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CISG CASE PRESENTATION

Germany 14 June 1994 Lower Court Nordhorn (Shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/940614g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19940614 (14 June 1994)

JURISDICTION: Germany

TRIBUNAL: AG Nordhorn [AG = Amtsgericht = Petty District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 3 C 75/94

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


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 26 ; 33 ; 39(1) ; 49 ; 50 ; 78 [Also cited: Articles 6 ; 14 ; 48 ; 62 ; 74 ; 81 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Issues covered and excluded (issues excluded): validity under domestic law (validity of general conditions of contract)];

26A [Notification of avoidance: effective declaration of avoidance required];

33A [Time for delivery: on date fixed by or determinable from contract];

39A ; 39C [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Other issues concerning notification: return of defective goods constituted valid notice];

49B [Buyer's loss of right to declare avoidance after delivery];

50A [Buyer's right to reduce price for non-conforming goods];

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

Descriptors: Scope of Convention ; Validity ; Delivery ; Avoidance ; Lack of conformity notice, timeliness ; Reduction of price, remedy of ; Interest

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Editorial remarks

"The Court held that the fact that the defective goods were sent back to the seller amounted to a valid declaration of lack of conformity . . . [However,] the Court found that the buyer's declaration of avoidance was not made according to a provision contained in the seller's general conditions of contract which the Court found to have been incorporated in the contract. The Court invoked art. 4(a) and evaluated the validity of the seller's general conditions on the basis of Italian law as the law governing the contract according to German rules of private international law. As the seller's clause was valid under Italian law, the buyer's declaration of avoidance was without effect because he had failed to declare the contract avoided according to the contractually established procedure." Kazimierska, Pace Review of the Convention on Contracts for the International Sale of Goods (1999-2000) n.n.164, 368, 433

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=114&step=Abstract>

Italian: Diritto del Commercio Internazionale (1996) 626-628 No. 99

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/259.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=114&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [225 n.786 (scope of CISG: standard contract terms), 248 n.1029, 253 n.1079 (interest issues)]; Koneru, 6 Minnesota Journal of Global Trade (1997) 145-148 [comments on the validity issue]; Liu Chengwei, Recovery of interest (November 2003) n.112; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.261, 546, 657; 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); 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. 8 paras. 46, 48, 51, 54 Art. 74 para. 5; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 366

Finnish: Huber/Sundström, Defensor Legis (1997) 747 [752 n.28]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

District Court (Amtsgericht) Nordhorn

14 June 1994 [3 C 75/94]

Translation [*] by Ruth M. Janal [**]

FACTS OF THE CASE

The [seller] runs a shoe factory situated in Italy. On 21 March 1993, the [seller] formed a sales contract regarding the delivery of 280 pairs of various shoes with the [buyer], who is a shoe retailer in Bad Bentheim [Germany]. The sales contract, which is written in the Italian language, contains a remark in handwriting "prima ferie non dopo" ["before the holidays, no later"] under the heading "Consegna approssimativa senza impegno" [approximate delivery, non-binding]. In the shoe trade in Italy, such wording means that the delivery is supposed to be effected before August.

On 5 August 1993, the [seller] delivered a first installment and invoiced the [buyer] on the same day with an amount of Italian Lira [ItŁ] 14,953,000. On 30 November 1993, the [buyer] paid ItŁ 14,504,410 subtracting 3% discount for immediate payment. The [seller] claims payment of the remaining ItŁ 448,590.

[Seller] delivered the remaining goods on 24 May 1993 [Translator's note: the Court probably means 24 September 1993] and invoiced the [buyer] with an amount of ItŁ 3,940,000 on the same day. The goods did not arrive at the [buyer]'s place of business until the beginning of October. By that time, the [buyer] had declared the contract avoided with a fax sent to the [seller] on 28 September 1993.

[Seller's position]

The [seller] furthermore claims payment of the remaining purchase price for deliveries invoiced in the previous season in the amount of ItŁ 392,195. The [buyer] has withheld this amount because of three complaints regarding the conformity of the goods. With respect to the [buyer]'s defenses, the [seller] relies on the [buyer]'s failure to give a timely notice of lack of conformity and on the statute of limitations.

The [seller] contends that the [buyer] was not entitled to declare the contract avoided. The preconditions for avoidance set out by the [seller]'s standard terms, which had validly been incorporated into the contract, had not been met.

The [seller] requests that the [buyer] is ordered to pay [seller] ItŁ 4,780,795 plus 10% interest on the following sums: on ItŁ 3,940,000 from 25 November 1993, on ItŁ 14,953,000 from 6 October 1993 until 30 November 1993, and on ItŁ 448,590 from 1 December 1993.

[Buyer's position]

The [buyer] requests that the [seller]'s claim be dismissed.

The [buyer] is of the opinion that the parties agreed on a fixed delivery date and that [buyer] was therefore entitled to an immediate avoidance of contract. Regarding the non-conformities, [buyer] submits that the [seller] never before referred to such time limits, but always accepted and credited goods returned. The [seller]'s current refusal therefore constituted a breach of good faith.

With respect to the further details of the case the Court refers to the content of the parties' briefs and attachments.

REASONS FOR THE DECISION

The [seller]'s claim is predominantly justified.

I. [Applicable law]

The [seller] is entitled to payment of the purchase price for the shoes, pursuant to Art. 62 of the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG). The CISG applies to the sales contract concluded between the parties. According to Art. 1(1) CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different Contracting States. Italy is a Contracting State since 1 January 1988 and the Federal Republic of Germany became a Contracting State on 1 January 1991. The Convention therefore governs the contractual relationship between the parties, as they did not choose to exclude the application of the Convention under Art. 6 CISG.

II. [Payment of remaining purchase price]

The [seller] may claim the payment of the remaining purchase price in the amount of ItŁ 4,388,590 based on the valid sales contract of 21 March 1993. Admittedly, both partial deliveries were effected after the delivery date set in the contract. However, this would release the buyer from the obligation to pay the purchase price only if the buyer declares the contract avoided under Art. 49 CISG. It is true that the [buyer] issued a corresponding declaration of avoidance by fax of 28 September 1993. But since the [buyer] was not entitled to avoid the contract, its declaration of avoidance did not have the desired effect.

[Seller's standard terms]

The Court may leave open the question of whether the prerequisites of Art. 49 CISG were met. Under clause 4 of the [seller]'s standard terms and conditions, the customer is entitled to avoid the contract in case of a late delivery only if it previously announces its intention to declare the contract avoided and if the goods are not dispatched by the seller within fifteen working days after receipt of the customer's warning.

The [seller]'s standard terms were validly incorporated into the contract under Art. 14 CISG. The terms are printed on the back of the order form in both the Italian and the German language. It is undisputed that the front side of the order form refers to the standard terms. This is sufficient to make the standard terms an effective part of the contract. According to Art. 4(a) CISG, the CISG is not concerned with the validity of standard terms. Rather, their validity is determined by the law that governs the contract. Under Art. 28 EGBGB [*], Italian law finds application on the present contract, as the parties did not form a choice of law clause. Therefore, the contract is governed by the law of the country to which it has the closest connection. Under Art. 28(2) EGBGB it is assumed that the closest connection exists to the country in which the party that performs the characteristic obligation has its residency or its place of business at the time of the conclusion of the contract. The characteristic performance in the present case is the delivery of shoes and the [seller]'s place of business is in Italy. Consequently, Italian law applies to the contract. This is supported by the fact that the contracting language is Italian and that the prices are stated in the Italian currency. The fact that the contract was formed at a fair in Cologne [Germany] does not alter that conclusion.

The Court can find no indication that the clause used by the [seller] is invalid. [Seller] has a legitimate interest in the announcement of an intended declaration of avoidance and the granting of an additional period of time. This interest results from the fact that, in cases where a buyer is entitled to declare the contract avoided under Art. 49 CISG, the buyer may do so even if the delivery has already been effected, pursuant to Art. 49(2)(a) CISG. The seller to that extent bears the risk that its deliveries will be refused in case of late performance. The provision in clause 4 of the [seller]'s standard terms is suited to minimize that risk. At the same time, it does not have an unreasonable adverse effect on the customer, because the wording of the clause does not exclude the possibility of an announcement that precedes the expiry of the delivery period. Consequently, there are no reservations regarding the validity of that provision.

The Court does not need to decide whether the clause would also find application to a time bargain. The remark "before the holidays, no later" does not constitute a fixed delivery date. Such a fixed date could only be assumed if the transaction was supposed to "stand and fall" with a delivery by that date. This was not the intention of the parties. Firstly, the wording is ambiguous. Secondly, the [buyer]'s conduct after the expiry of that date shows that a fixed delivery date was not intended. The [buyer], on the one hand, still accepted a delivery made on 5 August 1993 and, on the other hand, failed to refuse an additional period of time for performance by the [seller] of its obligations until 10 September 1993, as required by Art. 48(2) and (3) CISG.

The [buyer] did not comply with its obligation under clause 4 of the [seller]'s standard terms to warn the [seller] of its intention to declare the contract avoided. The [buyer]'s obligation to do so did not lapse because the [seller] notified the [buyer] with letter of 5 August 1993 that he would perform the delivery until 10 September 1993, and because the [seller] was consequently entitled to remedy its failure to perform its obligation under Art. 48(2) and (3) CISG. After that date had expired, it was still unclear to the [seller] whether the [buyer] would declare the contract avoided under Art. 49 CISG. Thus, it cannot be assumed that the requirement under clause 4 of the [seller]'s standard terms was satisfied. Moreover, the [buyer] had the opportunity to warn the [seller] of its intention to declare the contract avoided within that period of time. The [buyer]'s failure to fulfil this obligation cannot be to the [seller]'s detriment.

[Loss of buyer's right to avoid the contract]

Avoidance of contract was also not possible under Art. 49(2)(a) CISG. According to this provision, the buyer loses the right to declare the contract avoided unless it does so in respect of late delivery within a reasonable time after it has become aware that delivery has been made. As the provision concerns the continued existence of a right to avoid the contract, it presupposes a validly existing right to declare the contract avoided. As was explained above, such a right did not exist in the present case. The [buyer] was therefore not entitled to declare the contract avoided. Consequently, [buyer] was also not released under Art. 81(1) CISG from her contractual obligation to pay the purchase price. The [seller] is therefore entitled to payment of the purchase price in full.

The [buyer] was also not entitled to a discount for immediate payment. According to clause 2 of the [seller]'s standard terms, the [buyer] would have been entitled to a 3% reduction in price only if [buyer] had paid the invoiced amount within twenty20 days after receipt of the goods. It is undisputed that the [buyer] did not pay within that period. Therefore, the [seller] is entitled to payment of the remaining purchase price resulting from the sales contract of 21 March 1993 in the amount of ItŁ 3,488,590.

III. [Alleged non-conformities]

Under Art. 62 CISG, the [seller] may claim the remaining purchase price for deliveries effected in the previous year in the amount of ItŁ 338,134. The [buyer]'s defense that the goods lacked in conformity is only successful with respect to the complaint of 30 July 1993.

[Effective notice of non-conformity]

In that respect, the [seller] cannot claim that he was not notified of the lack of conformity within a period of ten days. The notice is not limited to a written declaration, but may also be effected by returning the defective goods. This procedure also sufficiently informs the [seller] of the extent of the non-conformity.

[Reduction in price]

In the Court's opinion, the exclusion of a return of the goods in clause 5 of the [seller]'s standard terms is invalid. Consequently, the [buyer] is entitled to a reduction in price pursuant to Art. 50 CISG. Having regard to the relatively low purchase price of German Marks [DM] 55 (= ItŁ 54,061) and the considerable cost of remedy due to the hourly wages, the Court, pursuant to § 287 ZPO [*], estimates the value of the defective goods to be zero DM. The purchase price is therefore equal to the reduction in price and the [buyer] was entitled to reduce the invoice by ItŁ 54,061.

[Transport costs]

The [buyer] is not entitled to a compensation for the transport costs claimed (in the amount of DM 29), because the transport costs were to be borne by the [buyer], following clause 5 of the [seller]'s standard terms. In order to notify the [seller] of the defect, it would have been initially sufficient to send a written declaration. Therefore, the clause does not appear to be unfair.

[Time limitation]

Regarding the other instances of alleged non-conformity, the [seller] correctly invokes the period of limitation. Under clause 8 of the [seller]'s standard terms, all claims against the [seller] are time-barred six months after delivery, unless the parties have reached a different agreement in writing. As there are no objections as to the clause's content, the [seller] is entitled to rely on the time limitation. The [buyer] cannot rely on the fact that the [seller] did not invoke the time limitation in previous instances. This does not constitute a breach of good faith.

Therefore, the [buyer] was entitled to reduce the overall purchase price of ItŁ 392,195 by ItŁ 54,061; thus, leaving [seller] a claim for payment of the remaining purchase price in the amount of ItŁ 338,134.

IV. [Loss of profit]

Contrary to the [buyer]'s opinion, [buyer] is not entitled to claim compensation from the [seller] for loss of profit. As was explained above, the [seller] was still entitled to perform the contract. Therefore, [buyer] is at the most entitled to damages for the delayed delivery, not to damages for non-performance. Since loss of profit constitutes a damage caused by non-performance, such compensation cannot be granted to the [buyer]. The [buyer] did not submit that it suffered a damage through the delayed delivery.

Therefore, the [seller] is entitled to payment in the overall amount of ItŁ 4,736,724. The claim was dismissed with respect to its further request.

V. [Interest]

The [seller]'s claim for interest is justified under Art. 78 CISG. According to that provision, interest is due from the time the claim was mature; a reminder of payment is not necessary. Consequently, it would have been up to the [buyer] to submit that the parties reached a different agreement regarding the payment of interest. As the [buyer] failed to make an according submission, the interest was granted according to the [seller]'s request. The legal interest rate in Italy is 10% pursuant to Art. 1284 Codice civile [Italian Civil Code].

The decision on costs is based on §§ 91(1), 92(2) ZPO [*]; the decision on the provisional enforceability is based on § 709 ZPO.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Italy is referred to as [seller]; the Defendant of Germany as [buyer]. Amounts in the currency of Italy (Italian Lira) are indicated as [ItŁ]; amounts in German currency (Deutsche Mark) as [DM].

Translator's note on other abbreviations: EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].

** Ruth M. Janal, LL.M. (UNSW) is a Ph.D. candidate at Albert-Ludwigs-Universität Freiburg. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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