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CISG CASE PRESENTATION

Germany 8 February 1995 Appellate Court Hamm (Socks case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950208g3.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISION: 19950208 (8 February 1995)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 11 U 206/93

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

CASE HISTORY: 1st instance LG Dortmund (100 167/92) 14 July 1993 [reversed]

SELLER'S COUNTRY: Italy (plaintiff was assignee of seller)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Socks


Case abstract

GERMANY: OLG Hamm 8 February 1995

Case law on UNCITRAL texts (CLOUT) abstract no. 132

Reproduced with permission from UNCITRAL

The German [buyer] ordered several times large lots of socks from an Italian manufacturer [seller]. Four contracts were concluded in the Italian language, the [buyer] being represented by its Italian agent. The [seller] delivered the socks and sent four invoices in Italian to the [buyer]. Before payment, the [seller] assigned its payment claims to [seller's assignee], an Italian bank, and gave notice to the [buyer]. The assignment notice was in French and English. Despite the notice, the [buyer] who understood only little English and no French paid to the [seller], against whom bankruptcy proceedings were instituted shortly afterwards. The [seller's assignee] claimed (second) payment from the [buyer].

Noting that the parties had their places of business in different Contracting States, the appellate court found the CISG to be applicable (art. 1(1)(a); art. 100(2) CISG).

The court further found that the [seller's assignee] was entitled to payment from the [buyer] according to article 53 CISG since it had effectively acquired the relevant claims by assignment. Noting that assignment is not regulated by the CISG, and that, therefore, its preconditions and effects must be decided according to the rules of private international law, the court, applying German private international law, found that Italian law was applicable.

As Italian law provided no specific rules on the "language risk", the court relied on the rules developed hereto under the CISG as part of the [buyer's] legal environment and found that the parties may either use the language agreed upon or customarily practised between them. In the court's view, if neither agreement nor practice exists at to which language is to be used, the circumstances of the case must decide. The court held that since the [buyer] in this case had recognized that the assignment notice could have some legal relevance, it was up to the [buyer] to clarify the precise contents of that notice.

The court also awarded 10% interest on the sum to be paid by the [buyer] (art. 78 CISG). As the CISG does not provide for a specific interest rate, the court took recourse to the governing contract law (in this case Italian law) which provides for 10% interest (art. 1284 Codice civile). The requested interest at the rate of 14% could have been recovered under article 74 CISG only if the [seller's assignee] had not failed to prove the higher interest damage.

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Classification of issues present

APPLICATION OF CISG: Yes [Articles 1(1)(a) and 100(2)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7 ; 8 ; 9 ; 24 ; 78 [Also cited: Articles 53 ; 74 ] [Also relevant: Article 27 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Issues covered and excluded (issues excluded): assignment (regulated by domestic law)];

7C221 [Gap-filling (recourse to general principles on which Convention is based): behaviour of a reasonable person (clarification of notice in foreign language)];

8B ; 8C [Interpretation of party's statements or other conduct: based on objective standards; In light of surrounding circumstances];

9B [Implied agreement on international usage];

24E [Communication "reaching" addressee: communication in a foreign language]

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

Descriptors: Scope of Convention ; Assignment ; Gap-filling ; General principles ; Intent ; Usages and practices ; Language issues ; Interest

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Editorial remarks

"The Court held that the mere fact that a notice was given in a language which was not that of the contract or that of the addressee was not an obstacle for the notice to be effective. The foreign language could be the language normally used in the respective trade sector, to which the parties may be considered to have agreed upon. If that was not the case, the notice would be effective if the addressee could have reasonably been expected to request from the sender of the notice explanations or a translation. The court decided the matter taking into account the understanding of a reasonable person, giving due consideration to usages and practices observed in international trade according to art. 8(2) and art. 8(3)." Kazimierska, Pace Review of the Convention on Contracts for the International Sale of Goods (1999-2000) n.n.170, 432

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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=133&step=Abstract>; 9 European Current Law Monthly Digest (1997) No. 103 [114] = European Current Law Yearbook (1997) No. 1052 [495]

German: Wirtschaftsrechtliche Beratung (1996) 857; [1997] 10 Jahrbuch für Italienisches Recht (JbItR) 208

Italian: Diritto del Commercio Internazionale (1996) 640-641 No. 113

Polish: Hermanowski/Jastrzebski, Konwencja Narodow Zjednoczonych o umowach miedzynarodowej sprzedazy towarow (Konwencja wiedenska) - Komentarz (1997) 272-273

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/141.htm>; Recht der Internationalen Wirtschaft (RIW) 1997, 153-155; Praxis des internationalen Privat- und Verfahrensrechts (IPRax) 1996, 197-199; Neue Juristische Wochenschrift -Rechtsprechungs Report (NJW-RR) 1996, 1271-1272; Die deutsche Rechtsprechung auf dem Gebiete des Internationalen Privatrechts im Jahre (IPRspr) 1995 No. 40 [72-76]; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=133&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [226 n.793 (scope of CISG: assignment of claims), 253 n.1079 (interest issues)]; Honnold, Uniform Law for International Sales (1999) 120 [Art. 8(2)] [cited as 8 March 1992]; Van Alstine, 146 University of Pennsylvania Law Review (1998) 767 n.334 [interest issues]; Behr, 17 Journal of Law and Commerce (1998) 266-288 [abstracts and comments on 29 interest rulings from 10 countries (this case presented at 280-283)]; Lookofsky, Understanding the CISG in Scandinavia (1996) 119 n.16; Bernstein/Lookofsky, Understanding the CISG in Europe (1997) 128 n.17; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 7-2 n. 20; 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. 38, 41, 42 Art. 24 para. 16

German: Schlechtriem, Praxis des internationalen Privat- und Verfahrensrechts (IPRax) 1996, 184; Schlechtriem, Internationales UN-Kaufrecht (1996) 58 n.46; Zoberbier, Wirtschaftrechtliche Beratung (WiB) 1996, 857

Spanish: Castellanos, Autonomia de la voluntad y derecho uniforme en la compraventa internacional, thesis, Carlos III de Madrid (1998) 153, 167-168

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Hamm

8 February 1995 [11 U 206/93]

Translation [*] by Daniel Fritz [**]

FACTS

The Defendant [Buyer] of Germany bought several lots of socks from an Italian manufacturer [Seller]. The contracts were concluded orally in Italy; the [Buyer] was represented by its Italian agent. By written communications of 2 September 1991, 6 September 1991, 10 September 1991, and 9 October 1991 the [Seller] notified the [Buyer] that claims arising from the sale were assigned on 2 September 1991, 5 September 1991, 10 September 1991 and 9 October 1991 to the Plaintiff [Seller's assignee]. Notifications of the assignments were provided by the [Seller's assignee] on forms in English and French. They reached the [Buyer] by registered mail on 11 September 1991, 17 September 1991, 20 September 1991, and 18 October 1991.

After receiving each notice of assignment, the [Buyer] paid upon each invoice by means of cheques before the sum fell due. The payments, however, were not directed to the [Seller's assignee] but to the [Seller]. Bankruptcy proceedings were instituted against the [Seller] on 1 March 1992. By letter dated 8 January 1992, [Seller's assignee] reminded [Buyer] to pay the debts to [Seller's assignee]; the reminder was drafted in the English language. The [Buyer], in turn, answered by letter of 20 February 1992 in the German language that the debts were redeemed by cheque payments. A further reminder in the English language dated 12 February 1992 was answered by [Buyer] again with the notice that the debts were redeemed and that the [Seller's assignee] should contact the [Seller].

[Seller's assignee] claims payment from the [Buyer] alleging that, due to the assignments, [Seller's assignee] is the holder of the claims arising from the sale.

REASONING OF THE COURT

A. [Seller's assignee] can claim payment from [Buyer] due to the assignment of the claims arising from the sale. The District Court was right in holding that [Seller's assignee] has a right to sue [Buyer]; this right is no longer contested by the [Buyer] in this appeal.

I. The CISG applies to the contract of sale between the parties according to Arts. 1(1)(a), 100(2) CISG. It has been in force in Italy since 1 January 1998 and in Germany since 1 January 1991.

II. According to Art. 53 CISG, the [Seller's assignee] is entitled to receive the price for the goods from the [Buyer]. This claim is not contested on the merits or the amount.

      1. Due to the assignment, the [Seller's assignee] is the holder of the claim arising from the sale.

           a) The assignment of claims arising from sales contracts is not governed by the CISG (Piltz, Internationales Kaufrecht, 1993, par 2, Rn 147). The requirements for a valid assignment are governed by the law that governs the legal relationship from which the assigned claim descends, Art 33(2) EGBGB [*] (BGH [*] RIW [*] 1991, 158). The dispute is about claims arising from a sales contract. Since the parties to the sales contract, the [Seller] and the [Buyer], had not chosen the law to be applied (Art. 27 EGBGB), the seat of the seller is decisive according to Art. 28(2) EGBGB; this is due to the fact that the seller performs the characteristic part of the sale (see Palandt/Heinrichs, 54th ed. Art. 28 EGBGB Rn 8). Accordingly, Italian law applies to the assignment, since the [Seller] (assignor) had its seat in Italy and the characteristic delivery was to be performed there.

           b) In conformity with Italian law (Art. 1260 C.c. [*]), the assignment agreements between [Seller] and [Seller's assignee] are valid. This is not at issue between the parties.

      2. According to Art. 1264 C.c., the assignment only becomes valid towards the debtor [here: Buyer], as soon as the assignment was consented to or brought to the attention of this party by means of service. The last mentioned option must be considered here. This means that if the assignment is valid towards the [Buyer], the payments made by the [Buyer] to the [Seller] (assignor) cannot discharge the [Buyer] from its debts owed to the [Seller's assignee].

           a) The notices of assignment were sent to the [Buyer] by registered letter. This satisfies the formal requirements of Art. 1264 C.c. (service). The Court follows the convincing presentation of the expert Professor Dr. G. in his expertise dated 15 August 1994. The notice of assignment pursuant to Art. 1264 C.c. aims to protect the bona fide debtor when paying the assignor. That is why it has to be warranted that the debtor became cognizant of the notice of assignment; a registered letter satisfies this requirement. This view is in accord with the court rulings of the Italian Supreme Court (cf. decision of 15 November1984 in: II Foro Italiano 1985 I, 1384). The court does not follow the alternative view that a service of the notice of assignment in the form prescribed by Art. 137 C.p.c. is required.

           b) However, Art. 1264 C.c. further requires that the assignment must be brought to the attention of the debtor. Concerning the debtor's knowledge, Art 1335 C.c. contains the presumption that the debtor's knowledge has to be considered from the time the notice reaches the debtor's address; a different result only applies if the addressee furnishes evidence that it was impossible to obtain knowledge of the notice without fault.

                 aa) It is not disputed that the notices of assignment, that means the letters themselves, must have reached the [Buyer]. Therefore, these notices must be considered as having been delivered, Art. 1335 C.c. Again, on this issue, the court follows the expertise.

                 bb) It also was possible for the [Buyer] to obtain knowledge of the notices of assignment pursuant to Art. 1335 C.c. However, the notices were drafted in English and French, languages that were not the language of the contract and the [Buyer] was not able to understand - as revealed during the course of the manager's hearing ( 141 ZPO [*]). According to Italian Law, this does not preclude the possibility of obtaining knowledge. According to the expertise, Italian courts and legal authors have not yet dealt with the issue of the "risk of language"; only one publication has considered this issue, however, concerning the law in Germany. Since Italian law does not offer a solution for this issue, one can, according to the expertise, consider the surrounding law, at least the legal concepts. This means one can consider the concepts of the law of the country, where the inexpert party come from. Therefore, in this case, one can consider the "language risk" concepts developed in German law when interpreting Art. 1335 C.c.

According to the predominant view in Germany, a declaration in a foreign language is to be evaluated as a delivery issue (von Caemmerer/Schlechtriem, CISG, Art. 24, Rn 16; Petzold, Das Sprachrisiko im deutsch-italienischen Rechtsverkehr in : Jahrbuch für italienisches Recht Band 2, p. 96) The prevailing view is to consider whether the addressee can obtain knowledge of the content of the notice under usual circumstances and whether one can expect him to actually obtain knowledge with due consideration of usages in the specific field (RGZ [*] 99, 20, 23, Soergel/Hefermehl, BGB, 12th ed., 130 Rn 9). In this connection, one has to consider the behavior of a reasonable person under due consideration of practices and usages of international trade; this is in accordance with the idea of Arts. 8(2), (3), 9 CISG (cf. v. Caemmerer/Schlechtriem, a.a.O.). The Court considers this solution to be sound since it allows one to consider the circumstances of each case.

From this it follows:

      (1) There is no doubt about the delivery of declarations if they are made in a language agreed upon by the parties or in a language which is used in accordance with the parties' practices and usages to be considered pursuant to Art. 9 CISG. In the case at hand, this would have been either Italian as language of the contract or German.

      (2) When applying a so-called world language (for example English), the view is taken that an addressee, having a longstanding business relationship and a negotiating language, does not have to accept a declaration in another language (OLG [*] Düsseldorf, IPRax [*] 1971, 388). According to the other view (Reinhart, RIW [*] 1977, 20; Reithmann/Martiny, Internationales Vertragsrecht, 4th ed., S. 146; v. Caemmerer/Schlechriem, a.a.O) one can expect a businessman in cross-border trade to have knowledge or at least an opportunity for translation of the world language English.

The Court takes the view that the issue of risk of language cannot be solved by referring to general statements. A reasonable person cannot be allowed to totally ignore a legally relevant declaration which is not drafted in the negotiation language, nor can a businessman necessarily be expected to have knowledge of the world language English or an opportunity for translation. Rather, one has to consider the circumstances of each case. In the context of this case, one has to consider:

The [Buyer] is a company with ten employees -- and it is undisputed that the company exclusively had business relations with Italian suppliers. Whether one can expect the manager of the company under these circumstances to have knowledge of the English language is questionable in the eyes of the Court. For the Court it is also questionable whether the [Buyer] was obliged to retain an interpreter or to render the translation on its own.

However, there is no need to decide on this issue. For the specific circumstances of the case, one can expect the [Buyer] to obtain reliable knowledge of the contents of the declaration in another manner. It is to consider enquiring as to the content from the [Seller] as sender of the declaration or from the [Seller's assignee], or to send the declaration back requesting a declaration in the German or Italian language if necessary. According to international practices and usages, one can expect a reasonable person to act like this when receiving a writing in a foreign language that is discernibly of legal relevance. The foreign texts discernibly were related to invoices received from the [Seller] earlier; the invoice number as well as the invoice price were indicated. This shows that the legal relevance was not only discernible, but was known to the [Buyer]. The [Buyer]'s manager submitted at the hearing of 8 February 1995( 141 ZPO [*]) that he phoned his Italian agent after receiving the notices of assignment, gave him the invoice number and enquired as to the character of the declaration; the agent answered that "you do not need to worry, this is the usual way, lots of parties do this, we acquire cheaper money by doing this." By being satisfied with this answer, the [Buyer] has not exhausted the opportunities of a reasonable person to obtain knowledge of the content. This is due to the fact that the answer of the Italian agent is in no way comprehensible. Also the [Buyer]'s manager was not able to see the sense of the agent's statement. Thus, the [Buyer] was not able to eliminate the presumption of obtained knowledge, established by Art. 1335 C.c. [...]

III. The claim for interest is justified on the merits pursuant to Art. 78 CISG. According to this provision, the party to the contract that failed to pay the contract price or another sum in arrears, has to pay interest on the sum in arrears. The rate of interest is not covered by the provision. The almost uniform view in this issue (cf. Piltz, 5 Rn. 412; OLG Frankfurt RIW [*] 1994, 241 - which is also held by the Court - is that the national law determined by German international private law is decisive. Pursuant to Art. 28(2) EGBGB [*], this is Italian law. In accordance with Art. 1284 C.c., the rate of interest is ten per cent, in force since 16 December 1990 (cf. Piltz, 5 Rn. 415, Kindler RIW 1991, 304 following). Art. 78 CISG does not preclude claiming higher damages - e.g., caused by utilizing credits - by means of Art. 74 CISG. But the [Seller's assignee] has not furnished proof for the claimed - and by the [Buyer] disputed - 14 per cent rate of interest.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Defendant of Germany is referred to as [Buyer], the manufacturer of Italy is referred to as [Seller], and the Plaintiff is referred to as [Seller's assignee].

Translator's note on abbreviations: BGH = Bundesgerichtshof [German Supreme Court]; C.c. = Codice civile [Italian Code of Civil Law]; EGBGB = Einführung zum Bürgerlichen Gesetzbuch [German Code of International Private Law]; IPRax Praxis des Internationalen Privat- und Verfahrensrechts [German Law Journal]; OLG = Oberlandesgericht [Higher Court]; RIW = Recht der Internationalen Wirtschaft [German Law Journal]; ZPO = Zivilprozessordung [German Code on Civil Procedure].

** Daniel Fritz is a graduate of the University of Potsdam, LL M (Stellenbosch).

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Pace Law School Institute of International Commercial Law - Last updated February 2, 2006
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