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CISG CASE PRESENTATION

Germany 23 March 1978 Appellate Court Hamm [ULIS precedent] (Brass poles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/780323g1.html]

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

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Case identification

DATE OF DECISION: 19780323 (23 March 1978)

JURISDICTION: Germany

TRIBUNAL: OLG Hamm [OLG = Oberlandesgericht = Provincial Court of Appeal]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 2 U 30/77

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Unavailable

BUYER'S COUNTRY: Unavailable

GOODS INVOLVED: Brass poles ordered to buyer's specifications


Classification of issues present

APPLICATION OF CISG: No, however, ULIS issue is present that is also relevant to the CISG

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74 can be said to be at issue because analysis of ULIS Article 82 is relevant to interpretation of CISG Article 74

Classification of issues using UNCITRAL classification code numbers:

74B [General rules for measuring damages]

Descriptors: Damages ; Foreseeability

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Editorial remarks

EDITOR: Albert H. Kritzer

The parallel language of ULIS Article 82 and CISG Article 74. ULIS Article 82 states that "damages shall not exceed the loss which the party in breach ought to have foreseen at the time of the conclusion of the contract in the light of the facts and matters which then were known or ought to have been known to him, as a possible consequence of the breach of the contract."

CISG Article 74 states that "damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

Use of ULIS jurisprudence as an aid to interpreting the CISG. Citing century old precedent to the effect that where a term is used in one statute, a subsequent statute that incorporates the same term in a similar context must be construed so that the term is interpreted according to the meaning that has been previously assigned to it, Mann adds: "It is simply common sense that if the Convention adopts a phrase which appears to have been taken from . . . where it is used in a specified sense, the international legislators are likely to have had that sense in mind and to intend its introduction into the Convention." F.A. Mann, Uniform Statutes in English Law, 99 Law Quarterly Review (1983) 382-383 [citations omitted]. In the same vein, Audit states: "The international character of the Convention should encourage courts to refer to the Convention's legislative history and prior instruments (i.e., the ULIS . . .) in order to ascertain the most likely intent underlying the wording of a given provision." Bernard Audit, The Vienna Sales Convention and the Lex Mercatoria, in: Thomas E. Carbonneau ed., rev. ed., Lex Mercatoria and Arbitration (Juris Publishing 1998) 188.

For examples of other case law interpretations of ULIS Article 82, go to the Match-up of ULIS Article 82 with CISG Article 74 and the section of that presentation entitled, ULIS case precedents aiding in interpretation of CISG Article 74. The ULIS citations presented are taken from the chapter on CISG Article 74 by Hans Stoll in Peter Schlechtriem ed., Commentary on the UN Convention on the International Sale of Goods (Clarendon Press: Oxford 1998) 552-572.

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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): Schlechtriem/Magnus, Internationale Rechtsprechung zu EKG und EAG [International case law on ULIS and ULF], Baden-Baden: Nomos (1987) Art. 82 EKG No. 8, 419-421

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Saidov, Damages under the CISG (December 2001) n.129; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 74 para. 18

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Case text (English translation)

Queen Mary Case Translation Programme

Oberlandesgericht Hamm 23 March 1978

Translation by Jarno Vanto [*]
University of Turku, Finland

Translation edited by Ruth M. Janal [**]
University of Freiburg, Germany

The Court essentially dismissed the appeal. According to the Court of Appeals the contract at issue was efficiently concluded as a sale subject to buyer’s specification.

The Court stated:

“The fact that the confirmation of the order provides: '... subject to future agreements after the basic samples have been accepted' does not cast doubt over the effective conclusion of a contract. The passage starts in the section of the contract with the heading ‘date of delivery’ and only refers to the time of performance by stipulating that the date of delivery was to be agreed on after the [buyer] had accepted the samples. The clause simply meant that the buyer had reserved itself the right to specify details of the goods later on, and that the contract was therefore a sale subject to the buyer’s specification in the meaning of Art. 67 ULIS. […] The right to make further specifications does not prevent a valid conclusion of the contract.

"Article 76 of ULIS provides that where, prior to the date fixed for performance of the contract, it is clear that one of the parties will commit a fundamental breach of the contract, the other party shall have the right to declare the contract avoided. Article 10 ULIS provides that a breach of contract shall be regarded as fundamental, wherever the party in breach knew, or ought to have known, at the time of the conclusion of the contract, that a reasonable person in the same situation as the other party would not have entered into the contract if it had foreseen the breach and its effects. If the contract is avoided, the party relying on the breach may, based on Article 77, claim damages under Articles 84-87. Article 87 provides that if there is no current price for the goods (as is the case in the present dispute), damages shall be calculated under Article 82. Art. 87 ULIS refers only to the legal consequences of Art. 82, as Article 82 is primarily applicable in cases where the contract is not avoided. Article 82 places a duty on the party in breach to compensate for losses suffered by the other party as a consequence of the breach, including loss of profit. Damages shall not exceed the loss which the party in breach ought to have foreseen as a consequence of its breach at the time of the conclusion of the contract, in the light of the circumstances which were known or ought to have been known to it at that point in time. The above-mentioned possibility to claim damages is open to the aggrieved party upon its choice next to exercising other remedies for anticipatory breach of contract. […] The declaration of avoidance as a requirement for liability for damages takes place by means of a constitutive statement of the aggrieved party. No specific form is required.

"The said prerequisites to establish [buyer’s] liability for damages are met. The [buyer] committed a fundamental breach of contract by declining not only to specify the goods, but also by declining to perform the contract as a whole without any justifiable reason. The [buyer] is not released from the performance of the contract due to the alleged legal restrictions in Israel. It was the [buyer’s] duty to check the usability of the ordered valves before concluding the contract; this includes the matter of legal admissibility. This responsibility was upon the [buyer] alone. [Buyer] cannot subsequently burden the [seller] with that risk.

"The [buyer] furthermore knew that a reasonable person in the [seller]'s position would not have concluded the contract with it, had it foreseen the [buyer’s] refusal to perform the contract and the consequences of that refusal.”

With respect to the claim for damages, the Court held:

“Firstly, [buyer] is to compensate [seller] for the loss it suffered as a result of the contract it concluded with its supplier for the purchase of 20,000 brass poles at a price of DM [Deutsche Mark] 580.- each, material which was required specifically for the [seller]'s performance of its obligations towards the [buyer]. [Seller] was later required to take possession of the brass material, but did not find use for it until the price of brass had considerably dropped and it could have acquired material at a much cheaper price, had [seller] not been bound by the initial supply contract […].

"It is not the [seller]'s fault that it concluded the contract with its supplier already in the year 1974. The [seller] was entitled to enter the contract at that point in time, as the contract with the [buyer] had previously been concluded in a way which effectively bound the [buyer]. This all the more so, because the [seller] had pointed out the question of metal prices to the [buyer] in view of the necessary supply contracts.

"In the light of all circumstances the [buyer] knew or ought to have known at the time of the conclusion of the contract, it could have foreseen the [seller]'s damage as a consequence of its refusal to perform its obligations under the contract (Art. 82 ULIS). [Buyer] is a businessperson. Furthermore, the brass material that [seller] purchased to perform its contract with the [buyer] is an article which depends on the market. Consequently, considerable fluctuations in price are to be expected. That includes a sudden drop in prices to the depths the [seller] uses to calculate its losses.

"The [seller] is not liable for contributory negligence. The [seller] had specifically pointed out the possibility of imminent damage in case of non-performance.

"Additionally, the [seller] is entitled to claim compensation for losses it suffered (Art. 87, 82 ULIS) after the conclusion of the contract by creating tools for the manufacture of the valves to be delivered to the [buyer] and by manufacturing the samples. These losses were also foreseeable to the [buyer]. Based on [seller's] offer, these measures were to be undertaken by the [seller] after the conclusion of the contract. […]

"The [seller] is not entitled to interest. The prerequisites under which a claim for interest arises under ULIS are not met. Under Art. 83 ULIS the seller is entitled to interest for default in payment of the purchase price at the rate of 1% above the official discount rate in the country where it has its place of business. However, the [seller]'s claim is for damages and not for payment of the purchase price. A claim for damages does not fall under the obligation to pay interest under Art. 83 ULIS […]. Whether such damages are recoverable under ULIS independently of Art. 83, is of no relevance to the present dispute: The [seller] did not prove a corresponding loss […] ULIS does not contain a provision similar to 291 BGB [German Civil Code], under which litigation interest is recoverable from the time the claim was filed.”


FOOTNOTES

* Jarno Vanto is an LL.M student at the University of Turku, Finland. He is currently working on his thesis on damages under the CISG.

** Ruth M. Janal, LL.M. (UNSW) is a Phd candidate at Albert-Ludwigs-Universität Freiburg.

All translations should be verified by cross-checking against the original text.

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Pace Law School Institute of International Commercial Law - Last updated September 14, 2006
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