Germany 25 January 2008 Appellate Court Hamburg (Café inventory case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/080125g1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 12 U 39/00
CASE HISTORY: 1st instance Landgericht Hamburg 30 March 2000
SELLER'S COUNTRY: Netherlands (defendant)
BUYER'S COUNTRY: Spain (plaintiff)
GOODS INVOLVED: Inventory for a café
GERMANY: Hanseatisches Oberlandesgericht Hamburg
[Judgement No. 12 U 39/00] 25 January 2008
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/149],
CLOUT abstract no. 1399
Reproduced with permission of UNCITRAL
A Spanish company bought from a Dutch seller fittings and equipment for ice production to be used for an ice café in Palma de Mallorca. The seller was obliged to make the items available in ready to use conditions in Mallorca according to a deadline established in the contract, which, later on, the parties agreed to postpone. The contract also included a contractual penalty for any party failing to perform their obligations and stipulated Hamburg as place of jurisdiction.
The fittings for the café and the equipment for the ice cream production were delivered and the purchase price partly paid, however the inventory for the ice cream production was not installed. After granting additional time to the seller in order to make the machines available in a ready to use condition the buyer finally declared the contract avoided. The fittings and equipment were stored and eventually seized by court order and realized in order to cover the storage charge.
Further to an assignment document of the buyer's CEO, all claims of the buyer against the seller were assigned to the CEO and other buyer's assignees. They brought action for repayment of the purchase price and for payment of the contractual penalty, claiming that the defendant had delivered defective and incomplete items and failed to install the equipment. The defendant (the seller's inheritors) denied the alleged non-conformity of the goods delivered stating in addition that the buyer had not given notice of lack of conformity within reasonable time. Furthermore, the installation of the ice cream production equipment had failed because the buyer had not provided a suitable room for installation.
On first instance, the Regional Court dismissed the action; the Higher Regional Court overruled that decision and granted the buyer's assignees payment of the contractual penalty, although it rejected the claim for refund of the purchase price.
The Higher Regional Court stated that the contract between the parties was governed by the CISG, part of German law, which had been tacitly chosen by the parties when stipulating Hamburg as the place of jurisdiction. The court found that the buyer's assignees had no right to claim reimbursement of the part of the purchase price that had already been paid neither under Article 81(2) nor under Article 50 CISG. According to the court, the buyer failed to notify the seller within reasonable time (Article 39 CISG) and to sufficiently specify the nature of the non-conformity. Relying on Article 8(2) CISG, the court did not find that the letters sent by the buyer to the seller could be considered as a complaint on the actual conditions of the goods, but they were to be understood as a mere reminder to install the equipment. With respect to the examination of the goods and the notification of non-conformity under Articles 38 and 39 CISG the court further stressed that the time limit, as applied by preceding jurisprudence, was usually of about fourteen days up to one month after receipt of the goods, except where particularcircumstances shortening or extending the time are to be considered.
The court also held that no fundamental breach of contract (Article 25 CISG) had occurred, which would entitle the buyer to declare the contract avoided pursuant to Article 49(1)(a) CISG. Applying Article 51(2) CISG through analogy, the court found that avoidance of the entire contract could have been possible only if the missing installation of the equipment for the ice production had affected the buyer's use of the other part of the goods delivered. Since this had not been the case, and the buyer had not declared partial avoidance of the contract (i.e. only with reference to the equipment intended for the ice production), the court left undecided whether the buyer's declaration of avoidance had been timely and effective under Article 49(2)(b)(i) CISG.
However, since the seller's failure to install the ice cream production equipment was undisputed, the court, referring to Articles 79 and 80 CISG (as well as to domestic law), held that the seller could not be relieved from its obligation to make the machine available in a ready to use condition. The buyer's assignees were thus entitled to receive the contractual penalty established in the contract. Pursuant to Articles 74 and 78 CISG, the court awarded interest on the contractual penalty payment with interest rate being determined according to the national law applicable on the basis of the conflict of laws rules of the forum state, i.e. German law.
In its decision, the court also considered the assignment of contractual rights by the buyer's assignees, which had been contested by the seller's inheritors. According to these latter the assignment was ineffective since, among others, it had been revoked by the buyer's CEO. The Higher Regional Court, relying on Article 16(1) CISG, noted that a declaration of intent may only be revoked before the offeree dispatches an acceptance. Since the buyer's assignees had requested the assignment, the CEO's declaration to assign the claim was in fact a declaration of acceptance: its revocation was thus not possible.Go to Case Table of Contents
Reproduced from Internationales Handelsrecht [3/2008] 98
"1. Goods have to be examined and a lack of conformity noticed within two weeks from their receipt. The notice must sufficiently describe the defect to enable the seller to form an opinion and determine the steps to be taken.
"2. Avoidance of the entire contract, being ultima ratio, will not be granted if limited or partial use of the goods can be made.
"3. How a right is transferred by assignment to the assignee is determined by the law applying to that right.
"4. The interest rate is determined by the subsidiary applicable national law."
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): penalty clauses, assignments]; 8B [Interpretation of party's statements or other conduct: interpretation based on objective standards]; 25B [Definition of fundamental breach: substantial deprivation of expectation, etc.]; 38A [Buyer's obligation to examine goods: time for examining goods]; 39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required]; 51A ; 51B [Non-conformity of part of goods: Avoidance as to entire contract]; 74A [General rules for measuring damages (loss suffered as consequence of breach): includes provable loss of interest on non-payment of contract penalty]; 78A [Interest on delay in receiving price or any other sum in arrears]
4B [Scope of Convention (issues excluded): penalty clauses, assignments];
8B [Interpretation of party's statements or other conduct: interpretation based on objective standards];
25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];
38A [Buyer's obligation to examine goods: time for examining goods];
39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required];
51A ; 51B [Non-conformity of part of goods: Avoidance as to entire contract];
74A [General rules for measuring damages (loss suffered as consequence of breach): includes provable loss of interest on non-payment of contract penalty];
78A [Interest on delay in receiving price or any other sum in arrears]
CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1352&step=Abstract>
CITATIONS TO TEXT OF DECISION
Original language (German): Internationales Handelsrecht (2008/3) 98-102; CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1681.pdf>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
25 January 2008 [12 U 39/00]
Translation [*] by Jan Henning Berg [**]
Edited by Institut für ausländisches und internationales
Privat- und Wirtschaftsrecht der Universität Heidelberg
Daniel Nagel, editor [***]
Further appeal (Revision) is not admissible.
[The Buyer's assignees] seek to exercise claims which have been assigned to them (exhibit K1) and which are based on a sales contract of 18 January 1995 (exhibit K2).
One party to this contract has been the Spanish company C.A. S.L. ,[Buyer], whose shareholders were [the Buyer's assignees] as well as the [Buyer]'s CEO and shareholder H.B. Under this contract, [Buyer] purchased inventory items stored in containers at a price of Deutsche Mark [DM] 125,000 from [Seller]. [Seller], who was domiciled in the Netherlands, had died in the meantime. He was the father of the Defendants [Seller's inheritors]. The inventory was supposed to be used as fittings for a café in Palma de Mallorca, Spain, as well as for a separate ice cream production site. [Seller] was obliged to make the inventory available in ready-for-use condition in Mallorca by 1 March 1995 according to the contract. This date was then mutually delayed until mid-April 1995. The contract provided for Hamburg as the legal forum. The contract further contained the following clause:
"Should buyer or seller fail to perform this contract in total or in part, the respective party will be liable to the immediate payment of a contractual penalty of DM 12,500."
The inventory for the café was delivered on 11 March 1995 while the machines for ice cream production were delivered on 30 March 1995. The parties are in dispute whether technicians of [Seller] or [Buyer]'s own personnel assembled and installed the inventory for the café. However, it is undisputed that on 13 April 1995 the café was put into commercial operation and that the inventory in question was used at that occasion. It is also undisputed that the inventory for ice cream production has not been installed.
On 21 March 1995, [Buyer] paid [Seller] a partial amount of the purchase price, DM 60,000. By letter of 18 April 1995, the [first assignee of the Buyer] and H. B. requested [Seller] to make the machines available in a ready-for-use condition. They set a time limit until 2 May 1995 (exhibit K5). By letter of 3 May 1995, the [first assignee of the Buyer] reiterated this request and set another time limit until 14 May 1995 (exhibit K6). By letter of 15 May 1995 (exhibit K16), [the Buyer's assignees] declared cancellation of the contract. However, the [first assignee of the Buyer] withdrew this declaration by letter dated 1 June 1995 (exhibit K7) and, instead, claimed damages and demanded collection of the inventory. By another letter of 8 June 1995 (exhibit K8), [the Buyer's assignees] requested reimbursement of the DM 60,000 until 23 June 1995 and, once again, demanded collection of the inventory, within three weeks after payment, which:
"We ... require inter alia in order to use this sum to acquire replacement for all items which have been delivered and which -- in the meantime -- have been provisionally used for operation of the café."
Alternatively, the inventory would be stored and the corresponding costs charged to [Seller]'s account. According to [the Buyer's assignees]' submissions, which have been contested, the entire inventory had been stored. On 21 February 1996, the entire inventory of [Buyer] was seized by court order (exhibit K9) and realized. [The Buyer's assignees] claim that this had been done in order to cover the storage costs.
According to an assignment document of 6 September 1995 (exhibit K1), [Buyer]'s CEO H.B. assigned all claims of [Buyer] against [Seller] to himself and to [the Buyer's other assignees]. The signature was certified by a Spanish solicitor in Palma de Mallorca.
POSITION OF THE PARTIES BEFORE THE COURT OF FIRST INSTANCE
Position of [the Buyer's assignees]
[The Buyer's assignees] claimed that [Seller] had delivered defective and incomplete inventory and had also failed to make it available in a ready-for-use condition. Following these breaches of contract, [Seller] -- and now [Seller's inheritors] -- were liable to reimburse the sum of DM 60,000 and to pay the contractual penalty of DM 12,500.
[The Buyer's assignees] requested the court to order [Seller's inheritors] as joint debtors to pay [the Buyer's assignees] as joint creditors the sum of DM 72,500 plus 9% interest since 29 July 1995.
Position of [Seller's inheritors]
[Seller's inheritors] requested the Court to dismiss [the Buyer's assignees]' action.
First, they contested that German courts had international jurisdiction to adjudicate the dispute. They further asserted that the assignment had been ineffective because [the Buyer's assignees] had gained the required declaration from H.B. by blackmailing him and because the latter had also revoked and rescinded the assignment on 10 March 1999 (exhibit B2). Furthermore, the assignment was ineffective because of a prohibition to act as principal and agent at the same time. Moreover, the inventory intended for the café had been purchased both in the condition as seen at the time of the conclusion of the contract and as second-hand goods. [Seller] had also effected delivery of the entire inventory and his personnel had installed the inventory in a way that it had been ready for use. However, the inventory intended for ice cream production could not be installed because [Buyer] had failed to provide a suitable room - [Buyer] had only provided a cellar without the required power sockets and had not even obtained any official authorization for the production of ice cream on [Buyer]'s premises. Consequently, the technician who had been instructed and sent by [Seller] had to return without having achieved anything. [The Buyer's assignees]' sole intention in bringing their action was to receive as much money as possible from [Seller] in a fraudulent manner.
REASONING OF THE COURT OF FIRST INSTANCE
By judgment of 30 March 2000, the District Court (Landgericht) dismissed [the Buyer's assignees]' action as not justified due to the fact that the plaintiffs to these proceedings had not embraced all of the joint creditors and, therefore, had not been entitled to demand performance without the other creditors.
POSITION OF THE PARTIES BEFORE THE APPELLATE COURT
Position of [the Buyer's assignees]
In their appeal, which has been filed in accordance with the relevant time limits and formal requirements, [the Buyer's assignees] reiterate their claims which have already been raised in the proceedings before the Court of First Instance. They have clarified during the oral hearing of 23 November 2007 that they do not seek damages, but merely reimbursement of the pro-rata purchase price and payment of the contractual penalty.
[The Buyer's assignees] request the Court to amend the judgment rendered by the District Court on 30 March 2000 and to order [Seller's inheritors] as joint debtors to pay both [the Buyer's assignees] and H. B. as joint creditors the amount of DM 72,500 plus 9% interest since 29 July 1995.
Position of [Seller's inheritors]
[Seller's inheritors] request the Court to dismiss the appeal. In the alternative, [Seller's inheritors] request the Court to grant a limitation of [Seller's inheritors] liability to the value of [Seller]'s estate and to admit further appeal (Revision).
[Seller's inheritors] correspondingly reiterate their submissions from the proceedings before the Court of First Instance. They assert in addition, that [the Buyer's assignees] had failed to give notice about the alleged non-conformities within reasonable time.
Reference is made to the parties' submissions and the case file.
REASONING OF THE APPELLATE COURT
The appeal is admissible but only partially justified.
I. [ADMISSIBILITY OF THE ACTION]
1. [International jurisdiction of the Court]
International jurisdiction of the Court follows from Art. 17 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, which still applies in this case. The provision of Art. 23 Brussels I Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters is not applicable because the action has been brought before the entering into force of the Brussels I Regulation (see Art. 66(1) Brussels I Regulation). The sales contract of 18 January 1995 contains a legally effective choice of forum clause which determines Hamburg as the forum. This clause is also binding on the [Seller's inheritors] as the legal successors to [Seller]. [The Buyer's assignees] can rely on the clause since they have conclusively shown that they have acquired [Buyer]'s claims arising out of the contract by way of assignment. It is not relevant for questions of admissibility whether the assignment was in fact valid. Such so-called facts of double relevance (doppelrelevante Tatsachen) are only to be assessed -- and have only to be proven -- in respect to the merits of a case. For the purpose of determining the admissibility of an action it is sufficient to make a conclusive submission in order not to over-burden the admissibility assessment (cf. BGHZ [*] 124, 237 (240 et seq.); Schack, Internationales Zivilverfahrensrecht, 4th ed. 2006, margin number 387). It cannot be relevant in this respect whether all assignees can exercise their claims only jointly, which again constitutes a substantive issue. Insofar, it must suffice for an admissibility test to require that the entitlement to bring the claim has been conclusively submitted in order to prevent that possibly justified actions are already being dismissed due to non-admissibility.
2. [Entitlement to litigate the claim]
[The Buyer's assignees] are also entitled to litigate the present dispute. Again, it is sufficient for them to make a conclusive submission in respect of their entitlement (cf. Zöller / Vollkommer, ZPO [*]. 25th ed. 2005, Vor § 50 margin number 18). In this respect, it does not affect [the Buyer's assignees] that [Seller's inheritors] have argued that [Buyer]'s CEO H.B. had effectively rescinded the assignment and, moreover, that even if the assignment had been effective, [the Buyer's assignees] would have been entitled to their claims and thus capable to sue only jointly with CEO H.B. Instead, it is sufficient if [the Buyer's assignees] have conclusively shown to be entitled to sue as well as that it might be possible according to the respective applicable law that there have not been any legal grounds for a rescission of the assignment or, in any case, that they have been raised in court too late and that [the Buyer's assignees] are entitled to request payment to all assignees (see below, at II.2.b). Any relevant challenges which are brought against these submissions and which concern the substantive entitlement of [the Buyer's assignees] are to be considered only at the substantive assessment stage.
II. [SUBSTANTIVE ASSESSMENT]
The action is not justified insofar as [the Buyer's assignees] seek to exercise a claim for reimbursement of the partial advance payment of the purchase price. However, the action is justified with respect to the claim for a contractual penalty.
1. [Claim for reimbursement]
[The Buyer's assignees] are not entitled to claim reimbursement of the sum of DM 60,000. Irrespective of the fact whether the assignment of claims arising out of the sales contract was legally effective or, as purported by [Seller's inheritors], was ineffective or subject to rescission, [Buyer] had no reimbursement claim against [Seller].
a) German law is applicable in respect to the contract of sale concluded between [Buyer] and [Seller]. According to preceding jurisprudence, a choice of forum agreement shows that there is a tacit choice of law in favor of the law applicable at the forum, unless the choice of forum clause does not stipulate an exclusive jurisdiction, or unless a different intent of the parties is obvious from the circumstances (BGHZ [*] 104, 268; BGH [*] NJW [*] 1996, 2569; Münchener Kommentar zum Bürgerlichen Gesetzbuch / Martiny, vol. 10, 4th ed. 2006, Art. 27 EGBGB margin number. 48; Palandt / Heldrich, BGB, 66th ed. 2007, Art. 27 EGBGB margin number 6; Staudinger / Magnus, Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, 2002, Art. 27 EGBGB margin number 64.) According to Art. 17(1)(1) Brussels Convention, a choice of forum agreement confers an exclusive jurisdiction except when otherwise stipulated. The parties to the sales contract at hand have not reached a diverging agreement and the circumstances do not indicate any intention of the parties not to confer exclusive jurisdiction. The seat of [Seller] -- being the party effecting the characteristic performance -- in the Netherlands does not sufficiently indicate any intention of the parties to choose Dutch law. Moreover, the place of performance in Spain does not sufficiently indicate that the parties wanted Spanish law to apply. Rather, the use of German language and even of specific terminology ("sicherungsübereignet") serves as another indication side-by-side to the choice of forum clause for a tacit choice of German law, which is also sufficiently clear in terms of Art. 27(1)(2) EGBGB [*].
b) Any express or tacit choice of German law also includes the United Nations Convention on Contracts for the International Sale of Goods of 1980 (CISG), which forms a special part of German law applicable to international contracts of sale (BGH NJW 1997, 3309 (3310); BGH NJW 1999, 1259; Staudinger / Magnus, 2005, CISG, Art. 1 margin number 104, Art. 6 margin number 24). The scope of application of the CISG also covers the sale of the inventory in territorial, temporal and subject-matter terms. The CISG is thus applicable.
c) The application of the CISG would also not be affected by the assignment, the effectiveness of which is in dispute between the parties. Art. 33(2) EGBGB provides that the law governing the assigned claim remains relevant for the legal relationship between the new creditor (possibly [the Buyer's assignees] in this case) and the debtor (the [Seller's inheritors]).
d) However, [Buyer] has no right to claim reimbursement of the part of the purchase price which has already been paid, neither under Art. 81(2) CISG nor by way of a price reduction according to Art. 50 CISG.
aa) It may remain undecided whether the purported lacks of conformity of the inventory, which has been sold as second-hand, have been of such impact as to constitute a fundamental breach of contract and thus to grant [Buyer] a right to declare the contract avoided pursuant to Art. 49(1)(a) CISG. It is even irrelevant whether [Buyer] has properly declared avoidance of the contract subsequent to [Buyer]'s revocation of its declaration of avoidance of 15 May 1995 by letter dated 3 June 1995 (exhibit K7). In any event, [Buyer] has not properly notified the non-conformities within due time and sufficiently specified the nature of the lacks of conformity. With respect to the examination and notification in terms of Arts. 38 and 39 CISG, the preceding jurisprudence usually applied a time limit of about fourteen days, up to a maximum of one month after receipt of the goods, except where particular circumstance must be considered which may lead to a shorter or longer period (concerning the notification period see in particular BGHZ [*] 129, 75 (85 et seq.); OGH [*] JBl [*] 1999, 318; OGH IHR [*] 2001, 81; Schlechtriem / Schwenzer / Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht, 4th ed. 2004, Art. 39 margin number 17; Staudinger / Magnus, Art. 39 margin number 49 with further references). Moreover, any lack of conformity must be notified in a way that the defect is sufficiently specified in order to enable the seller to comprehend it and to be able to plan his reaction (e.g., rectification or delivery of new goods). [Buyer]'s letters of 18 April 1995, 3 May 1995 and 1 June 1995 (exhibits K5-7) merely state that there has not been any "installation of the machines for ice cream production in ready-for-use condition for the operation of the café which would have been required under the contract". Any "reasonable person of the same kind as the other party" (Art. 8(2) CISG) would have understood this as a mere reminder to install the machines but not as a complaint about the actual condition of the inventory. A sufficient notice has only been given in the course of the present proceedings and therefore too late. Consequently, [Buyer] has lost its right to rely on a lack of conformity on the basis of Art. 39(1) CISG. Since it was neither entitled to declare the contract avoided nor to claim reimbursement according to Art. 81(2) CISG, no such claim could have possibly been assigned. This reasoning also applies to a price reduction pursuant to Art. 50 CISG, which equally could not have been exercised or assigned because of Art. 39(1) CISG.
The outcome remains unaffected even given that [Seller] has been obliged under the contract to make the inventory available in a "ready-for-use condition." If interpreted objectively and according to the understanding of a reasonable recipient (Art. 8(2) CISG), this wording cannot be understood in a way that the seller would give a warranty for a lack of defects, including completeness of the inventory -- which was purchased as second-hand -- and thereby to waive the statutory requirement for the other party to give a proper notice of any non-conformities. The stipulated obligation of [Seller] to make the inventory available in a ready-for-use condition thus did not relieve [Buyer] from its duty to give notice of the alleged lack of conformity (in terms of quality and quantity) in a sufficiently specified manner.
[The Buyer's assignees] do not rely on any claim for damages, which would, moreover, lack the required calculation of damages. In any event, no such claim would be existent on the basis of the alleged lack of conformity due to Art. 39(1) CISG.
bb) Furthermore, not even any asserted failure to install the machines in ready-for-use condition would entitle [Buyer] to declare the contract avoided in its entirety. It may remain undecided whether [Buyer] -- despite its revocation of the declaration of avoidance -- has effectively declared avoidance within a reasonable time after [Buyer] knew or ought to have known of the breach (Art. 49(2)(b)(i) CISG). In any case, there was no fundamental breach of contract, which, however, is a prerequisite for an avoidance of the entire contract if, as in the present case, the seller has effected the delivery of the goods (Art. 49(1)(a) and 51(2) CISG). A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result (Art. 25 CISG). In cases of delivery of defective goods, they must be practically useless for the buyer in order for the breach to be fundamental. If the defective goods can be put to use -- and even where only restricted use is possible -- there will generally be no fundamental breach of contract (BGHZ 132, 290 (298) (unrecoverable deviation in quality, which however did not render the delivered cobalt sulphate unmarketable); BG [*] SZIER [*] 1999, 177 et seq. (meat with too high and therefore non-conforming content of fat while it remained marketable). Given the efforts necessary to unwind a transaction, an avoidance of the contract should be only available as a last-resort remedy (BGHZ 132, 290 (298); OGH [*] IHR [*] 2001, 42; OLG [*] Köln IHR 2003, 15; Münchener Kommentar / Huber, vol. 3/I, 5th ed. 2008, Art. 49 margin number 3; Schlechtriem / Schwenzer / Schlechtriem, Art. 25 margin number 21a; Staudinger / Magnus, Art. 49 margin number 4). This rule also applies to cases where the goods cannot be put into full operation, e.g., where there is a failure to comply with additional obligations under the contract, such as the obligation to install the goods in a ready-for-use condition.
In the present case, [Buyer] has submitted that it had at least provisionally put the inventory for the café into operation and that it had operated the café using the inventory for a couple of months (exhibit K8). Therefore, the inventory must have been suitable for its intended use, albeit [Buyer] itself had to arrange assembly and installation. Even if the inventory which had been intended for ice cream production had not been usable in a similar manner, [Buyer] could at least have made use of a part of the inventory (namely, the part intended for the café) and has in fact made use of it. Avoidance of the entire contract would have only been possible under these circumstances if the missing installation of the inventory for ice cream production had affected [Buyer]'s interest in making use of the other part. The underlying idea of Art. 51(2) CISG, which according to its wording only covers a delivery which is not in conformity with the contract, is also applicable to cases like the present one by way of analogy (Münchener Kommentar / Huber, Art. 51 margin number 21; Staudinger / Magnus, Art. 51 margin number 20; apparently arguing in a similar manner: Achilles, in: Enstahler, Gemeinschaftskommentar zum Handelsgesetzbuch mit UN-Kaufrecht, 7th ed. 2007, Art. 51 margin number 4; different view: Schlechtriem /Schwenzer / Müller-Chen, Art. 51 margin number 1, at footnote 1.) Since [Buyer] has actually made use of a considerable part of the inventory, it has demonstrated that it has been interested in this particular part. Thus, there is no basis for an avoidance of the entire contract. [Buyer] has not declared a partial avoidance in terms of Art. 51(1) CISG, which might have covered only the inventory intended for ice cream production. Moreover, any partial avoidance would not entitle [Buyer] to claim reimbursement of the whole advance payment. Any claim for damages on the part of [Buyer] in the same amount cannot be awarded because [the Buyer's assignees] have expressly refrained from basing their action on a damages claim, which in any event would lack the required detailed calculation. Additionally, it is unclear how any claim for damages because of a breach of the obligation to install the machines in a ready-for-use condition should be calculated in relation to the entire purchase price, given that [Buyer] has lost its rights with respect to the purported lacks of conformity.
2. [Claim for the contractual penalty]
However, as joint creditors with H.B., [the Buyer's other assignees] are entitled to a claim for the stipulated contractual penalty in the amount of DM 12,500 (= EUR 6,391.80).
a) [Maturity of the contractual penalty]
[Buyer] was entitled to claim the contractual penalty of EUR 6,391.80. It is undisputed that [Seller] has failed to install the inventory for the café in a ready-for-use condition. According to the contract, this gave rise to the obligation to pay the contractual penalty. [Seller] had no right to rely on any excuse which would have relieved him from the obligation to effect installation in a ready-for-use condition.
Any possible excuse is to be determined according to the law applicable to the contract, which in turn also governs the contractual penalty (OLG [*] Hamm NJW [*] 1990, 1092; Erman / Hohloch, Bürgerliches Gesetzbuch, 11th ed. 2004, EGBGB, Art. 32 margin number 12; Münchener Kommentar / Martiny, EGBGB, Art. 32 margin number 54; Staudinger / Magnus, EGBGB, Art. 32 margin number 53). However, it is in dispute whether any possible excuse from the obligation to pay a contractual penalty is to be derived from the CISG (Art. 79 or 80) or by recourse to the subsidiarily applicable domestic law in respect to contracts of sale which are governed by the CISG (for this discussion see Münchener Kommentar / Huber, CISG, Art. 79 margin number 27; Münchener Kommentar zum Handelsgesetzbuch / Mankowski, 2nd ed. 2007, CISG, Art. 79 margin numbers 14 et seq.; Schlechtriem / Schwenzer / Stoll / Gruber, Art. 79 margin number 9; Staudinger / Magnus, Art. 79 margin number 53). The question may remain unresolved for purposes of the present dispute, since [Seller] would not be relieved from the contractual penalty both under the CISG and under German domestic law, which is the law applicable to questions which are not already covered by the CISG (see above II.1.a). According to the CISG, [Seller] would be relieved if due to an unforeseeable impediment beyond his control (Art. 79(1)) or due to conduct on the part of [Buyer] (Art. 80) the inventory for ice cream production could not be installed. Pursuant to §§ 339, 286(4) BGB [*], he would be relieved if he was not legally responsible for the failure to install. Neither of the two alternatives applies here. It is undisputed that [Seller]'s technician returned from his trip without having installed the inventory for ice cream production in a ready-for-use condition. [The Buyer's assignees] have contested [Seller's inheritors]' submission that this was caused by unsuitable prerequisites of the respective room and, in particular, a lack of access to water and electricity supply. However, even if this submission was correct, [Seller] would be obliged to assemble the inventory on the designated premises and to prepare it for operation as good as possible. Whether suitable premises were present was solely a concern of the [Buyer] and hence did not constitute an impediment for [Seller] to prepare the inventory in a way that [Buyer] would later be able to put it into operation, e.g., after installation of the required connections. The failure to install by the personnel is to be attributed to [Seller], either by way of Art. 79(1) CISG or § 278 BGB.
Furthermore, the existing claim for the contractual penalty has been validly assigned to H.B. and [the Buyer's other assignees].
In this case, the assignment was governed by German law. While Art. 33(1) EGBGB [*] provides that "the law applicable to the contract will also govern the obligations between the existing and the new creditor", the leading doctrine in German law assumes that this provision only concerns the obligations between assignor and assignee. The property-related effect of an assignment and, thus, the question on whether and how a claim is being transferred to the assignee by way of assignment, is instead governed by the law which is applicable to the claim thus assigned (BGH [*] NJW [*] 1999, 940; BGH NJW-RR [*] 2005, 206; Anwaltkommentar BGB / Doehner, vol. 1, 2005, EGBGB, Art. 33 margin numbers 3 et seq.; Münchener Kommentar / Martiny, EGBGB, Art. 33 margin number 11; Palandt / Heldrich, EGBGB, Art. 33 margin number 2; different view: Staudinger / Hausmann, EGBGB, Art. 33 margin number 33). The applicable domestic law in this case is German law because the primarily applicable CISG (see above II.1.b) does not govern an assignment (OLG Hamm, 1996, 1271; Münchener Kommentar / Martiny, EGBGB, Art. 33 margin number 8).
The contract of assignment which is required under § 398 BGB has been validly concluded, as [Buyer]'s CEO, H.B. had the capacity to act as an agent for [Buyer] (assignor and initial holder of the claim) and was also undisputedly authorized to assign the claim to himself. H. B. declared the assignment on behalf of [Buyer] by instrument of 6 September 1995, and [Buyer]'s three shareholders expressed their consent with the assignment. By way of the assignment, H. B. and [the Buyer's other assignees] have become joint creditors in terms of § 432 BGB, which means that each of the joint creditors may claim payment from all joint debtors.
c) [Authorization and issues concerning the acting as principal and agent at the same time]
The present assignment is not invalid on the basis of a prohibited acting as principal and agent by [Buyer]'s CEO H. B. The extent of a CEO's capacity to represent a company must be considered by recourse to the law governing the company (BGHZ [*] 128, 40 (44); Palandt / Heldrich, EGBGB, Anh. zu Art. 12 margin number 13; Staudinger / Großfeld, 1998, IntGesR margin numbers 278 et seq.). This is Spanish law at hand, because [Buyer] has been founded in Spain and also had its seat there. The Spanish international law on companies does not contain any renvoi or reference to another law (see Art. 9.11 Código Civil).
According to substantive Spanish company law, the CEO (administrador) of a S.L. (Sociedad Limitada) has the power of representation. Neither Spanish private law nor Spanish company law contains any general prohibition against self-contracting (autocontratación), see e.g., Aranzadi, Código Civil, 1992, Art. 1254 note III; Sierra Gil de la Cuesta, Comentario del Código Civil, vol. 6, 2000, Art. 1259 note I.3). Rather, it is generally possible to act as principal and agent at the same time, unless one of the few statutory prohibitions applies (see Tribunal Supremo 5 October 1995; Tribunal Supremo 12 June 2001; see also the other Spanish references above). However, such transactions may be declared invalid if the acting agent is exposed to conflicting interests and if abuses of his power of representation need to be prevented (see the judgments mentioned; see also Fischer / Fischer, Spanisches Handels- und Wirtschaftsrecht, 2nd ed. 1995, 216 et seq.; Sohst, Das Spanisches Bürgerliche Gesetzbuch, 3rd ed., 2005, annotations to Arts. 1254 and 1259). Statutory prohibitions do not apply here. A prohibition might have followed from Art. 10.1 Ley 2/1995 de Sociedades de Responsibilidad Limitada, which has entered into force on 1 June 1995 and was thus applicable at the time of the assignment; this provision only permits financial aid (asistencia financiera) by the company for its shareholders and CEOs after authorization by the assembly of shareholders (Junta General). However, in this case all shareholders have expressed their consent with the assignment. [The Buyer's other assignees]' approval to execute the assignment to H. B. as well thus demonstrated an additional, sufficiently perceivable authorization, which would in any event override any possible invalidity of the self-contracting transaction, which -- in addition -- appears possible given the conflict of interests on the part of H. B. (In fact, legal scholars recommend that a declaration of approval should be obtained from the person affected by the conflict of interests; cf. Fischer / Fischer, 217; Sohst, annotation to 1259).
d) [Revocation and rescission of the assignment]
The revocation and the rescission of the assignment, which had been declared by H. B. by letter dated 10 March 1999 (exhibit B2), have not been effective in law. Both the revocation and the rescission were governed by German law, just as the sales contract concerning the inventory. This is because revocation and rescission are legally assessed under the law which is applicable to the declaration of intent subject to revocation (Reithmann / Martiny / Martiny, Internationales Vertragsrecht, 6th ed. 2004, margin numbers. 245, 249; Staudinger / Magnus, EGBGB, Einl zu Art. 27-37 margin number A 77). The relevant law is thus German law including the CISG (see above II.1.a and b). However, the CISG merely governs the revocation of a declaration but not a rescission on the basis of deceit or menace, which means that the latter was governed by German (non-uniform) law. Art. 16(1) CISG provides that a declaration of intent may be revoked only if the revocation reaches the offeree before he has dispatched an acceptance. Since [the Buyer's assignees] had requested the assignment, H.B.'s declaration of 6 September 1995 to assign the claim already constituted the declaration of acceptance. There is no possibility for any subsequent revocation. Moreover, no rescission of the assignment on the basis of deceit or menace, which would be subject to German internal law, was possible because the time limit of § 123(1) BGB had expired on 10 March 1999, as H.B. had already been aware of the asserted deception at that time and as he additionally was no longer exposed to the asserted menace due to his change of employment with effect as of May 1996 (see his letters of 28 September 1995, 16 April 1996 and 30 May 1996, exhibits B4, B8 and B9).
e) [Claim for interest]
The claim for interest follows from Art. 78 in conjunction with Art. 74 CISG, despite the fact that this case concerns the payment of interest on a contractual penalty and that the CISG itself does not govern contractual penalties as such. Art. 78 CISG provides for a duty to pay interest with respect to "any other sum that is in arrears" and, therefore, also embraces exercisable contractual penalties which have been stipulated in a sales contract subject to the CISG. The CISG does not require any formalities (e.g., a reminder) before a monetary claim becomes mature and enforceable (see Art. 59 CISG, which is applied to govern all monetary claims; cf. LG [*] Flensburg, IHR [*] 2001, 202; Cour d'appel de Grenoble, CLOUT N. 152; Münchener Kommentar zum BGB/Huber, Art. 78 margin number 8; Münchener Kommentar zum HGB / Ferrari, 2nd ed. 2007, Art. 78 margin number 11; Staudinger/Magnus, Art. 78 margin number 9). In the present case, the claim for interest became mature concurrently with maturity of the claim for the contractual penalty. The claim for the contractual penalty came into existence when the inventory for ice cream production was not installed in a ready-for-use condition at the time stipulated in the contract (mid-April 1995). Consequently, a claim for interest has definitely existed at the point in time asserted by [the Buyer's assignees] (29 July 1995).
Since the CISG does not govern the relevant interest rate, it must be determined according to the subsidiarily applicable domestic law, which is German law in this case. However, Art. 78 and 74 CISG allow a creditor to claim interest which is higher than the statutory interest rate if he incurs corresponding expenses from lending. In the present case, [the Buyer's assignees] are entitled to claim an interest rate of 9% which they had to expend for a bank loan.
f) [Reservation: Limitation of liability to the decedent's estate]
In accordance with their procedural request, the [Seller's inheritors] retain the possibility to limit their liability to the decedent's estate (§ 780(1) ZPO [*]). It is not necessary to determine whether such limitation is already effective pursuant to the applicable law of succession or need yet be declared (cf. Thomas / Putzo / Putzo, ZPO, 26th ed. 2004, § 780 margin number 8; Zöller / Stöber, § 780 margin number 11). However, the decision on costs is not subject to the reservation because these costs have not been caused by the decedent but by [Seller's inheritors] themselves.
III. [ANCILLARY DECISIONS]
The decision on costs is based on § 92(1) ZPO. The decision on provisional enforceability is based on § 708 No. 10, 711 ZPO. Further appeal (Revision) is not admissible because the present dispute is neither of fundamental importance -- the dispute mainly concerns questions of fact while the relevant legal issues appear largely settled -- nor is a decision by the Federal Supreme Court necessary to develop the law or to ensure a uniform jurisprudence (§ 543 ZPO).
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiffs are referred to as [the Buyer's assignees] and the Defendants are referred to as [Seller's inheritors]. The Spanish company C.A. S.L. is referred to as [Buyer]. Mr. H. v. d. P., father of the Defendants, is referred to as [Seller]. Amounts in the uniform European currency (Euro) are indicated as [EUR]. Amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BG = Bundesgericht [Swiss Federal Supreme Court]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGH = Bundesgerichtshof [German Federal Supreme Court]; BGHZ = Entscheidungen des Bundesgerichtshofes in Zivilsachen [Officially reported decisions of the German Federal Supreme Court in Civil Matters]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; IHR = Internationales Handelsrecht [German law journal]; JBl = Juristische Blätter [Austrian law journal]; LG = Landgericht [German District Court]; NJW = Neue Juristische Wochenschrift [German law journal]; NJW-RR = Neue Juristische Wochenschrift Rechtsprechungsreport [German law journal]; OGH = Oberster Gerichtshof [Austrian Federal Supreme Court]; OLG = Oberlandesgericht [German regional appellate court]; SZIER = Schweizerische Zeitschrift für internationales und europäisches Recht [Swiss law journal]; 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.
*** Ph.D. candidate Daniel Nagel has studied law at the University of Heidelberg and at the University of Leeds.Go to Case Table of Contents