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CISG CASE PRESENTATION

Germany 4 March 1994 Appellate Court Frankfurt (Special screws case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940304g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19940304 (4 March 1994)

JURISDICTION: Germany

TRIBUNAL: OLG Frankfurt/M [OLG = Oberlandesgericht = Provincial Court of Appeal]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER:10 U 80/93

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

CASE HISTORY: 1st instance LG Gießen 22 December 1992 [affirmed]

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Sweden (defendant)

GOODS INVOLVED: Special screws


Case abstract

GERMANY: OLG Frankfurt 4 March 1994

Case law on UNCITRAL texts (CLOUT) abstract no. 121

Reproduced with permission from UNCITRAL

The Swedish [buyer] asked the German [seller] to make an offer for special screws of a certain quality. The [seller] filled in the prices and delivery periods and sent the letter back. The [buyer] then ordered 3,400 pieces of the named screws as well as 290 pieces of other articles not mentioned before. The [seller] confirmed the order but requested payment in advance or a letter of credit. The [buyer], in turn, asked for a pro-forma invoice. The [seller] sent an invoice which listed articles of lower quality with their respective prices. The [buyer] objected immediately and demanded delivery of the articles in the "ordered" quality. The [seller] proposed delivery of higher-quality articles for a higher price, but the [buyer] insisted on delivery of the higher-quality items for the price listed in the invoice.

The court found that the CISG was applicable as both parties had their place of business in States parties to the CISG (article 1(1)(a) CISG). The court noted that, pursuant to article 19(1) CISG, a reply to an offer that contains terms at variance with the offer is a rejection of the offer and constitutes a counter-offer. Accordingly, the [buyer's] final order constituted a new offer. Yet, this new offer was not sufficiently definite in the sense of article 14(1) CISG, because the prices of some of the ordered articles were neither known nor determinable. Consequently, the court held the new offer could not lead to the effective conclusion of a contract as it did not comply with article 14(1) CISG.

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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 14(1) ; 19(1) [without citing CISG, court also rules on issue of precontractual liability] [Also relevant: Article 55 ]

Classification of issues using UNCITRAL classification code numbers:

14A12 [Criteria for an offer (intention to be bound): definiteness of key conditions (determination of price)];

19A1 [Reply purporting to accept but containing additions or modifications: in general, constitutes rejection and counter-offer]

Descriptors: Offers ; Acceptance of offer ; Counter-offer ; Precontractual liability

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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: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=205&step=Abstract>

Italian: [1998] Diritto del Commercio Internazionale 1078-1079 No. 177

Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 267

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/110.htm>; OLG Report Frankfurt 1994, 85; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=205&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999)156 [Art. 14: definiteness and price (prior to delivery and acceptance)]; Bernstein/Lookofsky, Understanding the CISG in Europe (1997) 139 n.18; Perales, 10 Pace International Law Review (1998) 97-155 at n.91 [materiality of alteration contained in reply to offer]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 8-4 n. 19; Pilar Perales Viscasillas in Ferrari, Flechtner & Brand ed., The Draft UNCITRAL Digest and Beyond, Sellier / Sweet & Maxwell (2004) 274 [Art. 55 issues]; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.197 ("some items in the order contained prices but as buyer insisted on delivery of total order, the offer was not sufficiently definite under ... CISG Art. 14 because special screws did not contain a price"); Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 163

Finnish: Huber/Sundström, Defensor Legis (1997) 747 [750 n.14]

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Case text (English translation)

Queen Mary Case Translation Programme

Court of Appeals of Frankfurt/Main (Oberlandesgericht)

4 March 1994 [10 U 80/93]

Translation [*] by Dr. Peter Feuerstein [**]

Translation edited by Todd J. Fox [***]

Facts

Subsequent to making a basic inquiry about [seller's] products, the [buyer], located in Sweden, invited by letter the [seller] to make an offer for specified screws of a certain quality [W]. The [seller] answered by filling in the prices and the delivery periods. By fax dated 5 March 1992, [buyer] ordered 3,400 pieces of the named screws, stated by price, as well as 290 pieces of six other items not previously mentioned. On 10 March 1992, the [seller] thanked the [buyer] for the order and informed the [buyer] of [seller's] request for payment in advance or a letter of credit.

In the pro-forma invoice that was requested by the [buyer], the [seller] listed all ordered items of a [lower quality] with their respective prices. The [buyer] immediately objected and requested delivery in the "ordered" quality. The [seller] replied that, according to the catalogue, only items in the [lower quality] could be delivered; for items in the higher quality there would be longer delivery periods and higher prices applied. The [buyer], through its lawyer's letter, dated 16 March 1992, rejected [seller's] reply and insisted on delivery of goods in the [higher quality] for the prices stated in the pro-forma invoice and threatened to file a claim for damages for breach of contract.

[Buyer's position]

The [buyer] is of the opinion that a valid contract has come into existence and, therefore, the [seller] is liable for damages due to the non-performance of the contract. [Buyer] has already contracted to sell the goods to company B; this latter company is now claiming reimbursement from the [buyer] in the amount of 420,000 SKr [Swedish Krona], which it had to spend as additional costs in effectuating a substitute transaction.

The [buyer] has requested damages against the [seller] in the amount of 420,000 SKr - plus 12% interest since the date of service of process of the claim on 26 August 1992.

[Seller's position]

The [seller] has requested the dismissal the [buyer's] claim.

The [seller] is of the opinion that no contract has been concluded. [Seller] claims particularly that the [buyer's] "order" did not constitute an offer since the volume in the order was too small (under 50 pieces) and the prices for other ordered items had not been not determined. Furthermore, [seller] asserts that the [buyer] resold the goods too early, at a date when the conclusion of a contract with the [seller] was not at all foreseeable.

[Court of First Instance]

The District Court of Giessen [Court of First Instance] dismissed the [buyer's] claim. The Court of First Instance held that a contract had not come into existence; the faxes dated 12 and 17 February 1992 were non-binding inquiries. Although the order by [buyer] dated 5 March 1992 constituted an offer, the [seller] responded with a request for advance payment, which constituted a counter-offer that the [buyer] did not accept but, instead, rejected after receiving the requested pro-forma invoice. The Court of First Instance also held that a claim for pre-contractual liability (culpa in contrahendo) cannot be established, as the [seller] did not represent to the [buyer] that the conclusion of a contract was definite. In any event, the [buyer] was responsible for any loss it suffered since it resold the goods prematurely; thus, under 254 BGB [*], it is the [buyer] that must bear the loss.

[Buyer's position on appeal]

The [buyer] maintains in the appeal that its offer, in the form of an order dated 5 March 1992, had been accepted by the [seller] by fax, dated 10 March 1992. This results from the fact that the [seller's] request for a letter of credit emphasizes [seller's] willingness to deliver. Insofar as the request for a letter of credit provided a material modification of the offer under the CISG and, thus, constituted a new offer, the [buyer] had accepted it with the request that the [seller] send a pro-forma invoice. In any event, the [seller] is liable for damages for a breach of duty prior to the formation of the contract (culpa in contrahendo), since the [seller], by the manifested willingness to deliver, had established a basis of reliance which allowed the [buyer] to contract for resale of the goods. The [buyer] cannot be accused of contributory negligence.

The [buyer] thus requests the reversal of the decision of the Court of First Instance, so that the [seller] be ordered to pay damages in the amount of 420,000 SKr plus 12% interest since the date of service of process of the claim on 26 August 1992.

[Seller's position on appeal]

The [seller) requests the dismissal of the appeal.

The [seller] defends the appealed decision by repeating and expanding its previous pleadings. The [seller] again points out that the order placed by the [buyer] did not constitute an offer since the [buyer] had ordered five items in quantities of under 50, contrary to the [seller's] notification of 12 February 1992, and [buyer] had also ordered seven additional items, the prices of which were still open.

Grounds for the decision

The [buyer's] appeal, lodged in the correct form and within the prescribed time, is not successful, since the Court of First Instance dismissed the [buyer's] claim with appropriate reasoning. The [buyer] does not have a claim for damages against the [seller], either under the provisions of 326 BGB [*], or according to the principle of positive breach of contract (positive Forderungsverletzung), since no contract has come into existence.

The fax dated 12 February 1992 constituted - and the [buyer] does not dispute this - merely a production inquiry, the response to which did not constitute a contractual obligation.

The inquiry the [buyer] made on 17 February 1992, with which it requested an offer, is to be assessed as an invitation to make an offer (invitatio ad offerendum), so that the return fax containing the pricing constitutes an offer by the [seller]. The [seller's] fax contains all the essential elements of a contract for the sale of goods: namely, description of the goods, quantity, price, and time of delivery. However, the [buyer] did not accept this offer, certainly not by placing its "order" dated 5 March 1992. With this order the [buyer] deviates from the [seller's] offer insofar as the [buyer] ordered quantities different than the offered terms and, furthermore, additional items which had not yet been offered as deliverable and for which the price was not yet determined. Moreover- as already correctly pointed out by the Court of First Instance - the [seller's reply] differed from the [buyer's] offer in the [seller's] request of payment in advance or payment by letter of credit. An acceptance containing a modification is classified as a rejection according to 150(2) BGB. This is consistent with the provisions of the CISG, which apply in the present case since both parties belong to different Contracting States (cf. Art. 1(1) CISG). The CISG contains in Art. 19(1) a corresponding provision to 150(2) BGB [*].

The Court of First Instance held that the [buyer's] order constitutes a counter-offer according to 150(2) BGB and Art. 19(1) CISG; however, this new offer could not lead to an effective conclusion of a contract due to lack of sufficient certainty. An offer is sufficiently definite within the meaning of 145 BGB, as well as under Art. 14(1) CISG, only if it provides the basis for determining the price upon acceptance (cf. Palandt-Heinrichs, 53 ed., BGB 145, Annotation 1; von Caemmerer/Schlechtriem, CISG-Kommentar, Art. 14, Annotation 3). This was not possible in the present case, since the price of some ordered items was neither fixed nor determinable. Though it could be conceivable to presume a contractual agreement pertaining to the matching items in the [seller's] offer, this presumes a divisibility of the complete order. However, that would be something that the [buyer] explicitly did not want: in its written order dated 5 March 1992, the [buyer] expressly insisted on the delivery of the total order of all items.

Therefore, only the pro-forma invoice sent by [seller] at [buyer's] request contained the essential elements of an offer that is sufficiently definite and which could be accepted by a simple "yes". However, this offer was not accepted by the [buyer], who rejected it due to the different quality offered, whereby the contractual efforts of the parties finally failed.

Contrary to the [buyer's] auxiliary submissions, the prerequisites of a claim for damages under the doctrine of culpa in contrahendo [breach of duty at the time of contractual negotiations] for culpably aborting the negotiations (cf. for this Palandt-Heinrichs, 53 ed., 276 BGB, Annotation 72 et seq.) are also not met. Specifically, the [seller] did not create in the [buyer] a legitimate confidence as to the conclusion of the contract upon which the latter could then rely. Since contracting parties are generally free in their actions until the final conclusion of contract (cf. Palandt, op. cit.) the mere maintenance of contractual negotiations with the other party is not by itself sufficient to create a reliance that the contract will come into existence. Rather, special fiduciary elements (Vertrauenstatbestand) are required. These elements might be present if the aborting party represented that the conclusion of the contract was definite (cf. BGB in NJW 1970, 1840), if the aborting party had induced the other party to advance performance, or if the parties had already begun with the performance of the contract (cf. Palandt, op. cit., Annotation 74). None of these cases apply here. Therefore, pre-contractual liability (culpa in contrahendo) does not arise, independent of the question of causation. Causation is doubtful since the [buyer] had already sold the goods to company B at a time when the [buyer] could not foresee whether a contract with the [seller] would come into existence. When the [buyer] offered to bind itself contractually on 2 March 1992, only information about the prices was disclosed; the "order" was placed by the [buyer] later.

Thus, the appeal has to be dismissed with the auxiliary consequences from 97, 708 No. 10, 711 ZPO [*].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Respondent-Defendant of Germany is referred to as [seller]; the Appellant-Plaintiff of Sweden is referred to as [buyer]. Also, monetary amounts in Swedish Krona are indicated by [SKr]. Regarding the references to the different grades of quality of the goods: catalogue "quality 1.4401" is referred to as [lower quality]; "quality 1.4529" is referred to as [higher quality].

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code], ZPO = Zivilprozessordnung [Civil Procedure Code].

** Dr. Peter Feuerstein is an International Legal Consultant. He conducted his post graduate research at Cambridge University, England, where he studied at Clare College in preparation of his Doctoral Dissertation. He received his Dr. jur. from Philipps-University of Marburg, Hessia, Germany, in 1977. The second-iteration redaction of this translation was by Dr. John Felemegas.

*** Todd J. Fox is an Associate of the Institution of International Commercial Law of the Pace University School of Law. He received his LL.M. summa cum laude from Albert-Ludwig-Universität Freiburg.

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