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CISG CASE PRESENTATION

Austria 24 September 2007 Oberlandesgericht [Appellate Court] Linz (Laminated glass case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/070924a3.html]

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

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Case identification

DATE OF DECISION: 20070924 (24 September 2007)

JURISDICTION: Austria

TRIBUNAL: OLG [ = Oberlandesgericht = Appellate Court] Linz

JUDGE(S): Dr. Erich Wanko (Richter Senatspräsident), Mag. Gerhard Hasibeder, Dr. Wolfgang Poth

CASE NUMBER/DOCKET NUMBER: 1 R 77/07k

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

CASE HISTORY: 1st instance Landesgericht Salzburg 23 February 2007; 3d instance Oberster Gerichtshof 19 December 2007

SELLER'S COUNTRY: Austria (defendant)

BUYER'S COUNTRY: Switzerland (plaintiff)

GOODS INVOLVED: Laminated glass


IHR headnote

Reproduced from Internationales Handelsrecht (1/2008) 28

"1. The preclusion period in Art. 39 para. 2 CISG applies also in cases where the defect could not have been discovered by a diligent examination of the goods and the buyer neither did nor should have discovered them later.

"2. The excuse for the failure to give notice under Art. 44 CISG applies only to Art. 39 para. 1 CISG; thus rights under Art. 45 CISG have to be asserted within two years from the delivery of the goods in accordance with Art. 39 para. 2 CISG.

"3. The preclusion period of Art. 39 para. 2 CISG is to be observed ex officio.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 39(2) [Also cited: Articles 3 ; 6 ; 44 ; 45 ]

Classification of issues using UNCITRAL classification code numbers:

39B [Requirement to notify seller of lack of conformity (cut-off period of two years): effect of time limit (buyer loses right to rely on non-conformity)]

Descriptors: Lack of conformity notice, timeliness

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1583.pdf>; Internationales Handelsrecht (1/2008) 28-31

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Appellate Court (Oberlandesgericht) Linz

24 September 2007 [1 R 77/07 k]

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

[Buyer] had filed suit claiming damages and seeking declaratory relief. The Court of First Instance dismissed the [Buyer]'s suit. [Buyer] appealed.

DECISION

1.    [Buyer]'s appeal is partially allowed,
 
2.    The judgment of the Court of First Instance is upheld in respect to the dismissal of the claim for payment of 254,064.30 EUR plus interest and of the declaratory action. The judgment is revoked in respect to the remaining 88,051.46 EUR plus 9.47 % interest since 4 November 2005 and in respect to the decision on costs. The matter is referred back to the Court of First Instance.
 
3.    The costs of the appellate proceedings are to be seen as further costs of the proceedings of the Court of First Instance.
 
4.    The value of the appeal surpasses 20,000 EUR in respect to the declaratory action.
 
5.    Further appeal (Revision) is inadmissible in respect to the damage events S. Sp., B.R., G.R., A.Z. and H.W. according to 502 II ZPO [*] but allowed in respect to the remainder of the partial judgment according to 502 I ZPO [*].

POSITIONS OF THE PARTIES IN THE COURT OF FIRST INSTANCE

[Buyer]'s position

The [Buyer] filed suit on 25 October 2005 claiming damages in the amount of 342,115.76 EUR s.A. in respect to various objects in Switzerland and the declaration that the [Seller] was liable for all further defects, which occur as a result of the fact that the casting resin detaches from the glass of the casting resin laminated glass (delamination / "wormholes"), which has been delivered by a subsidiary of the [Seller].

The subsidiaries of the [Buyer] had assigned their claims to the holding company. The [Seller] had delivered casting resin laminated glass between 1994 and 2002, which had shown so-called "wormholes" in the casting resin layer. Starting from the end of the year 2002, this defect had emerged frequently. The [Buyer] had gotten to know in the course of its investigations that the [Seller] had changed the components for processing casting resin laminated glass from multi-component casting resin to an UV-hardening casting resin. The [Buyer] had neither been informed about this change nor that this UV-hardening casting resin could show an incompatibility with certain jointing compounds. The [Seller] had, however, been obliged to generally inform the [Buyer] about the change of components as well as to state for every delivery for which casting resin had been used. Since 2002, the [Buyer] had not ordered any casting resin laminated glass from the [Seller]. The defects had not occurred due to a mistake of the [Buyer] in processing the casting resin laminated glass but due to a lack of quality of the casting resin which was used by the [Seller] or due to the breach of the duty to inform the [Buyer], respectively.

The [Buyer] contested that the standard terms of delivery of the [Seller] had been included into the contract between the [Buyer] and the Seller or between the [Buyer] and a subsidiary of the [Seller], respectively.

The [Buyer] had not been able to notice until autumn 2003 that the defects had primarily occurred due to the casting resin which had been used.

[Seller]'s position

The [Seller] contested these allegations and stated that it was solely the incompatibility of certain jointing compounds with the casting resin had led to the defects. The [Seller] had informed the [Buyer] that it used UV radiation for the process of drying the casting resin. It had not been informed by the supplier company K that the formula for the casting resin had been changed. Only the defect in respect to the building of company G had been given notice of. The deadline for notices of non-conformity had expired and claims for damages or warranty rights would be time-barred. According to item 3 of the standard terms of delivery of the [Seller] which had been agreed on, a defective delivery would only entitle the buyer to a redhibitory action. Further rights, particularly the right to a reduction in price or the right to claim damages, would be excluded.

JUDGMENT OF THE COURT OF FIRST INSTANCE

The Court of First Instance dismissed both the claim for damages and the declaratory action. It ascertained the facts as stated in pp. 5-11 of the judgment of the Court of First Instance. Reference is made to these facts according to 500a ZPO [*].

The Court of First Instance applied the CISG, as it qualified the contract in the present case as a contract for the supply of goods to be manufactured according to Art. 3 CISG.

It held that the [Seller] had not breached the contract. The [Seller] had delivered laminated glass without any defects as an intermediate product.

It was the task of the [Buyer] to initiate quality checks in order to prevent that the product manufactured by the [Buyer] becomes defective due to the -- generally known -- incompatibility of secondary jointing compounds with the casting resin.

It would exceed the contractual obligations of the [Seller] if one expected that it took care of a possible incompatibility with the secondary jointing compound which was used by the [Buyer]. The [Seller] had informed its customers about the fact that it used UV radiation for the process of drying. This would be sufficient as the [Buyer] and its subsidiaries had been obliged to avoid problems through quality checks.

The [Buyer] would additionally not be entitled to any claim as it had breached its duty to give notice according to Art 39 CISG - apart from the defect in respect to company G.

The [Buyer] had failed to give notice within reasonable time and to specify the nature of the lack of conformity.

POSITIONS OF THE PARTIES IN THE APPELLATE PROCEEDINGS

The timely appeal of the [Buyer] is directed against this judgment of the Court of First Instance. The [Buyer] claims that the judgment shows procedural errors, defective fact-finding and wrongful legal assessment and requests that the judgment be revoked and the matter referred back to the Court of First Instance

The [Seller] sent a timely statement of defense and requested the dismissal of the appeal.

JUDGMENT OF THE COURT OF APPEAL

The appeal, which according to 492 ZPO [*] was heard in a closed session, is partially justified.

The [Buyer] alleges that -- in contrast to the assumption of the Court of First Instance -- the mere information that the means for the process of drying were changed to UV radiation was not sufficient. It had not been ascertained that the [Buyer] had been informed about the change of the chemical formula of the casting resin. It had therefore been impossible for the [Buyer] to know that it had to initiate quality checks in order to test the compatibility of the jointing compounds, which had been successfully used before, with the casting resin.

It was the duty of the [Seller] to not only inform the [Buyer] about the change in the process of manufacturing but also about the respective change of the formula.

Due to a lack of hints to a potential incompatibility of the casting resin with the jointing compounds, there could not be any duty of the [Buyer] to test the entire insulating glass.

In respect to the assumption of the Court of First Instance that the [Buyer] had breached its duty to give notice according to Art. 39 CISG, the [Buyer] stated that the [Seller] had neither argued in favor of an application of the CISG nor had it relied on a breach of Art. 39 CISG. This had not been taken into account, wherefore the legal assumption of the Court of First Instance constituted a breach of 182 a ZPO [*].

If this issue had been legally assessed in the correct way, the [Buyer] would have had the chance to demonstrate that it had had a reasonable excuse in the sense of Art. 44 CISG.

The dismissal of the declaratory action in respect to future defects could not be based on a breach of duty to give timely notice, as the duty to give notice in this respect had not arisen yet. The Court of First Instance had further failed to consider that the [Buyer] had additionally based the liability of the [Seller] on the delivery of defective laminated glass, particularly on the lack of bonding between the casting resin and the glass. It hence would have been necessary to obtain an expert opinion.

According to Art 1(1) of the CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different States, if these States are Contracting States of the Convention.

The [Buyer] is seated in Switzerland and the [Seller] in Austria. Both States are Contracting States of the Convention. Austria has been a Contracting State since 29 December 1987 and Switzerland since 21 February 1990. The parties have not indicated that the CISG had been excluded in the sense of Art. 6 CISG or that they had agreed on provisions in derogation from the Convention. The CISG hence applies to the contract for the sale of goods -- or contract for the sale of goods to be manufactured, respectively -- in the present case.

According to both Swiss law and Austrian law, the CISG is directly applicable in the present case. It therefore was unnecessary for the Court of First Instance to ascertain this separately.

The Federal Supreme Court of Austria has as well held in its judgment of 24 May 2005, 4 Ob 80/05a -- obviously being the first court to assume the applicability of the CISG in that case -- that the CISG was applicable and did not state that this was a surprising fact or that the previous instances had been obliged to consider this.

The [Seller] has expressly claimed that the [Buyer] had breached its duty to give notice in contrast to the allegations of the [Buyer] (cf. report pp. 20 and 54). This has to be legally assessed according to the applicable provisions, namely the CISG.

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 according to Art 39(1) CISG.

According to Art 39(2) CISG, the buyer loses the right to rely on a lack of conformity of the goods in any event, if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.

In case of the delivery of defective goods a buyer is hence obliged to give timely notice thereof. In case the buyer fails to give notice and the seller could not have been aware of the defects, the buyer not only loses its contractual remedies but also its right to claim damages (Karollus, UN-Kaufrecht, pp. 225 et seq.).

It is true that the subsidiaries of the [Buyer] have failed to give timely notice in the sense of Art. 39 CISG -- apart from the defect in respect to company G. However, in the present case, the requirements of Art 39(2) CISG are fulfilled in any case.

The time limit of Art 39(2) CISG does also apply if the defects could not have been discovered during an appropriate examination and if the buyer has not discovered or ought not to have discovered them later on. The two year time-limit runs from the date on which the goods were actually handed over, i.e., the date of the physical handing over of the goods to the buyer. (Schwenzer, in: Schlechtriem/Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG, 4th ed., Art 39 Rz 22 et seq.; Magnus in Honsell, Kommentar zum UN-Kaufrecht, Art 39 Rz 29 et seq.).

Insofar as the [Buyer] wants to rely on Art.44 CISG, namely, that it had been reasonably excused, it has to be said that Art. 44 CISG only refers to Art. 39(1) CISG. The absolute time-limit of Art. 39(2) is hence to be obeyed, wherefore any claims have to be brought within two years after the handing over of the goods according to Art. 45 CISG. (RIS-Justiz RS0111004; Schwenzer, loco citato, Art 39 Rz 32; Magnus, loco citato, Art 39 Rz 31).

The [Buyer] has failed to demonstrate that there had been a procedural error which influenced the judgment of the Court of First Instance.

According to the [Buyer]'s own statements, it has not ordered any casting resin laminated glass from the [Seller] since 2002 (record p. 7). It is undisputed that all casting resin laminated glasses have been produced by a subsidiary of the [Seller] between 11 March 1999 and 27 February 2003, and thus that all deliveries of the [Seller] have been effected prior to 27 February 2003. In consideration of the fact that the [Buyer] has failed to give substantiated notice apart from the defect in respect to company G -- the letter of 1 March 2005 of the attorney of the [Buyer] does not list the individual defects separately (exhibit B) and would not have been timely -- up to the initiation of these legal proceedings, the suit on 25 October 2005 was not filed by the [Buyer] in due time in the sense of Art 39(2) CISG. Due to this, the deadline for claiming damages is expired. This cannot be altered by the fact that the [Buyer] alleges that according to a note of 5 October 2006, ON 16, the [Seller] has not delivered the casting resin laminated glass in respect to H.W., until the beginning of 2003 (cf. record p. 109), as the two year period had still expired before the suit was filed.

In contrast to the view of the [Buyer] in the appellate proceedings, the period as set out in Art. 39(2) CISG also applies in respect to the declaratory action. The [Buyer] itself has stated that there had not been any deliveries of casting resin laminated glass since 2002 by the [Seller]. Hence, a timely notice is no longer possible in case a defect emerged.

The Court of First Instance has therefore rightfully dismissed the claim in respect to 254,064.30 EUR s.A. as well as the declaratory action. This is why this part had to be confirmed in a partial judgment. Neither the allegation in respect to procedural errors nor the allegation in respect to a defective fact-finding is based on the lack of a timely notice in the sense of Art. 39 CISG.

Hence, only the claim in respect to company G -- in the amount of 88,051.46 EUR s.A.-- has to be considered. The [Buyer] or its subsidiary, respectively, has given notice of defects on 26 November 2002 in this respect. The [Seller] has immediately inspected the purported defects on 3 December 2002 (report p. 11). It has, however, not been ascertained when the respective laminated glass had been delivered (the [Seller] alleged that the contract for this delivery had been concluded prior to 31 December 2001 (report p. 20 et seq.); according to an order confirmation of 24 August 2000 (exhibit L) delivery was planned or agreed on, respectively, to be effected on 18 September 2000).

As the provision of Art 39(2) CISG has to be considered ex officio (Schwenzer, loco citato, Art 39 Rz 23; Magnus, loco citato, Art 39 Rz 32) and additionally the [Seller] only generally stated that the notice of non-conformity had not been given in time (cf. report p. 20 et seq.) it will have to be ascertained by the Court of First Instance when the [Seller] actually delivered the laminated glass which has been used in respect to company G in order to be able to assess whether the notice has been timely in the sense of Art. 39(2).

In case the notice has been timely, the allegation of the [Seller] will have to be assessed that according to item 3 of its standard terms of delivery, which allegedly have been agreed on, any claim for damages would be excluded. The judgment of the Court of First Instance does not contain any findings in respect to the issue whether the standard terms of delivery of the [Seller] have been agreed on, which is contested by the [Buyer].

The necessary assessment of the conclusion of the contract will also have to include considerations on provisions of the CISG (cf. only Schlechtriem, in: Schlechtriem/Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG, 4th ed., Art 14 Rz 16). In contrast, the necessary cause test does not have to be effected according to the CISG (Schlechtriem, loco citato, Vor Art 14 - 24 Rz 1) but according to national law, which -- in the present case -- is according to Art 4(2) EVÜ [*] Austrian law, as the characteristic performance has to be effected by the [Seller], who is domiciled in Austria.

Furthermore, the allegation that the claim was time-barred will have to be considered. The statute of limitation does not form part of the provisions of the CISG. According to Art 4(2) EVÜ [*], Austrian law will again have to be applied.

It is true that the [Seller] has not sufficiently substantiated why the claim of the [Buyer] in respect to damage event G should be time-barred, and has especially not substantiated when the defect had emerged and thus when the period had started. The sole data in this respect (notice of non-conformity of 25 November 2002, inspection on 3 December 2002) would fall within the three year period of 1489 ABGB [*]. These issues therefore have to be further considered. The claim that the judgment showed procedural errors was not necessary in this respect as the argument of prescription has neither been mentioned in the judgment of the Court of First Instance nor in the present appeal.

The appeal of the [Buyer] is justified in this respect in case the claim of the [Buyer] or its subsidiary respectively turns out to be justified. The [Buyer] has expressly stated that the defect had not occurred due to a mistake of the [Buyer] in processing the casting resin laminated glass but due to a lack of quality of the casting resin which was used by the [Seller] as well as that the casting resin used by the [Seller] showed a lack of bonding between the casting resin and the glass (report p. 9), wherefore the cause for the damage was based on a defect of the casting resin laminated glass (report pp. 11 and 33).

The [Buyer] has suggested to obtain an expert opinion to prove this (cf. report p. 33). It cannot be assumed without further debate that the [Buyer] referred to the expertise of the Swiss Institute for Glass in Buildings of 1 September 2005 (exhibit K), as the [Buyer] expressly assumed in its letter ON 5 that the expert opinion had to be obtained (cf. report p.47) and as additionally the Court of First Instance assumed a respective request of the [Buyer] (cf. report p. 68 and US 16).

Insofar as the Court of First Instance assumes in contrast to these allegations that the defects occurred due to the incompatibility of the casting resin and the jointing compounds, it anticipates the assessment of evidence.

It is necessary to obtain an expert opinion first and do the assessment of the actual cause of the defects later.

It depends on the result of this expert opinion whether the witnesses -- the respective branch directors of the subsidiaries -- as named according to the report of 5 October 2006, have to be heard in order to prove that they have not been informed about the change of the chemical formula of the casting resin. The offer of evidence cannot be seen as belated as, on the one hand, it has not been obvious that the branch directors have allegedly been informed until the hearing of the executive director of the [Seller] and as, on the other hand, the [Seller] has stated that it had informed the [Buyer] (personally) about the change, whereas it is only decisive whether the respective contractual partners, namely, the subsidiaries of the [Buyer] have been informed.

Furthermore, it will not lead to a fundamental delay of the proceedings if an expert opinion is obtained. The offer of evidence is relevant as it can be assumed that the [Seller] was obliged to provide information, if the chemical formula of the casting resin is changed by the introduction of the UV radiation drying process, as the [Buyer] cannot be obliged to test potential incompatibilities of its jointing compounds with the new casting resin without any hint that a change of the chemical formula is present.

Due to these assumptions, it is not necessary to further comment on the alleged defective fact-finding.

As a conclusion, this the judgment has to be confirmed except for the claim based on the damage event in respect to company G, to be revoked for the remainder and the matter has to be referred back to the Court of First Instance in order to amend the proceedings.

The decision on costs is based on 52 ZPO [*].

The assessment of the value of the declaratory action is based on the assessment made by the [Buyer], which can be seen as reasonable.

An addition according to 55 JN [*] is not possible, as the claim consists of several assigned claims of subsidiaries of the [Buyer] in respect to different damage events and as the [Buyer] has not alleged that the deliveries had been effected based on a framework contract.

Further appeal (Revision) is not admissible according to 502 (2) ZPO [*] in respect to the dismissal of the claims in respect to the damage events S. Sp., B.R., G.R., A.Z. and H.W, as they do not amount to more than 4,000 EUR in each case.

For the remainder, further appeal (Revision) is admissible according to 502(1) ZPO [*], as the Federal Supreme Court of Austria has not yet decided whether the time limit of Art 39(2) CISG is unexceptionally applicable, particularly in respect to claims for damages based on contractual relationships, if it was not possible to immediately discover the defect or the damage respectively but only after the product has been further processed and installed by the buyer and thus potentially after the expiry of the two year period. A reservation on the legal effect of the revocation is not necessary as the revocation was basically caused by procedural errors.


FOOTNOTES

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

Translator's note on other abbreviations: ABGB = Allgemeines Bürgerliches Gesetzbuch [Austrian Civil Code]; EVÜ = Convention on the Law Applicable to Contractual Obligations (Rome 1980); HGB = Handelsgesetzbuch [Austrian Commercial Code]; RIS-Justiz = Rechtsinformationssystem des Bundes [Austrian Federal Database on Law]; ZPO = Zivilprozessordnung [Austrian Code of 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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