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CISG CASE PRESENTATION

Germany 17 September 1993 Appellate Court Koblenz (Computer chip case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/930917g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19930917 (17 September 1993)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 2 U 1230/91

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Computer chip


Case abstract

GERMANY: Oberlandesgericht Koblenz 17 September 1993

Case law on UNCITRAL texts (CLOUT) abstract no. 281

Reproduced with permission from UNCITRAL

A French seller, plaintiff, and a German buyer, defendant, entered into a long-term contract which granted the buyer exclusive distribution rights in Germany for the seller's computer printers and computer chip. After the contractual relationship had been terminated, the seller sued for outstanding payments of invoices from 1988. The buyer disputed the applicability of the CISG and claimed a set-off. Alternatively, the buyer sought to pay damages in German currency.

The court held that the rules of private international law of Germany led to the application of French law. Since the CISG was in force in France as of 1 January 1988, even though Germany was not a Contracting State at that time, the CISG was held to be applicable (article 1(1)(b)).

[A threshold issue had to do with separate sales under the exclusive distribution agreement. The court held that separate sales entered into pursuant to an exclusive sales agreement are, where the matter is unclear, subject to UN Sales Law." 14 Journal of Law & Commerce (1995) 234.]

The court [then] held that the CISG applied to the sale of the computer chip, since, within the meaning of the Convention, "goods" includes all tangibles and intangibles that might be the subject of an international sales contract, which would include computer software (article 1(1) CISG).

The court allowed the seller's claim. It held that the buyer had not alleged any lack of conformity of the goods (article 35 CISG), notwithstanding that any such notice would not have been given to the seller in time (article 39). The claim was awarded in French Francs. Permission to make payment in German currency pursuant to the German Civil Code was not granted, as this was dependent upon the place of performance of the contract being in Germany. According to article 57(1)(a) of the CISG, the seller's place of business in France was the proper place of performance. The court also awarded interest under article 74 of the CISG and stated that the rate of interest was to be determined by the law otherwise applicable, which in this case was French law. This damage award of interest was a legal consequence of the buyer's non-performance (article 61(1)(b) CISG).

As the Convention does not address the matter of set-off, the court applied French law under its rules of private international law and found that the set-off claim was inadmissible.

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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 4 ; 6 ; 7 ; 54 ; 57(1)(a) ; 59 ; 62 ; 74 ; 78 [Also cited: Articles 1(1) ; 3(1) ; 35 ; 39 ; 53 ; 61 ; 63 ; 75 ; 76 ; 77 ]

Classification of issues using UNCITRAL classification code numbers:

4A ; 4B [Scope of CISG: issues covered (sale of computer hardware component: computer chip) (computer software can also qualify as goods); Issues excluded (distribution agreement not a contract of sale: set-off (a matter to be determined pursuant to domestic law)];

6A [Agreements to apply Convention: choice of law of a Contracting State];

7C23 [Gap-filling by domestic law: set-off];

54A [Obligation to pay price: buyer cannot be given a right to pay price other than in agreed currency];

57A [Place for payment (in absence of agreement): payment at seller's place of business, place of payment determinative as to currency of payment)];

74A [Damages (general rules for measuring): loss suffered as a consequence of breach (interest for other credit obtained as a necessary consequence of a delayed payment)];

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

Descriptors: Applicability ; Choice of law ; Scope of Convention ; Gap-filling ; Set-off ; Computer software ; Distributorship agreements ; Price ; Currency issues ; Payment, place of ; Jurisdiction or venue ; Damages ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: 14 Journal of Law and Commerce (1995) 234; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=64&step=Abstract>

Italian: Diritto del Commercio Internazionale (1998) 451-452 No. 71

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/91.htm>; Die deutsche Rechtsprechung auf dem Gebiete des internationalen Privatrechts im Jahre (IPRspr) 1993 No. 35, 86-93; Recht der Internationalen Wirtschaft (RIW) 1993, 934-938; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=64&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999) 55 [goods: (computer "hardware" and "software")]; Behr, 17 Journal of Law and Commerce (1998) 266-288 [abstracts and comments on 29 interest rulings from 10 countries (this case presented at 276-277)]; Curran, 15 Journal of Law and Commerce (1995) 175-199 [183-185] [English summary of comments by Witz cited in Les premières applications below (comments on contractual exclusion of CISG)]; Ferrari, International Legal Forum (4/1998) 138-255 [186 n.403 (applicability to sales under distribution agreement), 196 n.507 (definition of "goods"), 217 n.714 (choice of law of Contracting State), 226 n.792 (scope of CISG: set-off issues), 247 n.1027, 248 n.1032, 253 n.1079 (interest issues)]; Ferrari, 15 Journal of Law and Commerce (1995) 64-67, 86-91 [comments on definition of "goods" and implied exclusion of the CISG, citing this case and other cases]; Koneru, 6 Minnesota Journal of Global Trade (1997) 136-137 [comments on currency of payment issue]; Karollus, Cornell Review of the CISG (1995) 51 [56-57, 57-58, 59, 73, 74, 75] [comments on Articles 3, 4, 6, 62, 74 and 78 and on jurisdiction and venue in the context of German case law on the CISG]; Perales, Battle of the Forms and Burden of Proof, 6:2 Vindobona Journal (2002) 217-228, n. 17 [set-off]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 2-5 n.37, n.47, n.49 & n.54; § 2-7 n.99; Liu Chengwei, Recovery of interest (November 2003) n.37; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.493-494, 497; 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. 1 para. 21 Art. 54 para. 10 Art. 59 para. 2 Art. 78 para. 20; Sarah Green & Djakhongir Saidov, Software as Goods, Journal of Business Law (March 2007) n.18

French: Witz, Les premières applications jurisprudentielles du droit uniforme de la vente internationale (L.G.D.J., Paris 1995) 32; 33 n.37; 46-47; 106 n.115; Witz, Tilburg Lectures (1998) 159 [163-164]

German: Schlechtriem, Internationales UN-Kaufrecht (1996) 118 n.152; Wenning, jur-pc (Stuttgart) 7 (1995) 3458 [3460]

Spanish: Perales, Cuadernos Jurídicos 3 (1996) No. 43, 5 [7 n.29]; Castellanos, Autonomia de la voluntad y derecho uniforme en la compraventa internacional, thesis, Carlos III de Madrid (1998) 87, 88, 105

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Koblenz

17 September 1993 [2 U 1230/91]

Translation [*] by Kirstin Statländer [**]

[...]

REASONS FOR THE DECISION

[...]

     1. Contrary to the opinion of the lower court and the [buyer], the dispute has to be decided according to French law.

Authoritative for the issue whether French or German law is applicable are the rules of the German law of conflicts that were in force before the coming into force of the law for the reformation of the German rules of international private law of 25 July 1986 (BGBl [*]. I , p. 1142), not Art. 27 et seq. EGBGB [*] in its new version. According to the interim regulation of Art. 220(1) of that law, the former rules of international private law remain applicable to courses of events that were completed before 1 September 1986. The contract of the parties to this dispute is dated 7 November / 1 December 1983. It is true that this contract is a long-term [framework] contract, but according to the leading opinion among scholars to which the court agrees, also in case of long-term contracts the question of the completion of course of events completed before 1 September 1986, the time of the conclusion of the contract is decisive (Palandt/Heinrich, Art. 220 EGBGB; Sandrock, RIW 1986, 841, 855). This is also true for contracts with appointed dealers with whom exclusive distribution contracts are entered into (Kindler, RIW 1987, 660, 665, 666). Due to the rules of the former German law of conflicts that has to be applied in this case as shown above -- according to Art. 27(1) EGBGB nearly the same is true -- in case of an explicit choice of law of the parties, this is decisive. In the present case, the parties made an explicit choice of law agreement in clause 13.1 of the exclusive distribution contract, for the contractual relation to be subject to French law (... under the jurisdiction of the laws of France). Whereas the parties argue about the interpretation of that choice of law clause (referral contract), there is no dispute concerning the validity of the choice of law clause between the parties.

The court can neither agree to the lower court's opinion that the clause was only intended to subject the modalities of the conclusion of the contract to French law, nor agree to the submission of the [buyer] that it was "self-evident" that the law of the seat of the [buyer] was to be applied. There are no hints in the disputed French text of the clause that support the lower court's opinion, not even if one -- as did the lower court -- attaches importance to the choice-of-forum agreement. Let alone that a choice-of-forum clause is not to be taken into consideration when determining the choice of law agreement (Lorenz, RIW 1992, 697, 702), the parties did not -- as the lower court believes -- agree on the German forum, but the courts of the seat of the party that was going to be in the position of the [buyer] were agreed to be internationally competent. This means either the German or the French court having jurisdiction. Neither are there any hints in the text of the choice of law agreement that support [buyer]'s submission, without an expert opinion as requested by [buyer] being necessary. [...]

The text of the choice of law clause and the circumstances, namely the formulation of the contract in French language and the fact that the [seller] -- the one granting the exclusive right of distribution -- is a French company, clearly lead to the conclusion that the parties submitted their contractual relations to French law even though agreeing to a so-called split jurisdiction. If the [buyer] believes that this opinion leads to the result that the German court has to apply French law, of which it is not capable, [buyer] misjudges the regulation of section 293 of the German Code of Civil Procedure which requires the the judge by continuous holdings to investigate foreign law as an official duty (BGH [*] WM 1992, 1040, 1044; BGH WM 1992, 1510, 1511 = NJW 1992, 3106). Contrary to [buyer]'s opinion, foreign regulations are not facts for the German judge but legal regulations (Zöller/Geimer, ZPO, section 293 German Code of Civil Procedure). The present law suit is therefore an application of French law that is not inconclusive as the [buyer] believes, because [seller] has not sufficiently put forward the relevant French regulations, which is by the way not even the case. [Seller]'s references to French law, especially the treatment of disputed set-off claims under French law, suffice to fulfill the duty of the court under section 293 of the German Code of Civil Procedure.

Considering all that, in the present case French law has to be applied, as the parties neither explicitly nor implicitly concluded a subsequent choice of law agreement, the [seller] always insisting on the application of French law.

The only remaining question is to what extent French domestic law is to be applied or whether - as far as the delivery of [seller] to [buyer] in the second half of 1988 are concerned - the CISG is to be applied to the present case. Whereas in Germany the CISG came into force only on 1 January 1991, in France it has been in force since 1 January 1988. If, as in this case, the rules of conflicts of a non-Contracting State -- which Germany was at that time -- refer to the national law of a Contracting State that has not made a reservation under Art. 95 CISG, the CISG has to be applied according to Art. 1(1)(b) CISG, if the other prerequisites for the application are given. The domestic law of a Contracting State is substituted by the Convention (Pünder, RIW 1990, 869, 872; von Caemmerer/Schlechtriem, Commentary to the CISG, Art. 1 CISG). France has not made a reservation to Art. 95 CISG (Herber/Czerwenka, Commentary to the CISG, Art. 1), so that the Convention must be applied.

In the present case, it can only be doubtful whether the Convention must also be applied concerning the disputed delivery of a computer chip for Company H. (invoice of [seller] of 8 November 1988). Individual sales contracts that are concluded within the ambit of a framework sales agreement are in case of doubt subject to the CISG (Pilz, Internationales Kaufrecht, p. 29). The computer chip that was delivered also falls under the term of goods, as this term is used in Art. 1(1) CISG. The term "goods" is to be interpreted widely, it comprises all objects, that can be subject of a commercial sale, also computer software (von Caemmerer/Schlechtriem, Art 1 CISG; Diedrich RIW 1993, 441). Concerning the disputed right to payment of the price for the computer chip, the CISG must be applied as well, as the parties agreed on the application of French law for their contractual relations and the Convention was already part of the French law for international sale of goods at the time of the delivery of the computer chip - as well as of the deliveries on which the undisputed invoices of [seller] are based.

     2. The lower court has correctly decided that the [buyer] must pay the price for the computer chip as requested by [seller] (Arts. 53, 3(1) CISG).

[Seller] alleges that it has delivered the computer chip as well as other cases directly to Company H., but has charged it to the [buyer], as [seller] had only maintained contractual relations with [buyer]. As [buyer] has already put forward at the court of first instance, the computer chip was intended for a machine that [buyer] obtained from [seller] and resold to Company H. Under these circumstances, it is not upon [seller] -- contrary to [buyer]'s assertion -- to provide that and when a contract concerning the delivery of the computer chip, namely the individual order of the computer chip by [buyer], was concluded between [seller] and [buyer]. The delivery was made within the framework of the sales agreement, even if Company H. had ordered the computer chip directly from [seller]. On the contrary, [buyer] has to show that this is a case of deficiency and that [seller] had to deliver the computer chip for free due to clause 10 of the contract. [Buyer] has failed to show this. [Buyer] does not at all prove that the computer chip was not as required by the contract (Art. 35 CISG), nor that [seller] was notified about the deficient performance in due time and according to the rules (Art. 39 CISG). It is also not shown that the computer chip falls under the guarantee that [seller] has assumed for eight months in clause 10 of the contract, as [buyer] did not inform about the date of delivery. Therefore, [buyer] has to pay the price for this computer chip.

     3. The amount of a total of 1,659,392.00 FF [French francs] owed subject to the declared set-off has to be paid by [buyer] in French currency, without the possibility to allow a refund of the sum in German currency according to section 244 German Civil Code (alternative performance).

If section 244 German Civil Code was also applicable to obligations that are not subject to German law (which is disputed, Palandt/Heinrichs, section 245 German Civil Code, Münchener Kommentar zum BGB, sec. 244), the application would require that there is a domestic place of fulfilment of the obligation. This is not the case here. According to Art. 57(1)(a) CISG, the place of fulfilment of the duty of payment is the place of the seat of the seller if there is no derogating agreement. Such a derogating agreement is neither established by the contract nor by the invoices of [seller], and is also not alleged by the parties. The invoices only bear the note "payable by urgent bank-transfer".

     4. The modified claim for determination that was submitted at the second instance and for which the interest in determination is to be acknowledged and which is to be admitted as being useful to the matter (sec. 256, 263 German Code of Civil Procedure), is founded as well.

The parties agreed (clause 3.4 of the contract) that the payment of the price for the deliveries of [seller] would be due ten days after delivery respectively (Art. 58 CISG).

If the buyer does not fulfil its obligation of payment at the time it was due, according to the Convention the legal consequences of non-performance are invoked without demand for payment, which means that, under Art. 61(1)(b), CISG the seller can claim damages according to Arts. 74-77 CISG (von Caemmerer/Schlechtriem, Art. 59; Herber/Czerwenka, Art. 59). Also the fixing of a final deadline is not necessary in case of a delayed fulfilment of the duty to pay the price (Art. 63(2), sentence two, CISG). The failure to pay the price is a breach of contract in the sense of Art. 74 CISG and causes the obligation of compensation without regard to the fault of the buyer (Herber/Czerwenka, Art. 74).

However, only those damages have to be compensated which had been foreseeable for the party in breach of the contract at the time of the conclusion of the contract (Art. 74, sentence two, CISG). The cost for a credit which are in addition to interest can constitute foreseeable damages in case of a delayed payment of the price (Herber/Czerwenka, Art. 74 CISG). Just due to that fact, the claim for determination now submitted by [seller] is founded with regard to the owed sum of 1,659,392.00 FF.

Under French law, [buyer] cannot set-off against the founded claim in the amount of 1,659,392.00 FF with its alleged counterclaims which are disputed individually by [seller]. Whether these counterclaims fall within the scope of the exclusion clause of clause 12.4 of the contract and whether this was valid under French law is irrelevant in this context.

These counterclaims also arose out of the contractual relations of the parties and fall into the ambit of the choice of law agreement in clause 13.1 of the contract, so that French law must be applied.

[...]

As to [seller]'s claim for interest of 11% since 6 June 1989, the dispute is not yet ripe for judgment.

The claim of interest is legally based on Art. 78 CISG. If a party to a contract fails to pay a price when due, the other party has a right to interest on this according to that regulation, without regard to a claim of damages under Art. 74 CISG. The percentage of interest is not set forth in Art. 78 CISG. It is to be determined according to the applicable national law, in this case French law. (Herber/Czerwenka, Art. 78). The percentage of interest determined under French law for monetary claims which is set forth by decree is to be taken as the basis for the claim of interest under Art. 78 CISG (OLG Frankfurt, RIW 1991, 591; Asam/Kindler RIW 1989, 841).

As to the percentage of statutory interest in France for the time since 6 January 1989, further ascertainment is still necessary.

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of France is referred to as [seller] and the Defendant of Germany is referred to as [buyer]. Amounts in the currency of France (French francs) are indicated as [FF].

Translator's note on other abbreviations: BGBl = Bundesgesetzblatt [Federal Law Gazette]; BGH = Bundesgerichtshof [Federal Supreme Court]; EGBGB Einführungsgesetz zum Bürgerlichen Gesetzbuche = [Introductory Act to the BGB (German Civil Code)].

** Kirstin Statländer is a student of law at Humboldt University Berlin. She was a member of the team of Humboldt University at the 9th Willem C. Vis International Commercial Arbitration Moot 2001/02 and a coach of the team at the 10th Willem C. Vis International Commercial Arbitration Moot 2002/03.

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Pace Law School Institute of International Commercial Law - Last updated March 12, 2007
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