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CISG CASE PRESENTATION

Germany 5 July 1995 Appellate Court Frankfurt (Chocolate products case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950705g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19950705 (5 July 1995)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 9 U 81/94

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

CASE HISTORY: 1st instance LG Frankfurt 6 July 1994 [reversed]

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Chocolate products


Case abstract

GERMANY: Oberlandesgericht Frankfurt 5 July 1995

Case law on UNCITRAL texts (CLOUT) abstract 276

Reproduced with permission from UNCITRAL

A French producer of chocolates, plaintiff, and a German buyer, defendant, negotiated over the delivery of chocolate. The seller sent a letter of confirmation to which the buyer failed to reply. After delivery, the seller sued for the outstanding purchase price, arguing that a contract had been concluded because the buyer had failed to reject the letter of confirmation. When the court of first instance dismissed the claim, the seller appealed.

The court held that no contract had been concluded by means of a letter of confirmation followed by silence. Although there is an established trade usage which recognizes such a conclusion of contract by silence in the jurisdiction of the recipient's place of business, due to the international character of the CISG, regard is to be given only to trade usages that are known to the law both in the jurisdiction of the offeror and in the jurisdiction of the recipient (article 9(2) CISG). Moreover, the legal effects of the trade usage have to be known to both parties.

Despite that ruling, the court allowed the seller's appeal. It found that a contract already had been concluded between the parties prior to the letter of confirmation.

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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 8(3) ; 9(2) ; 18 ; 19 [Also cited: Articles 1(1) ; 78 ]

Classification of issues using UNCITRAL classification code numbers:

8C [Intent: interpretation in light of surrounding circumstances];

9B [Implied agreement on international usages: usage must be widely known and observed in international trade];

18A [Acceptance, time and manner: criteria for acceptance];

19A [Reply purporting to accept but containing additions or modifications]

Descriptors: Intent ; Commercial letters of confirmation; Acceptance of offer ; Usages and practices

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Editorial remarks

Excerpt from Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 345-346

"Commercial letters of confirmation raise special issues regarding acceptance by silence.[246] In some national legal systems, most notably Germany, silence upon receipt of a commercial letter of confirmation indicates acceptance.[247] According to Professor Schlechtriem, the German rule which allows unanswered letters of confirmation to become part of the contract was expressly rejected at the Vienna Convention.[248] Consequently, Professor Schlechtriem maintains that letters of confirmation that modify or add to a contract are ineffective under the CISG, unless the sending of such letters amounts to a usage under Article 9(2).[249]

"National courts have differed in how they interpret the trade usage provision regarding commercial letters of confirmation. A Swiss court found that the buyer's failure to respond to a letter of confirmation from the Austrian seller constituted acceptance according to trade usage.[250] The court stated that both parties knew or ought to have known that under both Swiss and Austrian law, silence or inactivity can be regarded as an acceptance when there is no reply to a commercial letter of confirmation.[251] Professor Schlechtriem criticized this ruling on two counts. First, the court misstated the law of Austria, where the purported rule had been rejected. Second, "the usage must apply to the parties in the particular trade, and must be observed by them," for the exception to Article 18(1) to apply.[252]

"A Swiss court also found that the sender was entitled to regard silence as acceptance to a letter of confirmation even where the letter modified [page 345] payment terms.[253] The court stated that good faith is the key to determining whether a sender may assume the recipient of the confirmation letter intended to consent to the terms of the letter.[254] Although the court did not discuss prior practices or usage in this case, the recipient's conduct, accepting the first check that was attached to the letter of confirmation, was sufficient to support a conclusion that the recipient intended to be bound by the terms of the confirmation letter.[255]

"Two German cases reiterated the more conservative view that trade usage must be international in order for it to be implied into a contract. In one case, the court distinguished the use of letters of confirmation in a national context from the international context.[256] A French buyer and a German seller had concluded an oral contract regarding the price of chocolates. When the buyer was silent as to the different terms in the seller's letter of confirmation, the court held that the terms of the confirmation letter were not part of the contract as such letters could not be considered part of international trade usage as required by Article 9(2). The court concluded that although the practice was well recognized in Germany, it was not so recognized in France.[257] A German court held that a buyer seeking to hold a seller to the modified price contained in a letter of confirmation did not establish that there was a usage known in international trade recognizing silence as acceptance to a commercial letter of confirmation.[258]" [page 346]

246. See generally, Maria del Pilar Perales Viscasillas, Battle of the Forms, Modification of Contract, Commercial Letters of Confirmation: Comparison of the United Nations Convention on Contracts for the International Sale of Goods (CISG) with the Principles of European Contract Law (PECL), 14 Pace Int' L. Rev. 153 (2002) (describing the variability in legal interpretations of silence) [available at <http://cisgw3.law.pace.edu/cisg/biblio/pperales.html>].

247. See Einderlein & Maskow, supra note 20, at 92; Maria del Pilar Perales Viscasillas, The Formation of Contracts and the Principles of European Contract Law, 13 Pace Int'l Rev. 371, 391 (2001) (discussing legal treatment of confirmation letters in Germany, Austria, and Switzerland. See also, UCC § 2-201 (2) (2003) (written confirmation rule).

248. See Fletchner, supra note 214, at 246-47.

249. Id.

250. See W.T. GmbH v. P, Zivilgericht [Basel Civil Court][ZG] P4 [1991]/238, Dec. 21, 1992, (Switz.) available at <http://cisgw3.law.pace.edu/cases/921221s1.html> [English translation by Yvonne P. Salmon].

251. Id.

252. See Fletchner, supra note 214.

253. See BG Sissach, A 98/126, Nov. 5, 1998 (Switz.), available at <http://cisgw3.law.pace.edu/cases/981105s1.html> [English translation by Ruth M. Janal].

254. Id.

255. Id.

256. Landgericht [District Court][LG] Frankfurt 3/13 O 3/94, Jul. 5, 1995 (F.R.G.), available at [<http://cisgw3.law.pace.edu/cases/950705g1.html>] [English translation by Dr. Peter Feuerstein, translation edited by Chantal Niggemann].

257. Id. Although the court did not view the buyer's silence regarding the letter of confirmation as acceptance, it did, nevertheless, find that the letter was evidence of the terms of the oral contract and held for the seller.

258. See OLG Dresden 7 U 720/98, Jul. 9, 1998 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/980709g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. But see OLG Saarbrücken 1 U 324/99-59, Feb. 14, 2001 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/010214g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. In this case, the court held that the CISG applied to the contract for the sale of doors and windows and applied the provisions on notice for specifying a defect, but looked to the German Civil Code regarding acceptance of terms in a letter of confirmation. The court stated, "[i]t is an accepted trade usage that a tradesperson who receives a letter of confirmation has to object to the letter's content if he does not wish to be bound by it. If he does not object, the contract is binding with the content given to it in the letter of confirmation, unless the sender of the letter has either intentionally given an incorrect account of the negotiations, or the content of the letter deviates so far from the result of the negotiations that the sender could not reasonably assume the recipient's consent. The recipient's silence causes the contract to be modified or supplemented in accordance wit the letter of confirmation." Id.

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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=169&step=Abstract>

Italian: Diritto del Commercio Internazionale (1997) 742-743 No. 156

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/258.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=169&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999) 129 [Art. 9 (standards for usage)]; Gillette, 39 Virginia Journal of International Law (1999) 707 [714 n.25]; 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. 9 paras. 22, 24

Spanish: Perales, Contratos y Empresas (Peru 1997) [commentary on commercial letters of confirmation, citing this case and other case]

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Case text (English translation)

Queen Mary Case Translation Programme

Court of Appeal Frankfurt am Main (Oberlandesgericht )

5 July 1995 [9 U 81/94]

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

Translation edited by Chantal Niggemann [***]

Reasons for the decision

The appeal is permissible; it has been filed and substantiated in time. The appeal is also successful.

The [seller] has proven that the [buyer] has purchased the goods, payment of which is sought, in the capacity as buyer and that the [buyer] did not simply conclude a contract on commission for a third party.

The Landgericht [Court of First Instance] has correctly concluded that the contract did not come into existence on the basis of the rules on commercial letters of confirmation, independent of the proof of the conclusion of a contract.

The [seller] sent to the [buyer] by fax, dated 31 October 1989, a letter of confirmation with an unambiguous content. After the [seller] rendered the relevant evidence, it is no longer disputed [by the buyer] that this letter was received by it. From this letter, it is evident that the [buyer] and not an unnamed third party should be regarded as the [seller's] contractual partner, that the [buyer] has received [seller's] invoice and should pay it and, due to the absence of a relevant finding to the contrary, that the merchandise should not be regarded as goods delivered on commission.

The Court of First Instance is correct in ruling that the rules on commercial letters of confirmation, being trade usage in Germany, are inapplicable, in spite of the silence and the compliance with other requirements. The provisions of the international sales law apply according to Art. 1 CISG, as a sales contract for goods between parties having their places of business in different States (Art. 1(1) CISG) is present. Due to the requirement of internationality regulated in Art. 9(2) CISG, it is not sufficient for the recognition of a certain trade usage if it is only valid in one of the two Contracting States. Therefore, the provisions on commercial letters of confirmation would have to be recognized in both participating States and it would have to be concluded that both parties knew the consequences (leading opinion: von Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, CISG, 2nd ed., preamble to Art. 14-24, Annotation 4 with further evidence). It is not sufficient that the trade usage pertaining to commercial letters of confirmation exists only at the location of the recipient of the letter in Germany (Herber/Czerwenka, Internationales Kaufrecht, commentary, Art. 9, Annotation 12). As in most other countries, silence in response to the receipt of a commercial letter of confirmation does not have the same effect in France as in Germany, since such a confirmation is unusual in French trade practice (Graf von Westphalen-Wenner-Schödel, Handbuch des Kaufvertragsrechts in den EG-Staaten [Manual of the Law of Sales in the States of the European Union], Stichwort [Keyword] "Frankreich" [France], Annotation 23; Herber, op.cit., prior to Art. 14, Annotation 18).

However, although there is no room for German rules on the conclusion of a contract in the context of the international law of sales, a letter of confirmation can have considerable relevancy in the evaluation of the evidence (OLG Köln, EWiR [*] 94, p. 867-Leitsatz [leading record] with approving comment by Schlechtriem; von Caemmerer/Schlechtriem, op. cit., prior to Art. 14 to 24, Annotation 4).

In the setting of the present case, the letter of confirmation and the silence of the [buyer] in response to it and in response to the following several reminder letters constitute an essential evidence, which, together with the result of the taking of evidence in the Court of First Instance, lead this Court to the conviction of the correctness of the statement of facts by the [seller].

This Appellate Court is entitled to a different evaluation of the evidence taken by the Court of First Instance, as neither the Court of First Instance nor this Court doubted the credibility of the witnesses, but only a document is given a different, essential meaning in the context of the global evaluation of the evidence. The fact that the [seller] has confirmed the contract with the content on which it now bases its complaint argues for the correctness of [seller's] statement. This is because at the time of the sending of the letter, dated 31 October 1998, in which the [buyer] and not a third party was named as the contractual partner to the sales contract and no mention is made of a commission business, it was not predictable that problems would arise with the execution of the contract. Additionally, there is the relevant indication of the [buyer's] silence to the letter of confirmation. Independent of the question whether it was advisable for the [buyer], due to a trade usage, to immediately contradict the letter of confirmation, it seems to be totally unrealistic that the [buyer] would have accepted this letter uncontradicted.

According to its present statements, the [buyer] namely just wanted to introduce a commission business for a third party and did not want to engage itself unconditionally and without the right to return the goods. [].

The decision on interest falls under Art.78 CISG; other issues fall under 97, 708 No. 10, 713, 546(2) ZPO old version [*].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant of France is referred to as [seller]; the Defendant-Appellee of Germany is referred to as [buyer].

Translator's note on abbreviations: EWiR = Entscheidungen zum Wirtschaftsrecht [Decisions on Commercial Law (German law journal)]; ZPO = Zivilprozessordnung [German Civil Procedure Code]. Please note that the ZPO has been amended with effect as of 1 January 2002.

** 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.

*** Chantal Niggemann is an International Legal Consultant working at Allen & Overy, Frankfurt, Germany, in the corporate department. As a student she participated successfully in the Second Willem C. Vis International Arbitration Moot and assisted Prof. Dr. Dr. Peter Schlechtriem of the Albert-Ludwigs-Universität in Freiburg, Germany, for several years.

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Pace Law School Institute of International Commercial Law - Last updated August 10, 2005
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