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CISG CASE PRESENTATION

Germany 10 December 1986 Supreme Court [ULIS precedent] (Cement mixer case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/861210g1.html]

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

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Case identification

DATE OF DECISION: 19861210 (10 December 1986)

JURISDICTION: Germany

TRIBUNAL: Bundesgerichtshof [Federal Supreme Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: VIII ZR 39/86

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

CASE HISTORY: 1st instance LG Osnabrück (1 HO 105/84) 14 December 1984; 2d instance OLG Oldenburg (12 U 14/85) 17 December 1985

SELLER'S COUNTRY: Belgium (plaintiff)

BUYER'S COUNTRY: Germany and United Kingdom (defendants)

GOODS INVOLVED: Cement mixers


Classification of issues present

APPLICATION OF CISG: No, this is a ULIS Article 82 case. Presented because CISG Article 74 was taken from ULIS Article 82 and sits within the CISG in the same manner as ULIS Article 82 sits within ULIS

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74

Classification of issues using UNCITRAL classification code numbers:

74A [General rules for measuring damages: loss suffered as consequence of breach]

Descriptors: Damages

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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): Der Betrieb (DB) [1987] 681-682; Entscheidungen zum Wirtschaftsrecht (EwiR) [1987] 241-242; Lindenmaier-Möhring, Nachschlagewerk des Bundesgerichtshof (LM) No. 11/12 zu EKG; Monatsschrift für Deutsches Recht (MDR) [1987] 491; Recht der Internationalen Wirtschaft (RIW) [1987] 218-220; Wertpapier-Mitteilungen (WM) [1987] 290-292

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 74 para. 18

German: Rolf Herber, EwiR [1987] 241

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Federal Supreme Court (Bundesgerichtshof)

10 December 1986 [VIII ZR 39/86]

Translation [*] by Veit Konrad [**]

FACTS OF THE CASE

Plaintiff [hereinafter referred to as "seller"], seated in Belgium, and Defendant (1), a German limited partnership, both produced and distributed electric tools for craftsmen and home mechanics. [Seller] distributed Defendant (1)'s products in Belgium. In a letter dated 29 August 1980, Defendant (1) notified [seller] that since summer 1980 it had opened a subsidiary in Belgium. [Seller] intended to enter into the English market with its products. On 22 October 1980 Defendant (1), through Defendant (2) its personally liable company member, concluded a written agreement for the delivery of 25,000 cement mixers in commission for its English subsidiary, Firm J. [hereinafter referred to as "buyer"]. Delivery was due by quarterly installments, beginning the end of February 1981. The mixers were to be modified adding an extra pedal brake and a cover for the transition wheel. The agreement also contained a liability clause: In case of non-compliance Defendant (1) was to be liable for "damages or lost profits" to an amount of 75,000 Deutsche Mark [DM]. (The original document was written in German.)

On 19 February 1981, Firm J. [buyer], Defendant (1)'s English subsidiary, made a written call for the delivery of 80 mixers between the first and the fourth week of March 1981. In response to this call, [seller] delivered 52 cement mixers for the purchase price of 18,440 DM on 18 March 1981.The price was reduced by 250 DM for reasons that remained unclear among the parties. Payment of the rest has been provided through a cheque and a set-off. Firm J. [buyer] sent a note of complaint for lack conformity of the delivered goods and omitted further calls for delivery.

Plaintiff [seller] now sues Defendant (1), the German limited partnership, for 75,000 DM pursuant to the liability clause of their agreement dated 22 October 1980. Defendant (1) argues that it concluded this agreement only on behalf of its subsidiary, Firm J.

The District Court (Landgericht) held [seller]'s claim to be justified for the full amount of 75,000 DM. On appeal, the Appellate Court (Oberlandesgericht) granted the claim only up to an amount of 37,500 DM plus interest while any further claims were dismissed. Both parties appealed. [Seller]'s appeal aims for the quashing of the appellate judgment, while Defendant insists on the full dismissal of [seller]'s claim.

JUDGMENT

I. Defendant's appeal

     1. The Appellate Court contended that Defendant (1) - and Defendant (2), its personally liable company member under §§ 161, 128 of the German Civil Code (Bürgerliches Gesetzbuch; BGB) - could be held liable for damages under the clause of the agreement of 22 October 1980. Omitting further calls and not accepting further deliveries, Firm J. [buyer] failed to comply with its contractual obligations.

a) The Court's assumption that [seller], seated in Belgium, and Firm J. [buyer], seated in England, entered into a sales contract, which was governed by the ULIS cannot be disputed: Belgium and Great Britain are Contracting States of the Convention (Art. 1 ULIS). The fact that Great Britain joined the Convention conditioned under Proviso of Art V is irrelevant in a trial before German Courts (see BGHZ 96, 313, 318 (Judgment of the German Bundesgerichtshof, Official Compilation of Civil Cases Vol. 96, Page 318)).

b) The Appellate Court is also correct in stating that on 22 October 1980 the parties entered into a contract for delivery of goods by installments, governed by Art. 75 ULIS (see Dölle/Leser, Kommentar zum Einheitlichen Kaufrecht, Art. 75 No. 15; Soergel/Lüderitz, BGB, 11th ed., Art. 75 [ULIS], No. 2, 3). Yet, Firm J. [buyer] is not entitled to declare the contract avoided under Art. 75 ULIS. This follows irrespective of whether or not [buyer] failed to declare revocation within the time limit of Art 11 ULIS.

     aa) The Appellate Court held that, even in the event that the delivery of 52 deficient cement mixers constituted a fundamental breach of contract under Art. 10 ULIS, [buyer] would have frustrated [seller]'s right to examine the goods, forwarding the mixers to its Irish customer before the time limit for the examination had run out (see Dölle/Stumpf ibidem, Art. 39 No. 8; Mertens/Rehbinder, Internationales Kaufrecht, Art. 38/39 [ULIS], No. 28). Therefore [buyer] lost its right to declare the contract avoided under Art. 75(1) ULIS. This is so irrespective of whether [buyer] had notified [seller] of the presupposed lack of conformity of the delivered goods within the time limit provided by Art. 39(1) ULIS, Art. 11 ULIS.

     bb) The Appellate Court's contention that the conditions to declare avoidance of the contract under Art. 75. ULIS had not been met were supported by the assumption that [seller]'s breach of contract, which had consisted in the lack of covers for the transition, serial numbers, descriptions and manuals, as well as lacquer- and transport damages on 52 cement mixers, did not provide good grounds to conclude that fundamental breaches of contract would occur for future installments. This assumption falls within the Court's competence of free evaluation of facts of the case; it is not deficient in terms of misconception of Art. 75 ULIS (see Soergel/Lüderitz, ibidem Art. 75 No. 6-8; Mertens/Rehbinder, ibidem Art. 75 No. 7).

     2. The Appellate Court's judgment cannot be upheld as far as it imposes liability on the Defendant. The correct conclusion that [buyer]'s omission to make further calls (which constitutes a breach of contract under Art. 56 ULIS) fulfils the conditions of the liability clause, is nevertheless insufficient to quantify Defendant's liability under the contract.

a) In its interpretation of the contractual liability clause, the Appellate Court correctly assumes it to be a liability taken over for damages that occurred and lost profits, rather than a strict warranty for compliance with the agreement.

     aa) This interpretation, that imposes liability on Defendant also with respect to future damages, is unsuccessfully disputed in Defendant's appeal. It is supported by the wording of the clause which does not suggest that Defendant only wanted to obtain the position of a mediator for damages and lost profits payable by [buyer]. The circumstances of the agreement and an analysis of the economic interests of the parties (see Münchener Kommentar - Möschel, BGB, 2d ed., Vor § 414 No. 17) also indicate that Defendant agreed to take over liability for itself. Its appeal is further unjustified as far as it criticizes procedural matters of the Appellate Judgment; further explications are unnecessary (§ 565a German Code of Civil Procedure (Zivilprozeßordnung; ZPO)). The Appellate Court's assumption that liability of the Defendant is not subsidiary to liability of the [buyer] does not need to be corrected.

     bb) Under these premises the question about the function of the amount of 75,000 DM cited in the agreement arises. It is to be interpreted as a limit upon contractual liability, which, however, does not suspend the necessity to prove the damages actually suffered. As the Appellate Court correctly stated, the clause does not impose punitive damages on the Defendant, but provides an obligation to come up with payment for damages and lost profits actually suffered due to [buyer]'s breach of contract.

b) Such actual damages have not been proved. The District Court estimated the loss of profit to be about 30 DM per mixer. This estimate does not seem unreasonable. However, the parties need to be given the opportunity to bring new evidence to determine the damages and lost profits. In this respect, it becomes relevant that after the deficient delivery on 18 March 1981, [seller] did not react in any way. Under Art. 88 ULIS, a party who relies on a breach of contract is bound to take all affordable measures to mitigate the loss resulting from the breach. If the party fails to take such measures, the party in breach may claim a reduction in the damages (see Soergel/Lüderitz ibidem Art. 88 [ULIS] No. 10). The breach of contract consists in [buyer]'s omission to make further calls for delivery, which makes [buyer] liable to damages and lost profits either under Art. 70 ULIS, Art. 82 ULIS (see Dölle/von Caemmerer, ibidem Art. 70 No. 2, No. 4) or under Art. 65, 66, 68, 82 ULIS (see Mertens/Rehbinder ibidem Art. 65 No. 5; Soergel/Lüderitz ibidem Art. 70 [ULIS] No. 1, Art. 65 [ULIS] No. 3; Stötter, Internationales Einheitskaufrecht, Art. 67 No. 4). Undisputedly, Art. 88 ULIS obliges [seller] not only to the mitigation of damages, but also to the prevention of damages (Soergel/Lüderitz, ibidem Art. 88 [ULIS] No. 3). In a contract for the delivery of goods by installments, this may constitute a duty for a seller to continuously ask buyer to make further calls for delivery, if buyer had not definitely refused to do so. Under these premises. the case is to be retried.

II. Plaintiff [seller]'s appeal

The Appellate Court held the Defendant liable under the contractual liability clause. The amount of 75,000 DM, however, was meant to limit liability, rather than being part of a strict warranty agreement to become due automatically in case of non-compliance, irrespective of actually suffered damages or profit losses. According to the Court, [seller] did not fully comply with the contract itself: [Seller] failed to offer delivery within certain intervals and did neither ask for further calls, nor did it notify [buyer] of whether it insisted on the fulfillment of the contract, whether it claims damages under Art. 82 ULIS, or whether it lost interest in the fulfillments of the contract at all. [Seller] also did not ask Defendant for mediation between it and [buyer], as it would have seemed to be appropriate under the principle of good faith, § 242 German Civil Code (Bürgerliches Gesetzbuch; BGB). On these grounds, the Appellate Court - relying on § 287 of the German Code of Civil Procedure (Zivilprozeßordung, ZPO) - estimated the damages to which Defendant was liable to be 37,500 DM: It considered statistic knowledge to determine [seller]'s savings in production and delivery costs; and it took account of the losses in profit, on the one hand, and of both parties' breaches of contract that prevented the fulfillment of the agreement, on the other hand.

In this respect, the Appellate Judgment cannot be upheld. The fact that [seller] failed to comply with its contractual duties to ask [buyer] to make further calls and to notify [seller] of its decision to claim damages, or to keep to the fulfillment of their agreement must primarily be judged by ULIS and not by national law: Especially Art. 88 ULIS might impose a different liability on [buyer] than the principle of good faith established by national law (i.e., § 242 German Civil Code (Bürgerliches Gesetzbuch; BGB)) would have. Therefore, the Appellate Judgment is to be quashed and a new consideration of the facts of the case is required. To this extent, [seller]'s appeal is justified.

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this presentation, the Plaintiff is referred to as [seller]; Defendant (1)'s English subsidiary, Firm J., is referred to as [buyer].

** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.

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Pace Law School Institute of International Commercial Law - Last updated December 6, 2006
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