Germany 23 May 1995 Appellate Court Frankfurt (Shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950523g1.html]
Primary source(s) for case presentation: Case text
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 5 U 209/94
CASE HISTORY: 1st instance LG Frankfurt 13 July 1994 [affirmed]
SELLER'S COUNTRY: Italy (plaintiff)
BUYER'S COUNTRY: Germany (defendant)
GOODS INVOLVED: Shoes
GERMANY: Oberlandesgericht Frankfurt 25 May 1995
Case law on UNCITRAL texts (CLOUT) abstract no. 291
Reproduced with permission from UNCITRAL
An Italian manufacturer of shoes, plaintiff, sued a German buyer, defendant, for the outstanding purchase price. The buyer sought set-off with damages arising from non-performance by the seller. It argued, inter alia, that it had ordered 3,240 pairs of shoes instead of the delivered 2,700 pairs.
The court allowed the claim. It held that the buyer failed to prove that a contract for delivery of 3,240 pairs of shoes had been concluded. The buyer alleged that an order of that quantity constituted an offer according to article 14 CISG. Due to a lack of express acceptance of such offer by the seller, no contract for the delivery of such quantity was entered into. The court found that the delivery of 2,700 pairs amounted to an acceptance by performance according to article 18(3) CISG. The court held that the delivery of a different quantity of goods materially altered the terms of the offer under article 19(3) CISG. Accordingly, the seller's delivery had to be interpreted as a rejection of the offer by the buyer and constituted a counter-offer under article 19(1) CISG. Therefore, the court held that a contract was concluded only with regard to the quantity delivered by the seller.
The court further held that, even if the buyer had complained about the missing quantity, the seller would not have had the obligation to effect a further delivery, as at no time it had accepted any delivery of a higher quantity of shoes.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue: Articles
Classification of issues using UNCITRAL classification code numbers:
19A ; 19C [Reply purporting to accept but containing additions or modifications; Modifications that are material]; 38A [Buyer's obligation to examine goods: time for examining goods]; 39A1 ; 39A2 [Requirement to notify seller of lack of conformity: specification of nature of non-conformity; Within reasonable time]
19A ; 19C [Reply purporting to accept but containing additions or modifications; Modifications that are material];
38A [Buyer's obligation to examine goods: time for examining goods];
39A1 ; 39A2 [Requirement to notify seller of lack of conformity: specification of nature of non-conformity; Within reasonable time]
Excerpt from Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 354-355
"A German court held that an 8-day notice of defects provision in a confirmation letter was enforceable at the time the buyer took delivery of the goods. The notification terms contained in the seller's confirmation letter were additional material terms that amounted to a counter-offer under Article [19(1)], but the court found that the buyer accepted those terms by accepting delivery. Another German court found that a buyer of cashmere sweaters accepted the seller's additional terms which incorporated the "Standard Conditions of the German Textile Industry" by performing under the contract. The court merely cited Articles 18 and 19 without comment. Similarly, [this] court held that acceptance of delivery indicated assent to a material modification. When the buyer claimed to have ordered a certain quantity of shoes and the seller delivered a different quantity, the court interpreted the delivery of a different quantity as a material alteration under Article 19(3). The court held, however, that the delivery was a counter-offer which the buyer accepted by taking the goods. In contrast, a U.S. court in Claudia v. Olivieri Footwear Ltd. [page 354] held that even though the goods had been delivered, it could not hold as a matter of law that a valid contract had been concluded when the parties disagreed on a delivery term subsequent to an oral agreement. The court considered the parties' prior course of dealings, which included thirteen transactions, but found insufficient evidence to conclude that they had always used the same delivery term." [page 355]
301. OLG München 7 U 4427/97, Mar. 11, 1998 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/930113g1.html>.
302. See id.
303. OLG Frankfurt/M 5 U 209/94, May 23, 1995 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/950523g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen].
304. See Claudia, No. 96 CIV. 8052, 1998 U.S. Dist. LEXIS 4586, at *18 (S.D.N.Y. Apr. 6, 1998) [available at <http://cisgw3.law.pace.edu/cases/980406u1.html> ].
305. Id. at *26-*28.
306. The court refers to Article 19 only in a footnote, but evidently considered alteration of a delivery term to be a material modification and thus a counteroffer, not an acceptance. Id., at *25, n.7.
CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=188&step=Abstract>
Italian: Diritto del Commercio Internazionale (1997) 738-739 No. 151
CITATIONS TO TEXT OF DECISION
Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/185.htm>; Die deutsche Rechtsprechung auf dem Gebiete des internationalen Privatrechts im Jahre (IPRspr) 1995 No. 1396; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=188&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Honnold, Uniform Law for International Sales (1999) 189 [Art. 19 (contract based on conduct)]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 3-8 n.71; 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);  Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 18 para. 7 Art 39 para. 37; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 151; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 154Go to Case Table of Contents
Queen Mary Case Translation Programme
Translation [*] by Ruth M. Janal [**]
Translation edited by Camilla Baasch Andersen [***]
FACTS OF THE CASE
The [seller], a company under Italian law, is suing the [buyer] for payment of the purchase price for two deliveries of shoes at an overall price of Italian Lira [ItŁ] 144,148,790. In the proceedings before the Court of First Instance, the [buyer] argued that the delivered shoes were defective. The [buyer] further pleaded that the [seller]'s delivery was 540 pairs of shoes short, and that the [buyer] had suffered a loss of profit in the (converted) amount of ItŁ 8,100,000 for that reason. Moreover, Mr. […], who in the meantime was appointed as the [buyer]'s manager, allegedly assigned to the [buyer] a claim against the [seller] for compensation arising out of a commercial agency. The [buyer] declared a set-off with this claim.
For the details of the pleadings before the Court of First Instance, the Appellate Court refers to the statements of facts in the appealed decision.
[Judgment of the Court of First Instance]
The Court of First Instance granted the [seller]'s claim in its entirety. The Court of First Instance could not find that the [buyer] gave a notice specifying the alleged lack of conformity within reasonable time. Regarding the [buyer]'s claim for damages, the Court of First Instance considered that the documentary evidence regarding the quantity of the order was not presented. The Court of First Instance denied its international jurisdiction to make a decision on the [buyer]'s set-off with the alleged compensation claim arising out of the commercial agency.
[Buyer's pleadings at Appellate Court]
On 6 September 1994, the [buyer] appealed the decision of the Court of First Instance (which had been served on [buyer] on 12 August 1994). After being granted an additional period of time to substantiate the appeal until 5 November 1994, the [buyer] handed in the brief arguing its appeal on that day.
The [buyer] submits that the first delivery of goods arrived at its place on 28 or 29 September 1992 and the second delivery on 17 or 18 November 1992. The shoes had glue or spray rims on the side, the toe-caps were folded, and the shoe flap did not bear the [buyer]'s logo. One day respectively after arrival of the delivery, Mr. […] in the name of the [buyer] complained of the defect to the [seller], talking to Mr. […] and Mrs. […]. [Buyer] submits that the lack of conformity justifies a reduction in price by a quarter.
[Buyer] further argues that the delivery was short by 540 pairs of shoes (item no. 643), and that it gave notice to the [seller] complaining of the non-delivery of the shoes. [Buyer] claims damages for loss of profit in the amount of Deutsche Mark [DM] 8,100 (converted: ItŁ 8,100,000). [Buyer] would have been able to resell the shoes with an average profit of DM 15 per pair.
[Buyer] declares - in the following order - a set-off with two claims which the [buyer]'s manager was supposed to have possessed against the [seller] from its activity as a commercial agent. It is no longer disputed that [buyer]'s manager assigned those claims to the [buyer] with written declaration of 20 April 1994. [Buyer] submits that its manager possessed a compensation claim as the [seller]'s agent in the amount of ItŁ 127,050,570 and a claim for damages for loss of commissions in the amount of ItŁ 30,658,303. The Appellate Court refers to the [buyer]'s brief of 6 May 1994 for the [buyer]'s submissions regarding the existence of a commercial agency and the calculation of the compensation claim. The [buyer] pleads that its manager agreed with the [seller] at the beginning of the commercial agency that Italian law applied to their legal relationship. In any case, the choice of law resulted from the fact that both [buyer]'s manager and the [seller] had relied on Italian law during an oral hearing on 10 July 1994 before the Labor Court in Italy.
The [buyer] requests that the appealed decision be reversed and the [seller]'s claim be dismissed.
[Seller's pleadings at Appellate Court]
The [seller] requests that the appeal be denied.
The [seller] contends that the commercial agency is subject to German law. The submissions to the Italian court had constituted only an exchange of views and there were no other agreements concerning the applicable law. The Court of First Instance therefore lacked the international jurisdiction necessary for the decision regarding the [buyer]'s set-off claims. The [seller] disputes that the existence of the claims assigned to the [buyer] by its manager.
REASONING OF THE APPELLATE COURT
The [buyer]'s appeal is admissible, but unsuccessful.
1. [Seller's claim is upheld]
The amount of the [seller]'s claims for payment of the purchase price regarding invoices no. 197, dated 25 September 1992, and no. 232, dated 16 November 1992, for a total sum of ItŁ 144,148,790 is not disputed. The [buyer]'s main objection to the [seller]'s claims is the alleged lack of conformity of the goods.
It is disputed between the parties whether these non-conformities existed. The Court of First Instance held that the [buyer]'s objection was insignificant if only because the [seller] denied that a proper and timely notice of non-conformity had been given. Before the Court of First Instance, the [buyer] did not substantiate at what point in time the goods were delivered, when the notice of non-conformity via the telephone was supposed to have occurred, and which person partook in the telephone conversation on the [seller]'s side. In the appellate brief, the [buyer] substantiated its submissions, specified the day on which the deliveries arrived and named the witness […] for the telephonic notice of non-conformity. The [seller] disputes also these more detailed submissions of the [buyer].
Witness […] was summoned according to § 273 ZPO [*]. However, during the oral hearing it transpired that this witness had in the meantime been appointed as the [buyer]'s manager. As such, it is considered a party to the dispute and could only be heard under the prerequisites of §§ 445 to 448 ZPO. These preconditions are not met. The [seller] has not agreed to a hearing of the [buyer]'s manager, nor has there been any certain initial proof of the [buyer]'s allegation. It is therefore not admissible to hear the [buyer]'s manager. The [buyer] has still failed to provide proof that it gave a timely notice specifying the lack of conformity of the goods. The decision of the Court of First Instance is insofar upheld.
2. [Buyer's claim for damages is dismissed]
The [buyer] is further unable to set-off against the [seller]'s claims a claim for damages in the amount of ItŁ 8,100,000. This amount constitutes the alleged loss of profit - converted into ItŁ - which the [buyer] supposedly would have been able to make from 540 pairs of shoes not delivered. The prerequisites of Art. 74 CISG are not met.
The [buyer] alleges that it ordered 3,240 pairs of the shoes (item no. 643). It is undisputed that [buyer] received 2,700 pairs.
The [seller] denies that the [buyer] made an order for the alleged quantity. During the proceedings before the Court of First Instance, the [buyer] initially relied on the "presentation of the sales contract" and subsequently on a submission of the written order. The Court of First Instance considered the [buyer]'s contention as unfounded as the [buyer] produced neither of those two documents.
During the appellate proceedings, the [buyer] relies for proof of the order on the testimony of its manager as well as the written order, which - while described as attachment B1 to [buyer]'s brief - has not been submitted.
The [buyer] has failed to make sufficient submissions regarding its alleged claim in a way that would lead the Appellate Court to conclude that the [seller] was obliged to deliver more than 2,700 pair of shoes. It can only be gathered from the [buyer]'s pleadings that it allegedly placed an order for 3,240 pairs of shoes. It does not follow from [buyer]'s submissions how the [seller] is supposed to have accepted this order.
The [buyer]'s alleged order would constitute an offer in the meaning of Arts. 14 and 15 CISG. The [seller]'s delivery of 2,700 pairs of shoes would then indicate an assent to the offer in the meaning of Art. 18(3) CISG. As the delivery did not relate to the entire quantity allegedly ordered, it would have constituted a material modification of the offer. Therefore, the [buyer]'s offer would have to be considered rejected and the [seller]'s delivery seen as a counter-offer. Even if the [buyer] had then complained about the missing 540 pairs of shoes - a fact that is disputed between the parties - a sales contract was not formed and an obligation of the [seller] to deliver more shoes did not exist. After all, the [seller]'s acceptance regarding the disputed quantity was still missing.
Independent of this matter, the [buyer]'s claim for damages also fails because the [seller] denies that a loss of profit in the amount of 8,100 DM, (respectively, ItŁ 8,100,000) was incurred. Again, the [buyer]'s manager cannot be heard as a witness for the amount of damage incurred.
3. [Buyer's set-off is inadmissible]
Finally, the [buyer] tries in vain to declare a set-off with two claims that the [buyer]'s manager allegedly possessed against the [seller] and which it assigned to the [buyer] on 20 April 1994. One of the claims is a compensation claim in the alleged amount of ItŁ 127,050,570 and the other is the so-called "damages claim Riva" in the amount of ItŁ 30,658,503. The [buyer] declared a set-off with the claims in the above order.
The "damages claim Riva" concerns the loss of commissions. The [seller] supposedly refused to provide Mr. […] with further samples after Mr. […] had handed in its notice on 30 November 1992, even though the contractual relationship was ended with effect of 31 May 1993. [Buyer] submits that this was the reason why Mr. […] was unable to commission new orders for the [seller].
The [buyer]'s set-off is not admissible.
3.1 The [seller] pleads that the [buyer]'s claims cannot be used for a set-off and decision in the present proceedings, as the Appellate Court does not possess international jurisdiction. The Court of First Instance reached the correct decision on the matter of the set-off following the facts submitted during the proceedings of the first instance.
The BGH [*] (NJW [*] 1993, 2753) decided in a similar case (the assigned claims of a commercial agent set-off against the claim for payment of the purchase price of an Italian seller) that the decision regarding the set-off of a claim in the course of the proceedings requires the international jurisdiction of the trial court for the claim against which the set-off is declared. The international jurisdiction resulted from the Brussels Convention [*]. As in the present case, the place of business of the debtor of the claim was in Italy, so that Italian Courts possessed jurisdiction under Art. 2 Brussels Convention.
A different outcome may result from the application of Art. 5 no. 1 Brussels Convention, if the place of performance of the obligation in question is in Germany. The place of performance in the meaning of Art. 5 no. 1 Brussels Convention needs to be determined by virtue of the rules of private international law of the forum (cf. the ECJ [*] precedent cited in the decision BGH NJW 1993, 2754). If the parties to the commercial agency contract have not formed an agreement regarding the applicable law in the meaning of Art. 27 EGBGB [*], the applicability of German law follows from Art. 28 EGBGB. In this case, the place of business of the Italian merchant is the place of performance for its obligations.
3.2 In the present case, the Appellate Court reaches the conclusion that the decisive parties regarding the claims at issue (i.e., for the set-off) have formed a choice of law agreement in the meaning of Art. 27 EGBGB that leads to the application of Italian law.
[The Appellate Court analyzes the declarations made by the [seller] and the [buyer]'s manager before the Labor Court in Barletta [Italy]. The Appellate Court holds that Italian law was chosen by these parties. At that point in time, the claims of the [buyer]'s manager had already been assigned to the [buyer]. However, since the [buyer] approved of the choice of law agreement, Italian law was indeed also applicable between the [seller] and the [buyer].]
3.3 Ultimately, the application of Italian law does not help the [buyer]. According to Art. 1182(3) C.c., [*] the place of performance is the place of business of the creditor, that is, Germany for the claims of the commercial agent, Mr. […]. Thus, the international jurisdiction of the trial court is given under Art. 5 no. 1 Brussels Convention. The set-off is not prevented by a lack of international jurisdiction of the German courts.
However, even upon the basis that the place of performance under Art. 1182(3) C.c. is in Germany and the trial court possesses international jurisdiction, the set-off is still precluded by the requirements for a set-off under Italian law.
The claim for payment of the purchase price of an Italian seller is governed - insofar as matters are not settled by the CISG - by Italian law, which is the law applicable by virtue of Art. 28 EGBGB [*]. Whether a claim may be set-off against the claim for payment of the purchase price needs to be determined under Italian law.
The requirements for a set-off according to Art. 1243(1) C.c. [*] are met neither with respect to the compensation claim resulting from the commercial agency, nor with respect to the claim for damages.
[The Appellate Court explains that for a statutory set-off under Italian law, the reciprocal claims must be ready for decision ("liquiditá"), that is they must be certain regarding both the basis and the amount of the claim. In this instance, the [buyer]'s claims were not ready for decision because the Appellate Court would be unable to decide upon the matter without commissioning an expert report over the relevant Italian law. Furthermore, a judicial set-off ("compensazione giudiziale", Art. 1243(3) C.c.) was not possible because this form of set-off also requires that the verification of the claim is easily and quickly settled.]
4. [Interest and court costs]
The [buyer] did not appeal the interest of 10% granted to the [seller] by the Court of First Instance in accordance with Art. 1284 C.c. and law no. 253 of 16 November 1990.
The decisions on costs and preliminary enforcement follow from §§ 97(1), 708 no. 10, 711, 108, 546(2) sent.1 ZPO [*].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Italy is referred to as [seller]; the Defendant-Appellant of Germany as [buyer]. Amounts in the currency of Italy (Italian Lira) are indicated as [ItŁ]; amounts in German currency (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BGH = Bundesgerichtshof [Federal Court of Justice, the highest German Court in civil and criminal matters]; Brussels Convention = Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters; C.c. = Codice civile [Italian Civil Code]; ECJ = European Court of Justice; EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; NJW = Neue Juristische Wochenschrift [pre-eminent German Law Journal]; ZPO = Zivilprozeßordnung [German Code on Civil Procedure].
** Ruth M. Janal, LL.M. (UNSW), a PhD candidate at Albert-Ludwigs-Universität Freiburg, has been an active participant in the CISG-online website of the University of Freiburg. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.
*** Camilla Baasch Andersen is a Lecturer in International Commercial Law at the Centre for Commercial Law Studies, Queen Mary, University of London, and a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She is currently finishing her PhD thesis on uniformity of the CISG at the University of Copenhagen.Go to Case Table of Contents