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CISG CASE PRESENTATION

Germany 31 August 1989 District Court Stuttgart (Shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/890831g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19890831 (31 August 1989)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 3 KfH O 97/89

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: Shoes


Case abstracts

GERMANY: LG Stuttgart 31 August 1989

Case law on UNCITRAL texts (CLOUT) abstract no. 4

Reproduced with permission from UNCITRAL

A German shoe retailer ordered from an Italian seller 48 pairs of shoes of the same model and colour as delivered under an earlier order. Based on customer complaints concerning shoes of the earlier delivery, the buyer requested one week after its new order cancellation of that order. The seller shipped the second lot and the buyer examined only few samples without detecting any defect. 16 days later, the buyer notified the seller of customer complaints about imperfect sewing and measurements and loss of colour of the shoes. The seller demanded payment of the full sales price, including interest at bank loan rates.

Following German private international law, the court applied CISG as the relevant Italian law. Leaving open whether articles 38 and 39 of CISG applied or, by virtue of article 7(2) CISG, the time-period for giving notice under German domestic law became subsidiarily relevant, the court held that the buyer did not give notice within the required time. Having been forewarned by the complaints concerning the first delivery, the buyer should have examined carefully all shoes of the second contingent, in which case the buyer would have discovered the patent defects of the kind alleged later.

As regards the payment of interest, the court applied Italian law as the law of the creditor's country and since the purchase price was payable in Italian currency.


Abstract from 14 Journal of Law & Commerce (1995) 225-226

Reproduced with permission from the Journal

Examination requirements under CISG, Article 38. Under the given circumstances, the defendant [buyer of shoes] did not meet the standard of diligence required for a proper examination [of the goods under CISG, Article 38]. The [buyer's] complaints refer to obvious defects, not defects that only became evident when the shoes were worn. Because of his expert knowledge, the [buyer] had to conduct a proper examination [i.e., one based on his expert knowledge], especially since defects had been discovered in the first delivery and thus [the buyer] was already on notice. . . . A proper examination would soon have led to the discovery of the alleged defects.

Damages for loss caused by delay is recoverable under CISG, Article 74. Pursuant to CISG, Article 74, the [seller] can assert as damages the loss he suffered because he could not use the capital [i.e., the purchase price due from the buyer] due to the [buyer's] delay. This article in principle provides for the debtor's obligation to pay interest.

Rate of interest under CISG, Article 78. The rate of interest, however, is not stipulated and is in all aspects a matter of dispute [among scholars]. It is proper to refer to the domestic law of the creditor [Italy], especially since the default in payment has its effect there and the purchase price was to be paid in Italian currency. Consequently, the debtor has to bear the risk of paying interest in foreign currency at the rates of that country applicable to a monetary debt.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 38(1) ; 39(1) ; 74 ; 78 [Also cited: Articles 7(2) ; 49(1)(a) ; 53 ]

Classification of issues using UNCITRAL classification code numbers:

38A1 [Buyer's obligation to examine goods: as soon as practicable in the circumstances];

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

74A [Damages (general rules for measuring): loss suffered as consequence of breach];

78A ; 78B [Interest on delay in receiving price or any other sum in arrears; Rate of interest]

Descriptors: Examination of goods ; Lack of conformity notice, specificity ; Damages ; Interest

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Editorial remarks

EDITOR: Albert H. Kritzer

Notice of lack of conformity. A key issue is interpretation of the Article 39(1) requirement that notice of lack of conformity be given "within a reasonable time". The case involved the sale of shoes by a manufacturer of such goods to a retailer. The court held that a notice within sixteen days was not timely -- particularly in view of defects previously found in an earlier delivery. Commentaries on this case are cited below. In his citations of them Michael R. Will reports the following assessments of this ruling: Bonell/Liguori and Liguori ("excessively severe" and "eccessivamente severa"); Thieffry ("tres sévère"); Witz ("sévère")

Damages. Article 74 is cited as support for a rate of interest determination allowing seller to recover loss of use of capital.

Interest. The domestic law of seller's country was used to determine rate of interest. Rationale of the court: seller is the creditor, law of his country should be applied; also, payment of the interest is to be made in the currency of the seller's country.

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Uniform Law Review (1989-2) 853-854; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1&step=Abstract>

French: Uniform Law Review (1989-2) 853

German: Schweizerische Zeitschrift für Internationales und Europäisches Recht (SZIER)/Revue suisse de droit international et de droit européen 1993, 658-659 [cited as 6 September 1989]

Italian: Diritto del Commercio Internazionale (1992) 634-635 No. 4

Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 235-236

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/11.htm>; Recht der Internationalen Wirtschaft (RIW) 1989, 984-985; Praxis des internationalen Privat- und Verfahrensrechts (IPRax) 1990, 317-318; Jahrbuch für Italienisches Recht (JbItR) 3 (1990) 192-194; Uniform Law Review II, 1989, 853-856; Die deutsche Rechtsprechung auf dem Gebiete des internationalen Privatrechts im Jahre (IPRspr) 1989 No. 47, 102; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1&step=FullText>;

Translation (English): Translated text of case presented below

CITATIONS TO COMMENTS ON DECISION

English: Behr, 17 Journal of Law and Commerce (1998) 266-288 [abstracts and comments on 29 interest rulings from 10 countries (this case presented at 269)]; Bonell/Liguori, Uniform Law Review (1996-2) 359 [360 n.4]; Curran, 15 Journal of Law and Commerce (1995) 175-199 [196-198] [English summary of comments by Witz in Les premières applications cited below (comments on notice issues)]; Karollus, Cornell Review of the CISG (1995) 51 [69-71, 75]; Ferrari, International Legal Forum (4/1998) 138-255 [236 n.894, 238 n.915, 240 n.939, 240 n.949 (examination of goods/notice of lack of conformity), 254 n.1081 (interest issues)]; Ferrari, 15 Journal of Law and Commerce (1995) 99-125; Kizer, 65 University of Chicago Law Review (1998) 1279-1306 [comments on interest rulings in this case and other cases]; Thiele, 2 Vindobono Journal (1998) 3-35, citing this case [n.64, n.65-68] and 42 other interest rulings; Lookofsky, Understanding the CISG in the USA [CISG/USA] (1995) 49 n.63, 95 n.230; Lookofsky, CISG/Scandinavia (1996) 61 n.87, 114 n. 259; Bernstein/Lookofsky, CISG/Europe (1997) 62 n.66, 64 n.75; 121 n.264; Schwenzer, ibid, [Art. 38] 304 n.30, 305 n.42, [Art. 39] 315 n.59; Eberstein/Bacher, ibid, [Art. 78] 596 n.31, 598 n.43; for a survey of close to 100 judicial and arbitral rulings on Article 39(1), go to the 1998 Pace essay on this subject by Camilla Baasch Andersen; Kuoppala, Examination of the Goods under the CISG and the Finnish Sale of Goods Act (2000) 3.3.1 [analysis of related articles 38, 39, 40 and 44 (includes digests of relevant material in many CISG cases; also digests cases under a domestic sales code that is patterned, for the most part, after the CISG)]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 4-9 n.134 & n.147; § 6-31; Liu Chengwei, Recovery of interest (November 2003) nn.25, 238; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.363 ("Buyers may not rely upon sampling or spot checking in the event previous shipments from the seller, if any, were non-conforming": "non-conformity in initial shipment of shoes required buyer to conduct complete examination of second shipment of shoes from the same seller"); CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 68, 82; Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 38 paras. 13, 16 Art. 39 para. 17 Art. 74 para. 16; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 156

French: J. Thieffry, Emptio-Venditio Internationales, Neumayer ed. (Basel 1997) 288 n.38; Witz, Les premières applications jurisprudentielles du droit uniforme de la vente internationale (L.G.D.J., Paris: 1995), 43, 89-101, 105; Witz, Dalloz Sirey (1995) 43 No. 27; Witz, Tilburg Lectures (1998) 159 [169 n.33]

German: Asam, Recht der Internationalen Wirtschaft (RIW) 1989, 942-946; Jametti-Greiner, Schweizerische Zeitschrift für internationales und Schweizerisches Recht (SZIER) 5/1993, 653; Karollus, [österreichisches] Recht der Wirtschaft (öRdW) 1991, 319; Piltz, Int. Kaufrecht (1993) 193, 194, 280; Piltz, Neue Juristische Wochenschrift 1994, 1101; Reinhart, Praxis des internationalen Privat- und Verfahrensrechts (IPRax) 1990, 289-292; Staudinger-Magnus (1994) Art. 39 Nos. 41, 53, Art. 78 No. 13; Schwenzer in von Caemmerer/Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, München (Beck) 2d ed. 1995, Art. 38 No. 16, n. 42

Greek: Witz/Kapnopoulou, Ellenike epitheorese europaikou dicaiou (1995) 159 [169 n.33]

Italian: Bonell, Diritto del Commercio Internazionale (1992) 634-635; Liguori, Foro italiano (1996-IV) 145 [166 n.101]; Veneziano, Rivista del diritto commerciale e del diritto generale delle obbligazioni (1992) 925 [944-945]

Spanish: Perales, Cuadernos Jurídicos 3 (1996) No. 43, 5 [7n.27] [commentary on Article 78: determination of rate of interest under the CISG (review of case law)]; Piltz, La Ley (Buenos Aires: 5 September 1994) 35-37

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

LG Stuttgart 31 August 1989

Translation by Jutta Surovic [*]

Background of case

Chronology of events

21 March 1988. Buyer ordered forty-eight pairs of men's shoes of the same model and color as an order buyer had placed with seller on 21 September 1987.

28 March 1988. Buyer canceled the order of 21 March 1988. The reason given was that the first delivery of the order of 21 September 1987 resulted in complaints. Seller did not honor this cancellation.

11 April 1988. Seller billed buyer 5,208,000 Lira for the forty-eight pairs of shoes ordered on 21 March 1988

25 May 1988. Seller delivered these shoes to buyer.

10 June 1988. Buyer informed seller of complaints due to manufacturing defects: the insoles of the shoes were often of different lengths; there were places in which they were incorrectly sewn; many customers complained about strong bleeding of the stain.

21 Sept. 1988. Buyer made a partial payment in the amount of 3,044,000 Lira and advised that the goods accounting for the remaining 2,164,000 Lira were for seller's disposal.

14 Oct. 1988. Buyer sent seller a sample of faulty goods.

24 Nov. 1988. Seller refused to acknowledge buyer's complaints.

Position of the parties and decision of the court

Plaintiff (seller): Buyer's complaints are not valid because they were too late (CISG Article 39). This is not a matter of hidden defects . . . The shoes are not lined, therefore the stain of the leather can bleed; but this is not a substantial defect. Seller has a bank credit that does not exceed the payment demand. For this seller must pay interest in Italy, which exceeds the amount of the Italian discount rate . . .

Defendant (buyer): A spot check at the time of delivery did not reveal any defects. Following customer complaints after they wore the shoes, it came out that the stain of the shoes bled and, because of faulty manufacture, the seams tore. These facts were reported right away in the letter of 10 June 1988 and also reported orally to the seller. A follow-up inspection of the entire shipment showed that the insoles of the shoes were of different sizes, not matching the sizes of the shoes. This is a case of hidden defects because they can only be discovered after the shoes have been worn. The notification of defects was timely in accordance with German Law (Section 377 HGB); buyer is entitled to cancel the contract. The interest is not justified; a loss of interest was not proved.

Decision of the Court: Plaintiff's (seller's) action is well founded.

Reason for the decision

1. The United Nations Convention on Contracts for the International Sale of Goods (CISG) applies to the German-Italian sales contract dated 21 March 1988. Both parties correctly relied on this. The Convention came into force in Italy on 1 January 1988. According to Article 1(1)(b), it is also to apply if the rules of private international law lead to the application of the law of a Contracting State. This is the case. [Although the CISG was not yet effective in Germany] German law (Article 28, section 1, clause 1, and section 2, clause 1, EGBGB) refers the matter to Italian law. The contract refers to the connection of the country in which plaintiff (the seller) has its place of business.

2. Article 53 permits the seller to recover the remaining sales price. Article 49(1)(a) does not permit buyer to declare the contract avoided due to a lack of conformity of the goods. This is so because buyer did not notify seller of the defects in time. Whether or not the goods were defective is therefore irrelevant. Also it may be left open whether one applies Article 39 of the CISG or German law (Article 32, section 2, EGBGB; Section 377 HGB). The result is the same in either case. The buyer must examine the goods immediately, as the circumstances so require. Buyer acknowledges this stating, however, that his spot check did not reveal the defects; that the defects only came to his attention following customer complaints. This court holds that, under the circumstances, the buyer did not conduct a sufficient examination. Tearing of the shoes, faulty seam manufacture and different sizes of the insoles of the shoes are patent defects -- not defects only revealed when the shoes are worn. In view of his knowledge, buyer should have conducted a more thorough and professional examination -- all the more so because defects had already been found in the first delivery; buyer was therefore warned. Insofar as the staining is concerned, if there was a chance that the shoes could bleed, defendant should have had them examined for that. A proper examination would have revealed the alleged defects. Buyer's notice of 10 June 1988 was too late. The buyer's telephone report of his complaints was not sufficiently substantiated and therefore could not be used. The buyer's information on this did not include facts such as the date of the call and the party spoken to; the telephone references to the defects were also insufficient -- because of the fact that buyer did not provide enough substantive information about the nature of the defects. This Court holds that buyer lost the right to claim lack of conformity with the contract because he did not notify seller of the defects as soon as he should have found them.

["2. Die Kl. kann gem. Art. 53 den restlichen Kaufpreis beanspruchen. Der Bekl. ist nicht befugt, gem. Art. 49 Abs. 1 a wegen einer wesentlichen Vertragswidrigkeit der Ware die Aufhebung des Vertrages zu erklären. Die Berufung auf die Mangelhaftigkeit der Ware ist ausgeschlossen, da der Bekl. nicht rechtzeitig gerügt hat. Offenbleiben kann dabei, ob insoweit Art. 39 i.V.m. Art. 38 anwendbar ist oder über Art. 7 Abs. 2 i.V.m. Art 32 Abs. 2 EGBGB die Regelung des § 377 HGB subsidiär heranzuziehen ist. Die Anwendung dieser Vorschriften führt in vorliegenden Fall zum selben Ergebnis. Der Käufer hat die Ware alsbald zu untersuchen, wie es nach den Umständen tunlich ist. Dies behauptet der Bekl. Er macht jedoch geltend, bei der stichprobenhaften Überprüfung seien Mängel nicht festgestellt worden,die Mangelhaftigkeit habe sich erst durch Kundenreklamationen ergeben. Nach Lage der Dinge hat der Bekl. jedoch die an eine sachgerechte Untersuchung zu stellenden Sorgfaltspflichten nicht beachtet. Bei den gerügten Mängeln -- Einreißen der Schuhe, unsaubere Nahtverarbeitung, unterschiedliche Blattgrößen -- handelt es sich um offene Mängel, die nicht erst beim Tragen der Schuhe zutage treten. Der Bekl. war aufgrund seiner Sachkunde gehalten, eine fachmännische, gründliche Untersuchung vorzunehmen. Dies gilt um so mehr, als bei der ersten Lieferung Mängel entdeckt worden waren und er so 'vorgewarnt' war. So hätte er auch die Schuhe dahin untersuchen müssen, ob Abfärbungen auftreten können. Eine ordnungsgemäße Untersuchung hätte alsbald zu einer Entdeckung der behaupteten Mängel geführt. Die Rüge am 10. 6. 1988 ist demnach verspätet. Die Angaben des Bekl. über telefonische Reklamationen sind, da das Datum des Anrufs, der Name des Gesprächspartners, der Inhalt der Reklamation nicht mitgeteilt werden nicht ausreichend substantiiert und können deshalb nicht verwertet werden. Demgemäß hat der Bekl. das Recht verloren, die Vertragswidrigkeit geltend zu machen, da er den Mangel nicht alsbald, nachdem er hätte festgestellt werden müssen, angezeigt hat."]

3. Plaintiff (seller) can recover loss of use of capital as damages. This is supported by Article 74 based on the assumption that, in the event of default, the debtor is obligated to pay interest. The CISG does not fix the rate of interest. This is a controversial subject. It is advisable to fall back on the national law of the creditor because the consequences of the debtor's nonfulfillment of his payment obligation take effect there and payment was due in Italian currency. Therefore, the debtor must carry the risk of paying the monetary debt in the foreign currency according to the rate of interest there. (References: Stoll in Schlechtriem, Einheitliches Kaufrecht und nationales Obligationenrecht, 1987, §§ 279/280, 291; Schlechtriem Einheitliches UN-Kaufrecht, 1981, §§ 93/94).

["3. Der Kl. kann,gestützt auf Art. 74, die durch die Säumnis des Bekl. entgangene Kapitalnutzung als Schaden geltend machen. Dies Bestimmung geht grundsätzlich davon aus, daß der Schuldner im Fall der Säumnis zur Zahlung von Zinsen verpflichtet ist. Die Zinshsöhe ist allerdings nicht festgesetzt und in Einzelheiten umstritten. Es ist angebracht, auf das nationale Recht des Gläubigers zurückzugreifen, zumal sich die Folgen der Nichterfüllung der Zahlungsverpflichtung dort auswirken und der Kaufpreis in italienischer Wärung zu entrichten war. Demgemäß hat der Schuldner auch das Risiko zu tragen, eine in fremder Währung zu zahlende Geldschuld nach den dortigen Sätzen zu verzinsen (dazu Stoll in Schlechtriem, Einheitliches Kaufrecht und nationales Obligationenrecht, 1987, §§ 279/280, 291; Schlechtriem Einheitliches UN-Kaufrechts, 1981, §§ 93/94)."]


* 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 December 2, 2005
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