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CISG CASE PRESENTATION

Germany 25 June 1996 District Court Paderborn (Granulated plastic case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960625g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19960625 (25 June 1996)

JURISDICTION: Germany

TRIBUNAL: LG Paderborn [LG = Landgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 7 O 147/94

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Granulated plastic (PVC)


Case abstract

Prepared by Camilla Andersen for commentary on notice issues under Article 39(1)

"Only where a buyer can prove that a satisfactory examination would not reasonably have revealed the lack of conformity is Article 38 not relevant to Article 39. [Involving the sale of granulated plastic (PVC), this is a case in which] the non-conformities could only have been discovered by way of a detailed chemical analysis which the buyer could not have been required to carry out." Andersen, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 85 and n.61.

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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 35 ; 38 ; 44 ; 74 [Also cited: Articles 39 ; 45(1) ; 50 ]

Classification of issues using UNCITRAL classification code numbers:

35A [Conformity of goods: quality required by contract];

38A [Buyer's obligation to examine goods (time for examining goods): "defective composition of the PVC could only be discovered by special chemical analyses, which buyer was not obligated to have made"];

44A [Excuse for failure to notify pursuant to art. 39(1): art. 44 not cited but excuse present (only detailed chemical analysis would reveal fault; buyer not required to carry out)];

74A [Damages (general rules for measuring): loss suffered as consequence of breach]

Descriptors: Conformity of goods ; Examination of goods ; Excuse ; Damages

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Editorial remarks

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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=191&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/262.htm>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=191&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Honnold, Uniform Law for International Sales (1999) 455 [Art. 74 (damages, loss of profit)]; Kuoppala, Examination of the Goods under the CISG and the Finnish Sale of Goods Act (2000) 4.4.1.3 [analysis of related articles 38, 39, 40 and 44 (includes digests of relevant material in many CISG cases; also digests cases under a domestic sales code that is patterned, for the most part, after the CISG)]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 4-9 n.139 [Cited as 25 June 1996]; 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); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 66; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 38 para. 13; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 164; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 295

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Case text (English translation)

Queen Mary Case Translation Programme

Landgericht Paderborn 25 June 1996

Translation [*] by Jarno Varno [**]

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

FACTS OF THE CASE

The [seller]'s claim is for payment of the purchase price. The [seller] delivered PVC plastic to the [buyer] in 1993 and in the beginning of 1994, which the [buyer] used to manufacture rods destined for Rolladen [roll-down shutters]. [Translator's note: Rolladen are a type of heavy shutters one rolls down in front of a window to block out rays of light.]

[Seller] delivered PVC granules in colors of gray, beige and white. [Seller]'s invoices remain outstanding in part in the amount of 22,437.66 DM [Deutsche Mark].

The [seller] submits that the [buyer] repeatedly promised to pay the outstanding sums. In particular, [buyer]'s employee A acknowledged [seller]'s right to payment during a telephone conversation on 9 March 1994 and promised to send a check. Seller maintains that the [buyer] is obliged to pay it the requested amount on the basis of this acknowledgement.

The [seller] requests the Court to order the [buyer] to pay it DM 22,437.66, with 5% interest from 9 March 1994 onwards.

The [buyer] requests the Court to dismiss the claim.

The [buyer] alleges that it is not true that it had made a promise to pay the outstanding sums. In any event, an oral promise of payment does not have the valid legal effect of an acknowledgement because, according to Art. 28 EGBGB [*] in connection with Art. 1326 CC, [*] an acknowledgement has to be in writing and must be signed for the desired legal effect.

[Buyer] is furthermore of the opinion that the [seller] is not entitled to payment of the purchase price, because it failed to conclusively carry out its delivery obligations.

Alternatively, the [buyer] declares a set-off against [seller]'s claim with [buyer]'s claim for damages. [Buyer] alleges that the deliveries relating to [seller]'s invoices of 5 October 1993 and 9 November 1993 concerning PVC granules in amounts of 5,295 kg and 6,496 kg in color "blanc" [white] did not correspond to the sample agreed upon. The parties had agreed that the goods would have the same qualities as the granules of [buyer]'s former supplier, Firm L. The goods delivered by [seller] did not correspond to this requirement. The [buyer] produced Rolladen shutter rods out of this material, which it delivered to Firm F. Firm F manufactured Rolladen shutters out of these rods and installed them at several building projects. The shutters manufactured from the white rods did not completely block the light. Instead, the light shimmered through in a red tone, especially when the sun was shining. The reason was that the PVC granules delivered by the [seller] had too low a titanium dioxide content.

Firm F was obliged to remove the Rolladen shutters at the building sites and has charged the accrued expenses to the [buyer]. Additionally, Firm F has returned non-processed rods to the [buyer] and requested reimbursement of the purchase price. [Buyer] submits that the seller is liable for these costs accrued by Firm F's rightful complaint and for [buyer]'s additional costs resulting from acquiring new conforming goods. The damages consist of:

-     A debt of DM 24,286.85 owed to Firm F on the basis of Firm F's invoice of 27 June 1994;
- DM 1,919.35 to Firm S on the basis of a damage appraisal;
- DM 356.50 to Firm T for haulage of the non-conforming goods;
- DM 1,365 for the additional costs of entering a substitute transaction of 5,250 kg of white granules with Supplier R (at a higher price of 0.26/kg)
 
= 27,927.70 DM total

The [buyer] declares a set-off against the [seller]'s claim in this amount.

In the alternative, [buyer] declares that it reduces the price of the non-conforming granules "blanc" [white] to zero under Art. 50 CISG.

The [seller] replies that the acknowledgement made during the telephone conversation was legally effective, because the requirement under Art. 1326 CC [*] that an acknowledgement be rendered in writing does not apply to mutual business transactions, following Art. 109 of the French Commercial Code.

Moreover, [seller] submits that it is not correct that the granules delivered by it had too low a titanium dioxide content. The amount of 6% of titanium dioxide is perfectly sufficient for protection against light. The [seller] contests that the rods were not impervious to light, but even if that was the case, the reason is that the [buyer] had manufactured the rods in insufficient strength.

In any event, the [buyer] did not satisfy its obligation [under Arts. 38 and 39 CISG] to examine the goods and to provide to [seller] timely notification of the non-conformity.

Additionally, the [seller] disputes the amount of damages claimed by the [buyer].

With respect to the further submissions by the parties, the Court refers to the briefs exchanged and the attachments thereto.

The Court consulted an expert on the subject matter during the course of the proceedings. For the result of that taking of evidence, the Court refers to the report of the Expert S of 7 May 1996.

GROUNDS FOR THE DECISION

[Seller]'s claim for payment by [buyer] is unfounded.

That the [seller] has a claim for the outstanding sale price in the amount of DM 22,437.66 was not disputed by the [buyer]. However, this claim lapsed when the [buyer] declared a set-off with its claim for damages on the basis of Articles 45 and 74 of the CISG.

The Court finds that it is unnecessary to hear evidence whether the [buyer] issued an acknowledgement of its debt, a matter asserted by the [seller] and disputed by the [buyer]. For the sake of the argument, the Court assumes that [buyer]'s employee did, on 9 March 1994, promise the [seller] an immediate payment by sending a check, as the [seller] alleges. This, however, does not constitute a promissory debt or an acknowledgement of a debt to the effect that the [buyer] was under a duty to pay merely on the basis of the promise and without regard to the existence of the claim for the sale price. The promise to pay can only be interpreted in a way that the [buyer] promised to pay the purchase price and did not intend to create a new abstract legal ground for a duty to pay. The legal meaning of such a declaratory acknowledgement is limited to claims known at the time of the acknowledgement. The promise, assuming it was actually made, does not have a meaning to the effect that the [buyer] is prevented from raising objections to [seller]'s claim which [buyer] only became aware of at a later point in time.

Insofar as the [buyer] brings forward that the [seller] did not conclusively carry out its delivery obligations, this is erroneous. The fact that both parties mutually carried out the deliveries shows without a doubt that the contracts have been concluded.

However, the [buyer], according to Article (45)(1)(a) and Article 74 CISG, has a claim for damages at least in the amount of its statement of claim on the basis of [seller]'s non-conforming performance of the contract. According to the Court's taking of evidence, the titanium dioxide content of the granules was below 6%, the amount which [seller] itself considers necessary. The expert had taken two samples and determined the amount of titanium dioxide, coming up with figures of 5.51% and 5.38%. The photos taken by the expert indicate that the shutters manufactured out of the granules let light through. The reason for this according to the expert was, on the one hand, that the granules delivered by the [seller] had too low a titanium dioxide content and, on the other hand, that the profile of the Rolladen shutters was too thin in comparison to similar products manufactured by other producers. The effective strength of the rods is in part only 1.3 mm when it should customarily be at least 1.6 mm. However, even if the rods had possessed a strength of 1.6 mm, the damage could not have been avoided, because the light shone through also in those places where the strength was 1.6 mm or more.

The Court must conclude that despite the less than customary strength of the rods, [buyer]'s customers would not have issued complaints if the titanium dioxide content had been sufficient. This follows from the fact that in the course of using the granules delivered by Firm L ([buyer]'s former supplier), the [buyer] had not experienced this problem, as [buyer]'s manager testified in the oral hearing.

Whether the insufficient strength of the rods contributed to the damage is furthermore irrelevant under the law. Contrary to German sales law, under the CISG the [seller] guarantees the conformity of the goods (Arts. 35, 45(1), 74) in a way that the seller is liable for damages that the buyer suffers as a result of non-conformity of the goods. The [buyer]'s damages mainly consist of compensation for its customers, caused by the [seller]'s delivery of granules with an insufficient percentage of titanium dioxide. Therefore, the [seller] has to pay damages irrespective of the fact that the rods would have been less likely to have light shine through had the [buyer] manufactured them at a strength of 1.6 mm and above.

The [buyer] has not lost its right to remedies under the CISG for failure to examine the goods and notify the seller of lack of conformity of the goods in a timely manner as provided by Articles 38 and 39 of the CISG. The expert convincingly explained that the [buyer] was unable to establish without quantitative chemical analysis that the goods did not contain the correct amount of titanium dioxide. In the circumstances, such an analysis could not have been required from the [buyer] as a criteria for fulfilling its duty to examine the goods within the short period [seller] alleges.

[Buyer] substantiated its damages resulting from the lack of conformity of the goods with invoices.

-     An invoice of Firm F of 27 June 1994 establishes that an employee of Firm F had accrued expenses in the amount of DM 345.00 by visiting a building project on 18 March 1994. Replacing the non-conforming goods resulted in expenses of DM 6,960.00. Firm F. returned 17,300 Rolladen shutter rods to the [buyer] and invoiced [buyer] with the reimbursement of the purchase price in the amount of DM 11,088.00. Firm F had to use working time and materials in the amount of DM 2,726 for customer service.
-     From the invoice of Firm S of 21 March 1994, it appears that an employee of Firm S had accrued expenses in the amount of 1,919.35 as a result of examining the queried goods at the site.
-     On the basis of an invoice of Firm T of 11 April 1994, it is apparent that the haulage of refused plates resulted in expenses of DM 356.50.
-     On the basis of the invoice of Firm R of 11 April 1994, it is apparent that Firm R charged the [buyer] DM 2.14/kg for the delivery of 5,250 kg of white granules, resulting in a difference of 0.26 DM/kg in comparison to the price of the [seller], that being DM 1.88/kg.

The damages of the [buyer] have been substantiated on the basis of these invoices. The [seller] has not substantially disputed these. The conclusion can be drawn that the [buyer] has a justified claim against the [seller] at least in the amount of the [seller]'s claim against the [buyer], even if the travel expenses and hourly fees resulting from the invoice of 31 March 1994 issued by Firm S are reduced in the appropriate manner.

[Buyer] is therefore entitled to damages in an amount which -- at a minimum -- equals the [seller]'s claim for the outstanding purchase price. Following a set-off of the two claims, the [seller] is no longer entitled to demand payment of the purchase price.

The [seller]'s claim is dismissed.


FOOTNOTES

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

Translator's note on other abbreviations: CC = Code Civile [French Civil Code]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws].

** Jarno Vanto is an LL.M. student at the University of Turku, Finland. He is currently working on his thesis on damages under the CISG.

*** Ruth M. Janal, LL.M. (UNSW) is a PhD candidate at Albert-Ludwigs-Universität Freiburg.

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