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CISG CASE PRESENTATION

Germany 27 January 1981 District Court Heidelberg [ULIS precedent] [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/810127g1.html]

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

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Case identification

DATE OF DECISION: 19810127 (27 January 1981)

JURISDICTION: Germany

TRIBUNAL: LG Heidelberg [LG = Landgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: O 116/81

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Unavailable


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 ; Currency issues

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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. 19, 255-256; Recht der Internationalen Wirtschaft (1982) 285-286

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: CISG-AC advisory opinion on Calculation of Damages under CISG Article 74 [Spring 2006] n.43 (related cases cited in addendum to opinion)

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Case text (English translation)

Queen Mary Case Translation Programme

Landgericht Heidelberg 27 January 1981, O 116/81

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

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

The Italian [seller] demanded payment from the German [buyer] for an outstanding part of the purchase price. The due date for the payment was 13 October 1980. The [buyer] did not succeed with its claim of a set-off.

As to the extent of liability for damages, the Court stated the following:

"The [seller] cannot claim damages for the delayed payment based on losses suffered as a result of a drop in the exchange rate of the foreign currency used in the invoice as the currency of payment. Because the seller bears the risk of such an undesirable change in the exchange rate, the [seller] cannot claim the equivalent of the purchase price in DM [Deutsche Mark] based on the exchange rate of 13 October 1980 as requested by it.

"Monetary debts can either refer to the nominal value of the sum agreed upon [“Geldsummenschuld”] or to its actual value [“Geldwertschuld”]. With nominal value debts, the amount owed is already fixed at the face value of the time of the conclusion of the contract. True value debts, in contrast, serve the purpose of adapting the debt to the depreciation of the currency; while such debts are also geared towards monetary performance, the debt fluctuates in line with the currency. In its invoice of 12 June 1980, the [seller] requests payment of a determined figure. Money, and this goes for both Italian Lire and Deutsche Mark, is an abstract unit of value which stays true to its identity even if the currency value changes. […] This financial nominalism is derived from considerations of the stability of currency and also the promotion of good faith and legal certainty. If the value of the currency had to be considered in connection with every purchase price debt, this would lead to an accelerated depreciation of the currency and would present the contracting party, namely the buyer, in this case, with an incalculable risk. The buyer must be able to rely on the fact that it does not owe the seller more than the sum mentioned in the invoice. These principles also apply to a debtor in default who must compensate for its delayed payment by paying interest, but not by balancing the currency depreciation.

"ULIS Article 82 codifies the manner in which the aggrieved party is protected. Only such loss, which was foreseeable to the party in breach at the time of the conclusion of the contract is to be compensated. This foreseeability rule is more restrictive than the formula used in German law on damages, namely that the point of view of an optimal observer is decisive. The foreseeability rule under ULIS is not based on the idea of an optimal observer, but on an ideally typical obligor. The emphasis is more on the viewpoint of the party in breach.

"The Court does not fail to notice that the [seller] did in fact suffer a loss that resulted from currency fluctuation. […] However, it is not decisive that the [seller] suffered a loss, but that the compensable loss which was suffered can be attributed to the [buyer]. The legal system makes a difference between the natural concept of damage, which includes all material and immaterial damages and, on the other hand, normative, that is, compensable damage. In order to determine the compensability of a loss, attention must be paid to the protective purpose of the norm. That being said, Article 82 protects also the party in breach; it does not oblige the party in breach to compensate for all the possible consequences of the breach. Instead, it needs to be determined following normative criteria whether and to what extent the aggrieved party may pass on the suffered loss to the party in breach […]. To that effect, protection of the party in breach must be considered.

"The invoice dated 12 June 1980 mentioned a sum of money. Money does not posses a value different from the nominal amount it represents. If the parties anticipate currency fluctuations, they may account for it by means of a special clause in the contract. Such clauses are usually subject to authorization due to reasons of upholding the stability of the currency. […] Instead of such a clause, the parties have an essentially more comfortable and practical way to avoid the effects of currency fluctuations. Instead of using the currency of the place of payment or the place of delivery, they can agree to use the currency of a third country. The parties to the dispute could easily have agreed on payment in – say – Swiss Francs. In the absence of such an agreement, it can be assumed that the parties’ corresponding intent was that the nominal value of the sum stated in the contract be decisive.

"When determining compensable losses, in addition to the interpretation of the contract, attention must be paid to valuations brought about during the drafting of the uniform law, which found their expression in ULIS. Recognition of a loss of value of a currency as a compensable loss on grounds of a delayed payment would accelerate the drop of the value of a currency and would intervene in the monetary policies of the Contracting States. The ultimate goal of these policies is the maintenance of a stable currency. Already during the negotiations regarding the draft of the Convention in 1939, there was a consensus, that the uniform law would not intervene in the monetary policies of the Contracting States and therefore should not contain provisions regarding currencies […].

"These considerations of the drafting procedure are to be considered in determining compensable losses under Article 82. Monetary nominalism is the cornerstone of an economic order which strives to preserve the value of the currency.

"Finally, when determining the normative damage, regard is to be had to the regulative intent of Art. 83 and its influence on the compensable damage under Art. 82. Article 83 provides – contrary to German law – that the interest on arrears is 1% above the discount rate of the country where the seller has its place of business. The reasoning behind the Article is that the non-payment may force the seller to obtain credit in its own country. As the interest rate on a sum in arrears is based on the discount rate, it indirectly includes the loss resulting from currency fluctuations. In cases where the amount of circulating money is inflationary, the national bank uses the discount rate as a classical tool of monetary policy. By increasing the interest rate, the national bank affects the financing and refinancing of letters of credit. A higher interest rate – in the present case 16% and 19% – is generally an expression of inflationary value of the money. This in turn affects the flexible exchange rates which, as opposed to fixed exchange rates, are determined on the basis of the laws of supply and demand. The flexible rates mirror the respective purchase power of the currency.

"By referring to the discount rate, the interest rate under Art. 83 ULIS therefore indirectly compensates for the depreciation of the currency and the inferior exchange rate. Consequently, there is no room for losses resulting from an unfavorable conversion rate when determining the compensable damage under Art. 82 ULIS. There is, in effect, no right to payment of the purchase price on the due date. This might be different if a drastic depreciation of the currency disrupted the principle of equivalence of the parties’ obligations, that is, if the nominal value of the debt was incompatible with the purpose of the contract. This, however, is not the case in the dispute at hand.”


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 November 8, 2006
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