Wien; 3d instance Oberster Gerichtshof 8 May 2008

SELLER'S COUNTRY: Czech Republic (plaintiff)

BUYER'S COUNTRY: Austria (defendant)

GOODS INVOLVED: Poppy seeds


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 39 ; 50 ; 74 ; 78 [Also cited: Articles 7 ; 11 ]

Classification of issues using UNCITRAL classification code numbers:

39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required];

50A [Buyer's right to reduce price for non-conforming goods];

74A1 [Damages (loss suffered as consequence of breach): includes loss of profit (causation issues)];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Lack of conformity notice, timeliness ; Lack of conformity notice, specificity ; Reduction of price, remedy of ; Damages ; Proof of damages ; Profits, loss of ; Interest

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CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

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CITATIONS TO TEXT OF DECISION

Original language (German): Click here for German text of case

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

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Case text (English translation)

Queen Mary Case Translation Programme

Commercial Court (Handelsgericht) Vienna

3 May 2007 [43 Cg 34/05f]

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

Daniel Nagel [**]

JUDGMENT

  1. The [Seller]'s claim is justified in the amount of Czech crowns [CZK] [*] 834,210.00, payable in EUR according to the exchange rate of the day the payment has been due or of the day of the payment upon the choice of the [Seller].

  2. The [Buyer] is not entitled to its counterclaim.

  3. The [Buyer] has to pay CZK 834,210.00 within fourteen days plus 9.5% interest since 24 January 2005 payable in EUR according to the exchange rate of the day the payment has been due or of the day of the payment upon the choice of the [Seller].

    The [Buyer] has to bear the costs of the proceedings, which have been set at EUR 10,796.28 (including EUR 1,694.50 turnover taxes and EUR 629.30 cash expenses).

    The [Seller] is not entitled to claim further CZK 92,690.00 plus 9.5% interest since 24 January 2005 payable in EUR according to the exchange rate of the day the payment has been due or of the day of the payment upon the choice of the [Seller].

FACTS

The [Seller] operates farms in the Czech Republic and focuses on the cultivation of poppies. The [Buyer] trades with goods of all kinds, in particular with spices and round wood from the Czech Republic. The [Buyer]'s company is very small. It has only three employees.

On 26 November 2004, the [Buyer] ordered 30 tons of poppy seeds according to samples from the [Seller]. The goods were delivered in three cartloads to the address indicated by the [Buyer]. The [Seller] issued invoice No. 740012 in respect to this delivery in the amount of CZK 926,900.00, which has not been paid by the [Buyer].

POSITION OF THE PARTIES

[Seller]'s position

The [Seller] claims for payment of the purchase price and alleges that the [Buyer] had failed to give notice of non-conformity both in respect to the goods and in respect to the invoice. The delivered goods had corresponded to the samples. The ultimate buyer had accepted the goods without claiming a reduction in price. The [Seller] is not liable for transport damages as the [Buyer] had been obliged to pick up the goods at the premises of the [Seller].

The [Buyer] had been contractually bound to test a sample of the goods and had failed to do so.

As the [Buyer] had been informed by the ultimate buyer that the goods might also contain some caraway seeds, [Buyer] would have been able to give notice thereof at that point in time.

In its letter of 28 January 2005, the [Buyer] had promised to meet the invoice and had thus waived its right to give notice. The [Seller] had been forced to take out a loan for the purchase price and the costs of the proceedings in the amount of EUR 34,000.00 at an interest rate of 9.5% due to the deliberate delay of payment of the [Buyer].

[Buyer]'s position

The [Buyer] contests the submissions of the [Seller] and alleges that the delivered poppy seeds were be of poor quality and did not correspond to the samples. [Buyer] had given notice thereof both via telephone and in writing. [Buyer] is entitled to a reduction in price, which has been estimated at EUR 5,000.00 in [Buyer]'s counterclaim and extended to the amount of the entire purchase price during the oral proceedings. Furthermore, [Buyer] has incurred packaging costs, as the wholesale packaging had slipped during the transport.

[Buyer] had offered the goods to third parties at a low price and tried to secure a cover sale.

Due to the small size of [Buyer]'s company, the period to give notice should be extended. A timely notice had been given via telephone on 19 January 2005.

Due to the contamination of the delivered poppy seeds, the [Buyer]'s further business transaction with Company B had failed. [Buyer] would have had the possibility to deliver at least 120 further tons of poppy seeds. Hence -- based on a profit margin of EUR 5.00 / 100kg minus costs for delivery and the laboratory - [Buyer] incurred a loss of profit in the amount of EUR 5,184.00. [Buyer] declared a set-off in respect to all these damages against the claim of the [Seller].

Evidence has been taken via questioning of the [Seller] (ON 11) and of the [Buyer] (ON 14, 16, and 32), of Witnesses B (ON 16) and W (ON 24), via obtaining an expert opinion and via the inspection of the submitted documents.

FURTHER FACTS

Thus, the facts -- in addition to the aforementioned, which have partially been explicitly undisputed -- can be further summarized as follows:

The [Seller] contacted the [Buyer] by telephone in order to sell poppy seed. The contact followed an advertisement of the [Buyer] in the Czech press. The [Buyer] asked for a sample in order to be able to suggest a price based on the quality (letter of the [Buyer] of 24 November 2004, court report page 39). Shortly afterwards, the [Seller] delivered a sample. It was received by the [Buyer] on 26 November 2004. The quality of the sample was accepted by the [Buyer]. It offered to pay CZK 31.00 per kilo poppy seeds (letter of the [Buyer] of 26 November 2004, court report page 39). The [Buyer] sent a part of this sample to Company B, which estimated the contamination at 0.06% (enclosure ./F, Witness W court report page 106 and the project page to the legal assistance protocol in ON 24).

The contamination was seen as being caraway.

The [Buyer] concluded a contract with Company B on the basis of [Seller]'s sample. The parties agreed in this respect that the contamination with caraway should not exceed this level and that the contamination should in general not exceed 0.4 %.

The [Seller] asked the [Buyer] to conclude a written contract for the purchase of the poppy seeds it manufactured (enclosure ./O). The [Buyer] sent a standard purchase contract form on 2 December 2004 (enclosure ./2). This contact stated that the sale concerned 30 tons of Czech poppy seeds according to the quality of the sample as well as that the purchase price would be CZK 3,100.00 / 100 kg. The contract stated furthermore, that the delivery should take place by lorry from D__ in the Czech Republic. The conditions for payment were stated as: Payment is due immediately after the goods have been accepted (upon receipt of the goods) at the place of destination (10 to 14 days after the taking over of the goods).

The [Seller] asked for the following amendment: "Upon picking up the goods, the buyer will take samples. In case of non-compliance, the seller will take the goods back." The [Buyer] agreed to this amendment. Both parties signed the agreement (enclosure ./2).

The [Seller] additionally requested that the description of the goods "according to the sample" be changed to "first quality - according to CS norm [*] - as was the delivered sample" and pointed out that the sample would have been taken from a randomly chosen bag which had been sewn up and that the laboratory of the manufacturer would allow a slight deviation within the CS norm of 1% as regards contamination (enclosure ./4).

However, the [Buyer] refused to accept such an amendment in a letter of 3 December 2004 (enclosure ./3). It offered to further contract with the [Seller] if the latter was able to issue a guaranty that the quality would be in accord with the sample. On 3 December 2004, the [Seller] and an employee of the [Buyer], Witness Katherina B___, additionally had a telephone conversation. The [Seller] explained that:

   -    It only had 30 tons of poppy seeds available which matched the sample;
   -    The cleaning and the packaging would continually be examined; and
   -    The delivery would correspond to the sample.

The deviation would not mean that the goods would not match the sample, but that there might be differences of 0/1% within a delivery of 30 tons between two packages and that the sample of 26 November 2004 had been confirmed in the agreement (enclosure ./5).

The [Seller] requested that its handwritten amendments be included in the agreement enclosure ./2 and that the agreement be retyped, signed and sent to the [Seller] on 10 January 2005 (enclosure ./B).

On 21 December 2004, the [Buyer] asked for the delivery of another sample. The [Seller] fulfilled this request on 23 December 2004 (enclosure ./Q).

On 11 and 12 January 2005, the [Buyer] had the poppy seeds (29,900 kilos according to enclosure ./D) picked up at the [Seller]'s premises without taking samples and had the poppy seeds delivered to its Customer B in A___ (enclosure ./C). On arrival, a sample was taken and tested. The test result showed that the poppy seeds had not been cleaned homogenously. There was a contamination of between 0.4% and 1.1 % as well as 1.8% (enclosure ./F and witness W, court report page 107). Thus, the delivered poppy seeds did not match the sample of 26 November 2004.

Company B gave notice to the [Buyer] of a contamination with caraway and stated that it would not accept the goods (letter of 19 January 2005 enclosure ./6).

In order to clarify this, Witness B immediately called the [Seller], who was thus informed on 19 January 2005 at the latest, that the delivered poppy seeds were not in conformity with the contract as there was a strong contamination with caraway, which could be smelled as well. The [Seller] stated that it could exclude such a contamination as the sacks the poppy seeds had been delivered in would have been new and as there had not been any caraway in the storage rooms. In addition, it would be unusual in the respective area of cultivation to cultivate caraway.

The [Buyer] called Company M and reported the information it had received from the [Seller] and pointed to the samples it had taken on 29 December 2004 (enclosure ./9 and ./10). It additionally pointed out that the contamination could have been caused by feverfew (enclosures ./1, ./7, ./11 to ./14, and ./T). On the following day, the [Buyer] asked to be allowed to obtain a sample (enclosure ./15); Company B corrected its statement and said that the caraway would be feverfew. It, however, added that it would nevertheless not be able to accept the contamination and that it would not be interested in time consuming tests and disputes. It declared that it would keep the goods and settle the invoice, but would not be interested in further transactions with the [Buyer] (enclosure ./F).

The cancellation of the business relationship between the [Buyer] and Company B was not caused by the quality of the poppy seeds but a result of the behavior of the [Buyer] in the course of the transaction.

On 20 January 2005, Company B paid the purchase price for the poppy seeds in the amount of EUR 35,218.47 - posting date: 25 January 2005 (enclosure ./G).

After the [Seller] had reminded the [Buyer] to meet the invoices several times, the [Buyer] declared that the delivery would still be processed and that the matter would be finally solved the following week via letter on 28 January 2005 (enclosure ./H). Due to the aftertaste of caraway, the effective handing over of the goods would have been delayed and further tests would have been necessary; the [Seller] would not have to worry about the payment as the [Buyer] would immediately give notice as soon as the money was transferred.

Jan S___ offered credit to the [Seller] in the amount of EUR 34,000.00 in order to at least partially cover the purchase price and the costs of the proceedings. The [Seller] had to pay an interest rate of 9.5 % in this respect (enclosure ./L).

The poppy seeds which have been delivered by the [Seller] and which showed a strong contamination with feverfew could have been used in 2005 for fillings, if the quality standards would have been lowered or if the goods would have been sold in the East, e.g., in Russia. Thus, a price reduction of 10 % (of the market price of comparable cleaned poppy seeds, according to the sample of 26 November 2004) would be necessary. The poppy seeds could have been cleaned, so that it would have had a market price between EUR 0.89 and EUR 1.19 per kilo in January.

REASONING

These factual findings by the Court are based on the following evaluation of evidence. Documents are cited in the text as far as the facts are based thereon.

The [Seller] admitted that it had sent a sample to the [Buyer] twice. The extraordinary cleanliness of the first sample - only 0.06% traces of caraway - can be taken from the paper which has been submitted by Witness Andrea W (in ON 24). The [Buyer] must have passed on the first sample to Company B, as the latter received it on 22 December 2004 as can be seen from the paper. The second sample had not been sent by the [Seller] prior to 23 December 2004 and thus a day later (enclosure ./Q). Therefore, it was impossible for it to have reached Company B on 22 December 2004. The test results number 18 and 18 b which have been submitted by the [Buyer] could refer to the second delivery as regards time. They additionally correspond with the third item in the letter of Company B of 20 January 2005 (enclosure ./F) which show a cleanliness of 99.6%. Even though the expert witness could not verify whether these samples had been taken in compliance with the respective requirements - due to a lack of documentation - it is possible to match all results with the values as stated in the letter of Company B of 20 January 2005 (enclosure ./8 to ./10, ./M, paper in ON 24 as well as the consignment note which has been obtained by the expert witness in his report in ON 27). Thus, it can be assumed that the first sample which has been sent by the [Seller] formed the basis of the contract between the [Buyer] and Company B. This very sample was the basis for the agreement between the parties (enclosure ./B), which expressly referred to the sample of 26 November 2004. As the [Buyer] did not obtain this sample from the [Seller] until 22 December 2004 and could only transmit the latter to Company B, it can be assumed that the level of cleanliness as stated in the paper (in ON 24) of 0.06% formed the basis of the contract between the [Buyer] and Company B.

Test results in respect to the poppy seeds which have been delivered by the [Seller] are solely contained in the consignment note which has been included in the report of the expert witness (in ON 27) which shows a contamination between 1.1 % and 1.8%. Even though there is no documentation as regards the taking of samples in this respect, as the test was probably carried out via the taking of pictures, and even though the level of contamination is extraordinarily high as well as even though the consignment note itself is a bit strange, as it is dated 17 January 2005 while the delivery took place on 12 January 2005 or 13 January 2005, it should not be neglected that Company B heavily complained about the quality of the goods in the beginning. This leads to the assumption that the contamination must have been relatively high. The fact that Company B did not immediately refuse to accept the goods might be a result of the fact that there was a confusion whether the contamination was caused by caraway or feverfew. The latter does not have as strong an impact on the taste as the former. According to the expert opinion, it is possible for an expert to spot the contamination on a picture. Finally, it can be seen from the consignment note that it had been planned to carry out an internal test after the grinding of the goods and that the test results or the baking test have been positive.

Even though Witness Maria W stated in her e-mail of 19 January 2005 that the filling would taste of caraway, that the risk of complaints was too high and that the goods would be left at the disposal of the [Buyer] (enclosure ./6), she obviously was not interested in wasting time and having a dispute with the [Buyer] (enclosure ./F); thus, the quality of the poppy seeds cannot be seen as the cause for Maria W to cancel the business relationship with the [Buyer] (report page 108). Even though the consignment note (in ON 27) suggests that the supplier would not be suitable for Company B, the statement of Witness Maria W, namely, that the business relationship would be cancelled due to the behavior of the [Buyer] and not due to the quality of the poppy seeds, is not refuted.

This can already be seen from the fact that Company B directly ordered goods from the [Seller] in the aftermath and was satisfied with the quality (court report page 109). The allegation of the [Buyer] that this would constitute an elimination of the middleman cannot be ascertained due to a lack of circumstantial evidence. In particular, as the allegation of Witness Maria W in respect to the conduct of the [Buyer], namely, that the latter refused to accept telephone calls and that it stated that it had been obliged to take credit at an interest rate of 15%, are supported by the documents enclosure ./13 and ./14. In general, the correspondence of the [Buyer] with Company B is rather brusque, wherefore the statement of Witness Maria W, that the behavior of the [Buyer] and not the quality of the goods would be the reason the business relationship had been cancelled, can be seen as convincing.

The expert witness has stated the market price of respective cleaned poppy seeds in its report (in ON 27). Notwithstanding that he was not able to state a market price for contaminated poppy seeds at the time of the drafting of the report, he was able to conduct further surveys until the time of the oral hearing so that he was able to suggest a reduction of 10%. This amount is supported by the fact that the reduction would be approximately equal to the costs of further cleaning. This is not refuted by the fact that Company B paid the purchase price in full, as this payment obviously was not effected according to the usual market conditions, but in order to settle the matter.

The [Buyer] itself stated that it failed to take samples upon picking up the goods.

The aforementioned has the following legal consequences:

The parties concluded a contract for the sale of approx. 30 tons of CZ-poppy seeds according to the sample of 26 November 2004 at a price of CZK 3,100.00/100 per kilo. The payment was due "immediately after the goods have been accepted (upon receipt of the goods)" at the place of destination (10 to 14 days after the taking over of the goods).

The poppy seeds which have been delivered by the [Seller] showed a higher level of contamination than the sample the contract was based on. Hence, the price reduction - as alleged by the [Buyer] - has to be considered. As the parties are domiciled in different Contracting States to the United Nation Convention on Contracts for the International Sale of Goods (CISG) and as both the Czech Republic (BGBL [*] 1988/96) and Austria (BGBL [*] 1994/168) are Contracting States, this Convention has to be applied according to Article 1(1)(a) CISG.

According to Article 50 CISG, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time, if the goods do not conform with the contract and whether or not the price has already been paid. This reduction is effected on the basis of the relative calculation as according to Austrian law (Koziol-Welser I, page 186). As according to the facts the actual market price is 10 % below the market price of cleaned poppy seeds, the [Seller] is entitled to claim the purchase price reduced by 10%.

It is true that according to Article 39 CISG a 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, however, the [Buyer] fulfilled its duty to give timely notice.

The requirements of such a notice are higher than the requirements of a general notice which informs about the fact that complaints have been received (Schlechtriem/Schwenzer, Kommentar zum einheitlichen UN-Kaufrecht - CISG - 2004, margin number 7 of Article 39 with reference to LG Saarbrücken of 2 July 2002). It is required to state in detail whether a short shipment is claimed and if so, to what extent, or what kind of deviation in quality is alleged. The statement of symptoms is sufficient in this respect (loco citato, margin number 8). The hint in the telephone call between Katherina B and the [Seller] of 19 January 2005 is a sufficient clue for the deviation of the delivered goods from the order.

According to Articles 11, 7(2) CISG a notice need not be evidenced in writing and can thus be given orally or via telephone (loco citato, margin number 11). Hence, the formal requirements have been fulfilled in the present case.

The information by Company B in advance of the delivery that there was a contamination with caraway cannot set off the period for giving notice, as a certain, small amount of caraway (according to the sample) would not have constituted a non-conformity, as it would have been embraced by the content of the contract.

The high level of contamination within the delivery of poppy seeds could not have been discovered prior to the picking up of the goods by the carrier on 11 and 12 January 2005. Therefore, the period did not start to run prior to that date. The fact that the [Buyer] failed to take samples might lead to the loss of evidence, nevertheless, this does not constitute a general waiver of any rights in respect to claims of non-conformity. This is due to the fact that such an omission can be caused by several factors, wherefore the present omission of the [Buyer] cannot be interpreted as a waiver of its rights in respect to claims based on the non-conformity of the goods.

Even the period of fourteen days, which has been continuously confirmed by Austrian courts (RS0111001), has been met by the [Buyer]. Hence, a loss of [Buyer]'s right according to Article 39 CISG is not present.

The payment of Company B does not affect the contractual relationship between the [Seller] and the [Buyer] as long as the reduction in price is based on a warranty.

The [Buyer]'s letter of 28 January 2005, which states that the [Seller] should not worry about the payment of the purchase price, has to be interpreted in the general context. Thus, it has additionally to be considered that the [Buyer] stated that further tests would be necessary due to the aftertaste of caraway. Nevertheless, the outcome of these tests is open, wherefore the hint that the [Seller] should not worry has to be interpreted as a soothing in respect to the claims of the [Seller]. Therefore, it cannot be interpreted as a waiver of rights in respect to claims based on the non-conformity of the goods.

Hence, the [Seller] is entitled to claim the purchase price reduced by 10%, which has been due on 24 January 2005, wherefore the [Seller] is additionally entitled to claim interest due to the taking of a credit.

The [reduction] in price as alleged by the [Buyer] -- in the beginning in the amount of EUR 5,000.00 and later in an amount equal to the purchase price -- had to be considered in respect to the claim of the [Seller]. Hence, a further counterclaim is not possible.

The claim of the [Buyer], namely, that the reduction had to equal the purchase price due to the fact that the delivered poppy seeds could not be sold in Austria and that the East would not be interesting to the [Buyer], cannot be followed as it is possible to sell poppy seeds from Austria to the East and as it would have been possible to clean the goods in order to sell them in Austria and as there is a respective market price.

The [Buyer] is not entitled to claim the costs for the packaging based on the fact that the wholesale packaging had slipped during the transport from the [Seller]. The goods had to be picked up in the Czech Republic. Hence, the [Buyer] had to bear the risk of transport.

The [Buyer] has failed to prove that it incurred damages due to the non-conformity of the poppy seeds based on the fact that it had not been able to deliver a further 120 tons of poppy seeds to Company B as the business relationship was terminated due to the behavior of the [Buyer] and not due to the poor quality of the poppy seeds.

Therefore, the counterclaim of the [Buyer] is not justified. As a conclusion to this, the [Seller] is entitled to claim the reduced purchase price.

The decision on costs is based on 43 Section 1 ZPO [*] as the [Seller] has succeeded at 90% of its claims. It is hence entitled to claim 90% of the costs and 80% of the cash expenses. The submissions which have been made but not admitted after the beginning of the proceedings (ON 18 of 14 February 2006 and ON 23 of 19 June 2006) could not be honored despite their inclusion in the taking of evidence as they had been inadmissible (Kodek, in Fasching/Konecny, 257 margin number 37 et seq.; OLG Wien, 2 R 130/05 k). The expenses for the interpreter had to be taken into account in the amount of the actually needed EUR 250.00. As the [Buyer] succeeded in respect to 10%, it is entitled to claim the reimbursement of 10% of the costs for the expert opinion.

The penalty based on malice according to 408 ZPO [*] as claimed by the [Seller] is not covered by this provision, as according thereto only a claim for damages according to civil law can be awarded, whereas a penalty is not possible (Fucik in Fasching/Konecny, 408 margin number 1). As the claim additionally lacked sufficient factual submissions and an offer of proof, it could not be awarded.

It has to be agreed with the [Seller] that there was not a single clue in the course of the proceedings in respect to the alleged claims of the [Buyer] that it had offered to return the goods and tried to execute a cover-purchase. However, these allegations have neither been belated nor did they cause any delay, wherefore 44 or 48 ZPO [*] could not be applied.


FOOTNOTES

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

Translator's note on other abbreviations: BGBL= Bundesgesetzblatt [Austrian federal legal gazette]; CS norm = Czech State norm; CZK= Czech crown [former Czech currency]; ZPO = Zivilprozessordnung [Austrian Code on Civil Procedure].

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

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