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CISG CASE PRESENTATION

Germany 8 November 2007 Appellate Court Dresden (Funnel covers case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/071108g1.html]

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

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Case identification

DATE OF DECISION: 20071108 (8 November 2007)

JURISDICTION: Germany

TRIBUNAL: OLG Dresden [OLG = Oberlandesgericht = Appellate Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9 U 68/07

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

CASE HISTORY: 1st instance Landgericht Görlitz (K f HO 219/06) 29 November 2006

SELLER'S COUNTRY: Italy (defendant)

BUYER'S COUNTRY: Germany (plaintiff)

GOODS INVOLVED: Funnel covers


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 38 ; 39

Classification of issues using UNCITRAL classification code numbers:

38A ; 38C [Buyer's obligation to examine goods: time for examining goods; Deferral of examination in case of redirection or dispatch];

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]

Descriptors: Examination of goods ; 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/1624.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Dresden

8 November 2007 [9 U 68/07]

Translation [*] by Jan Henning Berg [**]

JUDGMENT

  1. Plaintiff [Buyer]'s appeal against the judgment rendered by the District Court (Landgericht) Görlitz of 29 November 2006, case docket 3 KfH O 219/06 is dismissed.

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

  3. The judgment is preliminarily enforceable. [Buyer] may avert enforcement through providing assurances worth 110% of the enforceable sum, unless Defendant [Seller] previously furnishes assurances of 110% of the sum subject to enforcement.

  4. Further appeal on legal grounds is not admissible.

      The value of the appellate action is set at EUR 24,378.10.

FACTS

[Buyer] and [Seller] are in dispute about claims for damages and price reductions on the part of [Buyer] from non-conformity of the purchased goods, arising out of an international sales contract.

Reference is directed to the factual basis set out in the judgment by the Court of First Instance for the undisputed and disputed submissions as well as the parties' requests in the First Instance. The Court further points out that the funnel covers subject to this dispute were supposed to conform to European Standard EN 124.

JUDGMENT BY THE COURT OF FIRST INSTANCE

The District Court (Landgericht) Görlitz dismissed [Buyer]'s action in the First Instance. The reasoning of that court was as follows:

   -    Since an international contract of sale was concluded and both Germany and Italy are Contracting States to the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980, the present dispute is governed by the CISG.
 
   -    In accordance with the CISG, [Buyer] was not entitled to any claims against [Seller] for delivery of non-conforming goods -- even under the assumption that [Buyer]'s submissions were correct.

  • The chronological course of events as laid out by [Buyer] demonstrates that not more than eight of the assembled funnel covers at the construction project could have actually not been in conformity with the contract.

  • It may remain undecided whether this had been the case. [Buyer] lost its right to rely on any non-conformity because it had failed to comply with the periods for examination and notification under Arts. 38, 39 CISG. [Buyer] at least had the duty to check random samples in order to see whether the delivered funnel covers conformed to the agreed qualitative specifications. [Buyer] could not simply store the funnel covers until their possible resale without any check of the quality. In this respect, it is not apparent that a corresponding examination would have resulted in disproportionate efforts or that the rattling sounds now complained of would not have occurred during an examination. Instead, exercise of little physical pressure would be enough to discover the rattling sounds. During a site inspection by the appointed expert on 15 September 2005, carried out in the course of independent evidentiary proceedings, he could ascertain through one manual attempt to put pressure on a non-assembled funnel cover that the cover and framework would rattle even in that state.

  • It was also reasonable for [Buyer] to have conformity of the funnel cover checked by a testing institute, at least by way of having random samples examined. Since a couple of weeks passed between delivery on 25 June 2004 and resale of the funnel covers from this delivery to Company G.W. GmbH in September 2004, [Buyer] may also not rely on Art. 38(3) CISG. Otherwise, any resale of goods would dispense with the buyer's duty to examine under Art. 38 CISG.
     
   -    [Buyer] was further not entitled to claim from [Seller] a reduction of the purchase price in relation to the 98 funnel covers which were not then assembled. [Buyer]'s submissions were neither comprehensible concerning the defects nor concerning the duties to examine and notify. After acceptance of the goods [Buyer] bore the burden to prove any non-conformity and it did not even submit that there had been actual defects in relation to the funnel covers which were remaining in its storehouse. The mere reference to eight allegedly defective funnel covers, sold to Company G.W. GmbH, is not sufficient to demonstrate non-conformity of the whole delivery. [Buyer] further failed to argue that these funnel covers had been examined and that any defects were notified (Arts. 38, 39 CISG).

POSITIONS OF THE PARTIES IN THE APPEAL

Position of [Buyer]

[Buyer]'s appeal of 12 January 2007 before the Appellate Court (Oberlandesgericht) Dresden challenges the judgment by the Court of First Instance, which was served on 15 December 2006. After having received an extension to substantiate its application to appeal until 5 March 2007 by court order of 6 February 2007, [Buyer] provided arguments for its appeal by memorandum filed by its legal representative on the same days as the appeal.

[Buyer] argues that the District Court (Landgericht) Görlitz unjustifiably found non-compliance with the duties to examine and notify according to Arts. 38, 39 CISG concerning the assembled funnel covers. [Buyer] had already submitted in the First Instance proceedings that the defects at the funnel covers could not be discovered despite a thorough and timely examination. Moreover, the expert, in the course of his site inspection during independent evidentiary proceedings, was not able to determine the rattling of the covers merely by simple and manual attempts to exercise physical pressure. Instead, he had expressly ascertained in his written opinion that the covers lay evenly in case of loose assembly and thus did not emit rattling sounds owing to the weight of the persons on top of them. Only after the covers were locked in place with a screw did the cover rise at the opposite edge and cause the corresponding rattling sound. Given that, [Buyer] had no reason to screw the covers and subsequently check for possible rattling noises in the course of an examination of the delivery for conformity with the contract. Additionally, this was possible only by using considerable physical force. Rather, [Buyer] could reasonably assume on the basis of its visual inspection that the covers conformed to the quality specifications under the contract. In the case at hand, its assumption of conformity was further supported on the basis that screwing of the covers was only to be done for security purposes. This had been explained by the expert on p. 10 of his opinion. Moreover, [Seller]'s explanations should be considered that the covers were adjusted to fit onto the corresponding framework, after the problem of failing levelness of the supporting points had already been discovered during the manufacturing process. Assuming that these assertions of [Seller] were correct and given the statements made by the expert during the oral hearing of 18 October 2006, the manufacturer had to have made an indication that covers and framework must not be disassembled. As a consequence, it could not be ruled out that during a random check of covers and framework, both parts were not as then interchanged and that therefore no defect could be discovered. There existed a hidden defect. Thus, the time period under Art. 39(1) CISG could commence not earlier than at the time of objective possibility of recognition of the hidden defect. Consequently, [Buyer]'s notification of non-conformity was made in the time required under Art. 39 CISG.

The reasoning of the District Court was equally erroneous in relation to the funnel covers which were still located in [Buyer]'s storehouse. In that respect, the expert opinion of 24 September 2005 unequivocally showed that the rattling sounds had been caused by a manufacturing fault, with the consequence that [Buyer] had reason to assume that the explanations concerning non-conformity of the assembled funnel covers would hold true also for those covers which were still in its storehouse. There was no reason to check each individual item of the non-assembled funnel covers and to lay out the respectively ascertained non-conformity. Moreover, the expert had ascertained the non-conformity of the funnel cover located in the storehouse (submitted as exhibit 5). In addition to that, [Buyer] offered the court or any expert to examine some of the covers which were still in its storehouse by way of its memorandum of 9 August 2006. Finally, the District Court should not have rejected [Buyer]'s submissions as inconclusive before granting the opportunity to amend any missing argument.

In its additional memorandum of 19 June 2007 filed by its legal representative, [Buyer] for the first time asserts during appellate proceedings that not only eight of the funnel covers in question had been resold on 3 September 2004. Additional sales of two funnel covers were concluded on 16 September 2004 and another ten funnel covers were resold on 24 September 2004 to Company G.W. GmbH.

[Buyer] requests the Court to amend the judgment rendered on 29 November 2006 by the District Court (Landgericht) Görlitz, case docket 3 KfH O 219/06 and to order [Seller] to pay EUR 24,378 as well as

   a)   interest of 2.5% on EUR 10,924.15 since 3 December 2005;
   b)   interest of 2.5% on EUR 200 since 7 April 2005;
   c)   interest of 2.5% on EUR 172.55 since 1 January 2006;
   d)   interest of 2.5% on EUR 176.78 since 10 December 2005;
   e)   interest of 2.5% on EUR 10,263.61 since 24 December 2005;
   f)   interest of 5% above the prime lending rate on EUR 22,054.52 since pendency of proceedings; and
   g)   interest of 7% above the prime lending rate on EUR 2,232.58 since 18 July 2004.

In the alternative, [Buyer] requests the Court to repeal the judgment rendered on 29 November 2006 by the District Court (Landgericht) Görlitz, case docket 3 KfH O 219/06 and to remand the litigation to the District Court.

Position of [Seller]

[Seller] requests the Court to dismiss [Buyer]'s appeal.

[Seller] defends the judgment rendered by the Court of First Instance and argues that [Buyer] failed to comply with its duty to make immediate examination of the delivered funnel covers (Art. 38 CISG). In general, [Buyer] had the duty at least to make random assemblies of the delivered funnel covers in accordance with their purpose assumed under the contract. In the case at hand, the alleged defect could have been discovered through a simple attempt to exert pressure on them. The expert explained during the oral hearing that he had stepped onto a non-assembled funnel cover and that on this occasion he recognized a rattling sound. In this respect [Seller], takes the position that [Buyer]'s duty to examine also extended to the previous latching of framework and cover using screws since this was one function of the parts.

In relation to the further details of the dispute, reference is directed to the parties' memoranda, their exhibits as well as to the minutes of the hearing of 25 October 2007.

After the closing of the oral hearing, a memorandum by [Buyer]'s legal representative reached the Court on 5 November 2007. Its content will not be considered by the Court.

REASONING OF THE COURT

Since an international contract of sale has been concluded and since both Germany and Italy are Contracting States to the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980, the present dispute is to be assessed under the provisions of the CISG.

1. [Buyer]'s admissible appeal is unfounded. The District Court (Landgericht) Görlitz was correct in dismissing [Buyer]'s action on the grounds that [Buyer] may no longer rely on a lack of conformity of the goods because it had failed to comply with its corresponding duty to examine, Art. 38 CISG. This finding applies both to the already assembled funnel covers and to those funnel covers which were still stored at [Buyer]'s storehouse. Pursuant to Art. 38 CISG the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. In the case at hand, this time period expired in any case prior to resale of the first part of the delivery in September 2004.

      a) Indeed, the Court tends to assume that [Buyer] -- contrary to the view taken by the District Court -- had not been obliged to assemble random funnel covers onto the corresponding pavement and to subject it to usual traffic in the course of costly stress tests. The inappropriate time and effort required for these tests appear hardly reasonable in the light of the possible damage resulting from a lack of conformity (cf. Münchener Kommentar/Gruber, BGB [*], vol. 3 CISG, 4th ed., Art. 38 paras. 25 et seq.).

      b) However, this does not mean that [Buyer] was entitled to restrict itself to a visual examination of the funnel covers. Instead, it had a duty to assemble random samples of the funnel covers according to their purposive use, to lock covers and framework with screws and subsequently to subject them to simple stress tests. According to the explanations provided by the CEO in the oral hearing, the funnel covers were delivered as a unit and firmly assembled onto pallets. Therefore, a corresponding examination would have been possible without much effort and at little costs. The Court is further convinced that this examination would have been sufficient for [Buyer] to determine the alleged lack of conformity. This follows from the statements made by the expert in the course of the independent evidentiary proceedings (case docket: 1 OH 5/05, District Court (Landgericht) Görlitz). The expert has explained on p. 10 of his opinion (file p. 30) and during his hearing before the District Court on 18 October 2006 (minutes p. 4, file p. 120) that the rattling sounds occurred even without prior assembling in the course of simple testing.

Given these circumstances, the Court is not inclined to follow [Buyer]'s argument that if according to the expert's findings the defect could be ascertained only after assembly, it would be unable to detect the defect because cover and framework were only to be latched for security reasons which needed not be done in the course of an examination for possible lacks of conformity. [Buyer] does not consider in this respect that an examination of the goods for any non-conformity necessarily presupposes that the purchased goods subject to a random test must first be put into the state intended under the contract. Consequently, if cover and framework had to be latched in order to achieve the contractual purpose, [Buyer] also would have had a duty to do so in the course of its examination for lacks of conformity.

      c) In this context, [Buyer] may not successfully rely on the assumption that the asserted defect might not have been discovered during such examination on the grounds that it could not be ruled out that covers and framework were not yet interchanged at the time of arrival of the goods. This submission is in contrast to the expert's statements who managed to detect the non-conformity alleged by [Buyer] with a funnel cover which, according to the CEO's statements in the oral hearing, had not yet been interchanged. This indicates that the defect relied upon by [Buyer] becomes apparent not only after an interchange of cover and framework, but also during treatment of the funnel covers as one unit. This further corresponds to [Buyer]'s assertion derived from the expert's findings that the alleged defects resulted from poor production in general and were not an exception.

      d) Finally, [Buyer] may not successfully rely on Art. 38(3) CISG. The District Court has correctly explained that several weeks passed between receipt of the delivery of funnel covers on 15 June 2004 and their resale in September 2004 to G.W. GmbH. [Buyer] had sufficient opportunities to examine the goods. Thus, it may remain unresolved whether all funnel covers delivered by [Seller] on 15 June 2004 show the same non-conformity asserted by [Buyer]. It is further irrelevant to determine whether [Buyer] has notified the defects to [Seller] within a reasonable time in terms of Art. 39 CISG and whether the claimed losses are at all recoverable.

2. The CEO of [Buyer] has asserted during the oral hearing before the Court that the rattling sounds occurred irrespective of whether covers and framework were examined as a unit or after their interchange. Therefore, [Buyer] is not entitled against [Seller] to any claims for failure to indicate the pairs belonging together or because of failure to comply with a possible obligation of information in a way that the delivered pairs must not be separated. Therefore it needs not to be resolved whether Standard EN 124 regulates the use of covers and framework only in pairs, which has been in dispute between the parties.

3. The late memorandum submitted by [Buyer]'s legal representative on 5 November 2007 does not provide any reason to reopen the oral hearing, 156 ZPO [*].

III. The decision on costs is based on 97(1) ZPO.

The decision on preliminary enforceability follows from 708 No. 10, 711 ZPO.

Further appeal on legal grounds is not allowed because the requirements of 543(2) ZPO are not fulfilled.


FOOTNOTES

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

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

** Jan Henning Berg has been a law student at the University of Osnabrück, Germany and at King's College London. He participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.

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Pace Law School Institute of International Commercial Law - Last updated May 28, 2008
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