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CISG CASE PRESENTATION

Germany 3 July 1992 District Court Heidelberg (Computer components case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/920703g1.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISION: 19920703 (3 July 1992)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: O 42/92 KfH I

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: U.S.A. (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Computer components


Case abstract

Prepared by Robert Koch for commentary on fundamental breach

"[Th]e German buyer concluded a contract for the sale of computer components with a U.S. seller. After delivery of 5 parts had been carried out, the buyer refused payment and declared the contract avoided on the grounds that the delivery of 11 parts had been agreed. The . . . Court held that even if delivery of 11 parts had been agreed the dispatch of only five parts would not entitle the buyer to declare the contract in its entirety avoided according to art. 51(2). The Court further held that, in determining fundamental breach, regard must be had whether it was reasonable for the buyer to make a substitute purchase and claim damages for any extra costs arising out of that substitute transaction. Since it turned out that the buyer had purchased the missing parts already before the delivery became due in order to satisfy his own client in Vienna, the Court found that no fundamental breach was committed." Koch, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 243 n.213.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 51(2) ; 53 ; 78 [Also cited: Articles 45(1)(a) ; 49 ; 54 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach];

51B1 [Non-conformity of part of goods (avoidance as to entire contract): must be based on fundamental breach of contract as a whole];

53A [Summary of buyer's obligations: obligation to pay price of goods];

78B [Interest on delay in receiving price or any other sum in arrears: rate of interest]

Descriptors: Fundamental breach ; Avoidance ; Price ; Interest

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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

English: See above; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=18&step=Abstract>

Italian: Diritto del Commercio Internazionale (1993) 655-656 No. 16

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/38.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=18&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [195 n.505 (definition of "goods"), 253 n.1079 (interest issues)]; Lookofsky, Understanding the CISG in the USA [CISG/USA] (1995) 71 n.47, 96 n.238; Lookofsky, CISG/Scandinavia (1996) 87 n.58, 115 n.268; Bernstein/Lookofsky, CISG/Europe (1997) 90 n.56, 123 n.273; Thiele, 2 Vindobono Journal (1998) 3-35, citing this case [n.18] and 42 other interest rulings; Mullis, Avoidance for Breach under the Vienna Convention: Critical Analysis of Some of the Early Cases (1998) nn.98, 118; Koch, Pace Review of Convention on Contracts for International Sale of Goods (1998) 243 n.224 [fundamental breach (gravity of consequences of breach): remedy-oriented approach]; Kazimierska, Pace Review of the Convention on Contracts for the International Sale of Goods (1999-2000) n.130; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 6-8 n.72; § 6-31 n.362; 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]; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 402; Spaic, Analysis of Fundamental Breach under the CISG (December 2006) nn.307, 340, 368

French: Witz, Les premières applications jurisprudentielles du droit uniforme de la vente internationale (L.G.D.J., Paris: 1995), 96, 106

German: Piltz, Neue Juristische Wochenschrift (NJW) 1996, 2768 [2770 n.35]; Schlechtriem, Internationales UN-Kaufrecht (1996) 107 n.128

Spanish: Perales, Cuadernos Jurídicos 3 (1996) No. 43, 5 [7 n.29] /[commentary on Article 78: determination of rate of interest under the CISG (review of case law)]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

District Court (Landgericht) of Heidelberg

3 July 1992 [O 42/92]

Translation [*] by Sabine Kossebau [**]

[FACTS OF THE CASE]

The [Seller] demands that the [Buyer] be directed to pay the purchase price for the delivered computer parts.

In response to a faxed letter by the [Buyer] of 10 July 1991 that included references to 11 individual parts, the [Seller] delivered the five computer parts listed in the letter whose prices were given in the letter by the [Buyer]. The [Seller] invoiced the delivered parts on 24 and 30 July 1990 at a total of US $23,150.-- .

The [Seller] contends that the parties concluded a sales contract only in regard to the delivered computer parts. Even in case that there be a contract including all of the parts listed in the faxed letter of [Buyer], [Seller] contends that its installment delivery constitutes a non-fundamental breach which furthermore was not properly objected to by the [Buyer].

The [Seller] requests the court to sustain its claim for payment.

The [Buyer] requests the court to dismiss the [Seller]'s claim.

The [Buyer] contends that the parties concluded a sales contract including all of the parts listed in the faxed letter of 10 July 1991. The delivery of only a part of the goods would constitute a fundamental breach by the [Seller], which gave the [Buyer] the right to avoid the contract, which was declared with [Buyer]'s answer to [Seller]'s claim.

Apart from that, [Buyer] contends that it properly objected to the breach of contract and had declared the avoidance within the period of time provided by the CISG [*].

For supplementary material at this to stage of the proceedings, see the exchanged writs including attachments.

[GROUNDS FOR THE DECISION]

The [Seller]'s claim is justified.

1. In the main issue, the [Seller] is entitled to payment of the purchase price by the [Buyer] in accordance with CISG Art. 53. The Vienna UN Convention on the International Sale of Goods of 11 April 1980, which is to be applied to the situation on hand, is applicable law in the U.S.A. since 1 January 1988 and in Germany since 1 January 1991.

Regarding a decision in the present dispute, the question of whether the parties concluded a contract that only included the first five items of the fax letter of 10 July 1991 or if that contract was extended to all eleven items of the original enquiry later on may be left open. This being the case, even in the second alternative, as the [Buyer] was not entitled to avoid the entire contract in accordance with CISG Arts. 45(1)(a), 49, there being in that case a so-called partial delivery by the [Seller].

Even if one alleges that the [Buyer] through M. E., who is named as a witness, set an additional period of time in accordance with CISG Art. 49(1)(b) and after the expiration of that time informed the [Seller] within a reasonable period of time in accordance with CISG Art. 49(2)(b)(ii) that it would avoid the contract, a right to avoid the contract is not present. In accordance with CISG Art. 51(2), this would require that the partial delivery by the [Seller] at the same time constitute a fundamental breach of the entire contract. Evaluating all circumstances, this condition is not present in the case on hand.

The term fundamental breach is defined in CISG Art. 25. Accordingly, the breach must have resulted in such detriment to the [Buyer] as substantially to deprive it of what it was entitled to expect under the contract. Specifically, the purpose for the purchase of the goods by the [Buyer] which also has to at least indirectly become clear out of the contract, must then be unobtainable because of the breach of contract by the [Seller] (Reinhart, UN-KaufR. 1991, Art. 25, para. 5,6). To guarantee the achievement of the purpose of the contract in cases of a breach of contract by the seller, the buyer may be expected to make a substitute transaction (Herber-Czerwenka, Internationales Kaufrecht, Art. 79 para. 7; in case of a quality deficiency, the concept of which also has to be applied with the quantity deficiency at hand). Ultimately, the buyer may claim possible additional costs due to a substitute transaction as damages caused by delay in accordance with CISG Art. 74.

In the case at hand, the [Buyer], as it brought forth, wanted to use the ordered computer parts to fulfil an order placed by the company M. GmbH,[*] Vienna. This contractual relationship was likewise concluded in July 1991; but the performance of the [Buyer] was not due until October 1991. It can meanwhile be seen from a letter by the [Buyer] of 11 August 1991 that in the beginning of August, the [Buyer] was already in possession of the missing computer parts because of a substitute purchase, that [Buyer] - as was submitted - was legally obligated to make; and therefore was in the position to fulfil the contractual obligations in regard to M. GmbH. The withdrawal by M. GmbH from its contract with the [Buyer] - and therefore the non-accomplishment of the purpose of the purchase targeted by the [Buyer] - only took place in January 1992 and therefore was obviously not a result of the breach of contract by the [Seller], as the [Buyer] had all the computer parts it needed to fulfil the order at hand.

Accordingly, there is no fundamental breach by the [Seller] in the sense of CISG Art. 25. Therefore, an avoidance of the contract by the [Buyer] in accordance with CISG Art. 51(2) was not possible.

Hence, in accordance with CISG Art. 53, [Seller]'s suit for the purchase price is justified in the claimed and uncontested amount.

The authority of the [Buyer] to provide a substitute by payment in domestic currency is based on BGB [*] 244 which, in accordance with EGBGB [*] Art. 34, is applicable for lack of a provision in the CISG.

The claim for interest is based on CISG Art. 78. To be sure, this provision does not regulate the amount of the interest rate. In accordance with the majority opinion, this is to be ascertained in accordance with the private international law of the State in which the proceedings take place, and therefore in accordance with the substantive law of the State that would be applicable if the CISG was not applicable (Reinhart, as above, Art. 78 para. 5). In the case at hand, it has to be assumed that the parties have chosen the law of the State in which the [Seller] has its place of business. It is furthermore to be proceeded on the assumption that there is no valid interest rate below 4 percent in the State of Massachusetts, U.S. The starting point of time for the payment of interest results from the expiration of the time allowed for payment on 21 February 1992.

2. The request for official recognition is admissible and justified.

A suit for performance is not possible at this time because of uncertainness regarding the currency exchange rate on the day of payment and the amount of damages connected to this. Because of that, a request for official recognition is imperative (ZPO [*] 256). The [Seller] claims the damage caused by delay which it is entitled to claim in accordance with CISG Arts. 45, 74.

3. The costs order - taking into account the negligible abandonment of action regarding the claim for interest - is based on ZPO 92(2), the decision on the provisional enforceability is based on ZPO 709, 108.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Massachusetts, U.S.A. is referred to as [Seller] and the Defendant of Germany is referred to as [Buyer]. Amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM], amounts in the currency of the United States of America (U.S. dollars) are indicated as [US $].

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGH = Bundesgerichtshof [German Federal Supreme Court]; CISG = United Nations Convention on Contracts for the International Sale of Goods; EGBGB= Einführungsgesetz zum Bürgerlichen Gesetzbuch [Introductory Statute to the German Civil Code]; GmbH = Gesellschaft mit beschränkter Haftung (Public Limited Company); ZPO = Zivilprozessordnung [German Civil Procedure Code].

** Sabine Kossebau, student of law at the University of Hanover, Germany.

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Pace Law School Institute of International Commercial Law - Last updated March 20, 2007
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