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CISG CASE PRESENTATION

Germany 31 January 1997 Appellate Court Koblenz (Acrylic blankets case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970131g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19970131 (31 January 1997)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 2 U 31/96

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

CASE HISTORY: 1st instance LG Koblenz 29 November 1995 [affirmed]

SELLER'S COUNTRY: Netherlands (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Acrylic blankets


Case abstract

GERMANY: Oberlandesgericht Koblenz 31 January 1997

Case law on UNCITRAL texts (CLOUT) abstract no. 282

Reproduced with permission from UNCITRAL

A Dutch seller, plaintiff, delivered acrylic blankets to a German buyer, defendant. The buyer gave notification of the lack of quality of the goods and claimed that five reels of blankets were missing. The buyer also argued that the sale was conditional upon an exclusive distributorship agreement between the parties, which had been violated by the seller. The seller brought an action for the outstanding purchase price and the buyer claimed set-off.

The court held that the seller's claim was justified (article 53 CISG). Lack of conformity includes lack of both quality and quantity (article 35(1) CISG), but the buyer had lost its right to rely on the lack of conformity under the Convention. Although the buyer gave notice that five reels of blankets were missing, it did not specify of which design. As the seller had delivered blankets in different designs, the notice did not enable the seller to remedy the non-conformity. Therefore, the notification was said to lack sufficient specification (article 39(1) CISG).

As to the sale being conditional upon compliance with an exclusive distributorship agreement, the court stated that, if any such condition existed, which the buyer had failed to prove, the buyer had lost its right to declare the contract avoided as it failed to do so within a reasonable time (article 49(2)(b)(i) CISG). The period of time considered reasonable must be determined in the light of the seller's interest in certainty and whether the seller has to arrange for alternative use of the goods. Even taking into account the time required for consideration, to obtain legal advice, and for negotiations between the parties, eight weeks was held to be unreasonable. These considerations also would apply to the time period within which the buyer could declare the contract avoided due to the lack of conformity of the goods.

Moreover, since the seller had made an offer to deliver new goods, which was refused by the buyer, the lack of quality did not amount to a fundamental breach of contract (article 25 CISG). In considering a breach to be fundamental, account has to be taken not only of the gravity of the defect, but also of the willingness of the party in breach to provide substitute goods without causing unreasonable inconvenience to the other party (article 48(1) CISG). Thus, in the given case, even a serious lack of quality was said not to constitute a fundamental breach as the seller had offered to furnish additional blankets (article 49(1) CISG). Therefore, the buyer was not entitled to damages as it had rejected the seller's offer for new delivery without justification (article 80 CISG). It thereby also lost its right to reduce the price (article 50 (second clause) CISG). The seller was entitled to interest (article 78 CISG), determined according to Dutch law.


Case abstract

Prepared by Robert Koch for commentary on fundamental breach

"An alleged violation of an exclusive distribution agreement was . . . the subject of a recent decision rendered by the Koblenz Court of Appeals in a German-Dutch dispute over the delivery of acrylic blankets where the buyer refused any payment, inter alia, on the grounds that the seller had breached an exclusive distribution agreement. The court held that the buyer lost his right to declare the contract avoided under article 49(2)(b)(i) and that in fact, the buyer had never declared the contract avoided for the alleged violation. Nevertheless, the court stated in obiter that, if proven, such a violation could constitute a fundamental breach." Koch, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 249.

"The Koblenz Court of Appeals, in the above mentioned dispute over the delivery of acrylic blankets, expressly held that there is no fundamental breach if there is a serious offer to cure the defect. In that case, the buyer refused payment of the purchase price not only on the grounds that the seller had broken an exclusive distribution agreement, but also because the goods delivered were defective and 5 acrylic blankets' rolls were missing. Attempts to settle the dispute in the presence of the Spanish manufacture of the goods, who had offered to make a substitute delivery against payment of the purchase price, were unsuccessful. The Koblenz District Court found for the seller and the Appellate Court affirmed the decision.

"With regard to the alleged non-conformity of the goods, the Court held that, even if proven, such a breach of contract would not be fundamental, since the seller's supplier had offered substitute delivery. The Appellate Court stated that, according to article 49(1)(a), the buyer's right to avoid the contract generally prevailed over the seller's right to cure under article 48(1). However, referring to its underlying purposes, the Court held that article 49(1)(a) only prevails if the delivery of non-conforming goods amounted to a fundamental breach. In determining fundamental breach, the Court stated that regard must be had not only to the gravity of the breach, but also to the willingness of the seller to cure the defect. Where the seller is willing to make substitute delivery and such delivery would not cause the buyer unreasonable inconvenience even non-conformity of major significance does not constitute a fundamental breach." Id. at 254-255.


Case abstract

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

"The [Koblenz Court of Appeals] found that the buyer's notice was not specific enough. The buyer had communicated that five rolls of acrylic blankets were missing, but did not specify how he wished the seller to cure this defect in the spirit of Article 39. The Court stated: 'Spricht die Beklagte in ihrem u. a. die Fehlmenge rügende Schreiben vom 8 (December) 1993 lediglich davon, daß fünf Rollen fehlten. Eine solche Angabe versetzt die Klägerin nicht in die Lage, eine Ersatz- oder Nachlieferung in die Wege zu leiten, was die Regelung von Art. 39 CISG u. a. bezweckt.'

"The Court found that although timely notice was given in regard to time-frame, in principle no notice could be said to have been given within reasonable time. Andersen, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 104 and n.133.

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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 8 ; 25 ; 26 ; 39(1) ; 48 ; 49(1)(a) and 49(2)(b)(i) ; 50 ; 78 ; 80 [Also cited: Articles 4 ; 6 ; 35(1) ; 45 ; 46 ; 47 ; 51(1) ; 53 ; 74 ; 75 ; 76 ; 77 ]

Classification of issues using UNCITRAL classification code numbers:

8C4 [Interpretation of party's statements or other conduct: interpretation in light of surrounding circumstances (conduct subsequent to agreement)];

25B [Definition of fundamental breach: breach of secondary obligation related to an exclusive distributorship agreement can constitute a fundamental breach];

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

39A11 [Requirement to notify seller of lack of conformity: specification of nature of non-conformity (degree of specificity required)];

48A ; 48B [Cure by seller after date for delivery: seller's right to remedy any failure to perform; seller's offer to cure (consequences of buyer's unjustifiable rejection)];

49A ; 49B1 [Buyer's right to avoid contract (grounds for avoidance): fundamental breach of contract; failure to avoid within reasonable time];

50C2 [Reduction of price: buyer may not reduce price when buyer refuses to accept seller's offer to cure];

78B [Interest on delay in receiving price: rate of interest (determined pursuant to gap-filling law];

80A [Failure of performance caused by other party: party causing non-performance (loss of rights)]

Descriptors: Intent ; Avoidance ; Fundamental breach ; Lack of conformity notice, specificity ; Set-off ; Cure ; Reduction of price, remedy of ; Failure of performance, other party ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: See above; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=223&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/256.htm>; OLG Report Koblenz 1997, 37-39; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=223&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Mullis, Avoidance for Breach under the Vienna Convention: Critical Analysis of Some of the Early Cases (1998) n.86; Koch, Pace Review of Convention on Contracts for International Sale of Goods (1998) 249 nn.240, 242 [fundamental breach (no-reliance on other party's future performance): violation of exclusive rights], 253-254 nn.253, 255-257 [fundamental breach: offer to cure/possible cure]; Ferrari, International Legal Forum (4/1998) 138-255 [229 n.829 (quantity as a lack of conformity), 253 n.1079, 254 n.1091 (interest issues)]; Honnold, Uniform Law for International Sales (1999) 322 [Art. 48]; For a survey of German case law on specifying the nature of the non-conformity, go to 1998 Pace essay by Camilla Baasch Andersen at Section III.1.1.; Thiele, 2 Vindobono Journal (1998) 3-35, citing this case [n.59] and 42 other interest rulings; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 6-9 n.86; Graffi, Case Law on the Concept of "Fundamental Breach" in the Vienna Sales Convention, Revue de droit des affaires internationales / International Business Law Journal, No. 3 (2003) 338-349 at n.84; 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 90; 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. 1, 48, 51, 61 Art. 25 paras. 20, 21a Art. 39 paras. 8, 30 Art. 48 paras. 14, 15 Art. 49 paras. 7, 12, 32 Art. 78 para. 27 Art. 80 para. 3; Spaic, Analysis of Fundamental Breach under the CISG (December 2006) nn.324-326, 341, 343-345; Peter Huber, CISG: The Structure of Remedies, 71 RabelsZ (2007) n.43

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Court of Appeal (Oberlandesgericht) of Koblenz

31 January 1997 [2 U 31/96]

Translation [*] by Veit Konrad [**]

FACTS OF THE CASE

The Plaintiff-Appellee [Seller], a textile producing company under Dutch law, claims for payment of acrylic blankets against Defendant-Appellant [Buyer], a German company trading in beddings and blankets.

On 24 November 1993, [Buyer] confirmed by signature an offer which [Seller] had made on 4 November 1993 (pp. 15/16 of the case record). Delivery took place on 3 December 1993 at [Buyer]'s place of business. The goods were unloaded on Saturday, 4 December 1993. In its bill of 3 December 1993 (p. 18 of the case record), [Seller] invoiced an amount of 73,409.10 DM (Deutsche Mark) for this delivery. By letter of 8 December 1993, [Buyer] complained about defective wrapping and packaging, about the overall quality of the delivered goods, and about one box and five rolls of blankets that were missing.

In a meeting at [Buyer]'s place of business on 28 January 1994, [Buyer] alleged that [Buyer]'s managing director, [Seller]'s managing director and the Spanish manufacturer of the fabrics were unable to agree on how to deal with this situation. [Buyer]'s letter of 25 April (pp. 50/51 of the case record) expressed its will to overcome the differences between the parties but did not entail any kind of settlement.

[Seller] has acknowledged that one box and two rolls of blankets had been missing in its delivery. Therefore, [Seller] credited [Buyer] an amount of 1,001.40 DM. Taking this into account, [Seller] in the Court of First Instance claimed for payment of the remaining 72,407.70 DM. Subsequently, [Seller] also reduced its claim by another 350 DM to compensate [Buyer] for efforts taken.

POSITION OF THE PARTIES

[Seller]'s position

[Seller] had submitted the following to the Court of First Instance:

Apart from the above acknowledgments, [Seller] denied that the goods it delivered had been deficient either in quality or in quantity. Seller alleged that the issue of claimed defects had already been settled by the parties in their meeting of 28 January 2004 and that [Buyer] had then dropped its assertion that any of the goods had been defective. Seller alleged that this must be inferred from [Buyer]'s letter of 25 April 1994. A right to exclusive distributorship of the goods (see [Buyer]'s claim below) had never been part of the parties' agreement. Also, [Seller]'s offer to firm (X) concerned goods which were incomparably different than the blankets [Buyer] had ordered.

After reducing its claim for interest, [Seller] had brought its claim before the Court of First Instance for payment of 72,057.70 DM plus five percent interest since 4 February 1994.

[Buyer]'s position before the Court of First Instance

[Buyer] has sought dismissal of the claim. [Buyer] argued the following:

Although [Buyer] and [Seller] undisputedly had entered into a contract for the delivery of the blankets, [Seller] was not entitled to claim payment, because:

   -    [Seller] had breached the exclusive distributorship agreement between the parties; and
 
   -    The goods that [Seller] delivered did not conform to the contract in quantity and in quality; apart from the acknowledged two missing rolls of blankets, three more rolls of blankets were missing.

On 29 July 1993, the parties had discussed the prospects of their business relationship and [Seller] had guaranteed [Buyer] the exclusive supply of so-called Telan blankets within the German market. In turn, it had been bindingly agreed that from then on [Buyer]'s products should be distributed in the Netherlands and Belgium exclusively through [Seller] and its Belgian sister company, firm (Y). This, however, had never become the case. Immediately after the delivery, [Buyer] came to realize that [Seller] was supplying another German company, firm (Z) in A., with exactly the same kind of blankets -- for a lower price. Due to this violation of their agreement, [Buyer] had lost any economic interest in the transaction. Further, the goods that [Seller] delivered were deficient and poorly packaged. [Buyer] notified [Seller] of this immediately. Among other things, the plush of the acrylic blankets had been too thin and thus did not conform to the specifications made in the contract. As concerns the rolls of blankets, the fabric of these goods did not have the requested roughened finish. At their meeting of 28 January 1994, [Seller] acknowledged these defects. Even so, considering all viable options, the parties could not reach final agreement on how to deal with the situation.

In eventu, [Buyer] has declared an offset with counterclaims and, for the remainder, claims a right to retention.

By phone call on 1 December 1993, [Seller]'s managing director had ordered goods worth 49,000.00 DM. For carriage to take place efficiently through a Jumbo van, the parties had agreed upon further orders, which however, were never placed.

[Buyer] has claimed a set-off in the amount of 5,571.94 DM as invoiced on 19 January 1994, as the purchase price for a delivery to [Seller]'s Belgian sister company, firm (Y). According to [Buyer], it had been agreed that those debts could become the subject of an offset between the parties.

[Seller]'s reply

As for the offset, [Seller] replied that the order of 1 December 1993 had in fact never been given. [Seller] never received any confirmation of such an order, either. [Buyer] had rightly submitted that in the conversation of 28 April 1994 exchange deliveries had been discussed, but not bindingly agreed. Equally, there had been no agreement about offsets.

JUDGMENT IN THE FIRST INSTANCE

The Court of First Instance granted [Seller] claim. It concluded that [Seller] had not granted [Buyer] the right to exclusive distributorship. Through the order confirmation [Buyer] gave to [Seller] on 24 November 1993, all prior agreements had been abrogated. Moreover, [Buyer] could not rely on damages for breach of contract, partly because it did not sufficiently specify the alleged defects, and partly due to the description of the goods stipulated in the contract. [Buyer]'s letter of 25 April 1994 did not mention any claim for damages for breach of contract, and thus must be seen as an implicit waiver of [Buyer]'s rights. According to [Buyer]'s own allegations, a substitute transaction to mitigate its suffered losses had never been concluded; Also, [Buyer] failed to submit enough evidence to substantiate the claimed offset.

PROCEEDINGS IN THE SECOND INSTANCE

[Buyer]'s submissions

The findings of the Court of First Instance are subject to [Buyer]'s appeal (Berufung) in which it seeks the dismissal of [Seller]'s claim. Keeping to its allegations made in the First Instance, [Buyer] has submitted the following:

[Buyer] alleges that [Seller]'s claim has to be reduced by the price of the three other missing rolls of blankets. As regards the right to exclusive distributorship, which had been agreed on [Seller]'s first visit at [Buyer]'s place of business, the contract between the parties has been frustrated. Due to the mentioned defects, of which [Buyer] had given specific and timely notice, [Buyer] would be entitled to a reduction, respectively, a cancellation of the contract under CISG provisions. Never had [Buyer] waived any of its rights due to [Seller]'s breach of contract. As concerns the declared set-off, [Buyer] submitted that the delivered goods had been worth no more than 49,910.10 DM, thus claiming a reduction of the price. [Buyer] further claims damages of 8,710.00 DM and 8,300.90 DM for lost profits, because the defective goods could not be sold for the ordinary price. [Buyer] also brings a counterclaim for 49,900.00 DM due to an order, that [Seller] had placed by phone on 1 December 1993, and which had subsequently been confirmed. Further, [Buyer] maintains its counterclaim for 5,571.94 DM relying on the presumed offset agreement between the parties.

With its appeal [Buyer] wants the judgment of the First Instance set aside and [Seller]'s claim dismissed.

[Seller]'s submissions

[Seller], in turn, seeks the dismissal of [Buyer]'s appeal. In eventu, [Seller] petitions that enforcement may be suspended through the provision of primary guarantees by a German Bank.

[Seller] keeps to its submissions made in the proceedings before the Court of First Instance and alleges that none of [Buyer]'s claimed positions is justified. As for the claimed reduction of the price, [Seller] has replied that [Buyer]'s submissions were arbitrary and unsubstantiated. [Seller] also denies any claim for damages, questioning that [Buyer] ever had any losses. But even if this had been the case, those losses would have fallen within [Buyer]'s own responsibility, as [Buyer] apparently did not show any interest in [Seller]'s attempt to remedy.

For further details the Court refers to the parties' pleadings and the other submitted documents that are included in the case record.

REASONING

The Appellate Court holds that [Buyer]'s appeal is dismissed and [Seller]'s claim is justified.

[...]

The contract between the parties is governed by the UN Convention on Contracts for the International Sale of Goods (hereafter referred to as CISG). Both parties have their places of business in different Contracting States that had adopted the CISG on 1 January 1992. Under Art. 53 CISG, [Seller] may claim payment for the blankets that were delivered. It is undisputed that [Buyer] bindingly accepted [Seller]'s offer of 4 November 1993; [Seller] is entitled to payment under the thus concluded contract.

[Buyer] is not entitled to rely on any of its counterclaims in defense to [Seller]'s claim. [Buyer] alleged that in the deliveries of 3 and 4 December 1993 not only were there the two missing rolls of blankets that [Seller] acknowledged, but that three more rolls of blankets had been missing, for which the price must be reduced by another 1,254.60 DM. This implies a partial cancellation of the contract for partial failure to perform. Arts. 51, 46, 47, and 49 CISG provide for such a partial avoidance of the contract. However, [Buyer] has lost its right to rely on these provisions according to Art. 39(1) CISG.

Art. 35(1) CISG obligates the seller to deliver goods which are of the quantity, quality and description required by the contract. But, according to Art. 39(1) CISG, the buyer loses the right to rely on a lack of conformity of the goods -- i.e., deficient quantity of the goods -- if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. [Buyer] failed to give sufficiently specific notice in the sense required by Art. 39(1) CISG. [Seller]'s bill of 3 December 1993 listed rolls of blankets of different design. Yet, [Buyer]'s complaint notice of 8 December 1993 merely mentioned that five rolls were missing. Such notice does not suffice to enable [Seller] to provide for remedy of its failure to perform. Therefore, it cannot suffice under Art. 39 CISG and the other relevant CISG provisions. Moreover, [Buyer] did not give specific and timely notice in any other way either.

In addition, [Buyer] cannot rely on the claimed violation of a right to exclusive distributorship. This must be concluded irrespective of whether one assumes that the parties have indeed stipulated such an exclusive right -- as claimed by [Buyer]. [Buyer] does not provide any evidence to substantiate its allegation that, by the parties' agreement, compliance to such a right to exclusive distributorship had been made an essential legal condition, affecting all the other transactions between the parties, thus derogating from CISG provisions pursuant to Art. 6 CISG.

In any case, this does not entitle [Buyer] to declare the contract avoided for fundamental breach of contract under Art. 49(2)(b)(i) CISG. According to Art. 49(1)(a) CISG, the buyer may declare the contract avoided if the failure by the seller to perform any of his obligations under the contract or the CISG amounts to a fundamental breach of contract. A fundamental breach of contract may well lie in the violation of a secondary obligation such as adherence to an agreed right to exclusive distributorship (see: Caemmerer / Schlechtriem; CISG, 2nd ed., Art. 49 note 17). Yet, the buyer needs to declare the avoidance of the contract within a reasonable time after he knew about the fundamental breach of contract; otherwise he loses his right according to Art. 49(2)(b)(i) CISG. [Buyer] itself has submitted that it realized that [Seller] supplied other German companies with the same kind of goods for a lower price immediately after the deliveries on 3 and 4 December 1993 had taken place (see p. 27). On the assumption that this had actually been the case, [Buyer] would have been allotted a certain amount of time to consider its legal options, to seek legal counselling and to initiate negotiations with [Seller]. However, this time frame would have certainly expired before 28 January 1994, when [Buyer]'s and [Seller]'s managing directors met with the Spanish manufacturer.

[...]

Considering the various statements [Buyer] claimed to have made on occasion of this meeting, one cannot assume that [Buyer] had unambiguously declared the contract avoided, thus refusing any further performance from [Seller]. Even if the Court takes [Buyer]'s version of what had happened on the aforesaid meeting to be true, it cannot find that [Buyer] made any statement, which -- under the applicable provisions of Art. 8(2) and (3) CISG -- could have been understood by a reasonable person of the same kind as the other party as a declaration to avoid the contract. To the contrary, [Buyer]'s conduct immediately after that meeting, which is to be accounted for under Art. 8(3) CISG, strongly indicates that [Buyer] itself did not presume the contract to be avoided. In its writing to [Seller] of 25 April 1994, [Buyer] mentioned [Seller]'s supply of other customers in Germany for a lower rate. Yet, [Buyer] did not declare the contract avoided then, but instead made suggestions on how the transaction could be completed in the current situation to both sides' satisfaction. If at all, one could assume that [Buyer] had threatened to avoid the contract during the meeting. However, in no way did the statements and suggestions that [Buyer] made amount to a definite declaration to avoid the contract.

Neither the spirit of Art. 49(2)(b), which aims to ensure the seller has enough information and clarity to arrange for alternative use of the goods, nor the circumstances of the particular case indicate that [Buyer] should have been allotted a more generous period of time -- until 28 January 1994 or even later -- to consider its options or seek a settlement agreement. [Buyer]'s own submissions do not suggest this. At the crucial point of time, [Buyer] had been well informed about all relevant facts as well as about [Seller]'s position in the dispute. [Buyer] could not rightfully assume [Seller] would make further concessions. Hence, it must be concluded that if [Buyer] wanted to rely on [Seller]'s breach of contract, i.e., the violation of the exclusive distribution agreement, [Buyer] would have needed to declare the contract avoided before 28 January 1994. [Buyer]'s declaration in its letter of 25 April 1994 was too late and by no means appropriate under the requirements of Art. 49(2) CISG. Furthermore, this letter does not even entail a declaration to avoid the contract, but merely addresses ways how to complete the transaction.

[Buyer]'s loss of its right to rely on [Seller]'s breaches of contract for failure to declare the contract avoided also extents to the claimed deficiencies of the delivered goods. As far as [Buyer]'s submissions could possibly constitute a fundamental breach of contract, again [Buyer] had failed to unambiguously declare the contract's avoidance within reasonable time as required under Art. 49(2)(b)(i) CISG. The Court hereby refers to its reasoning above.

Even on the assumption that the delivered goods had been deficient, [Seller]'s conduct does not amount to a fundamental breach of contract as required under Art. 49(1)(a) CISG; [Buyer] itself has admitted that [Seller] had offered to remedy the defects in the conversation on 28 January 1994. [Buyer] rejected this offer. Subject to Art. 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the seller (Art. 48(1) CISG). Compliant to this provision, [Seller], within the conversation of 28 January 1994, offered delivery of blankets of the required standards through its Spanish manufacturer. By its reference to Art. 49 CISG, Art. 48 CISG gives priority to the buyer's right to avoid the contract over the seller's right to remedy for his failure to perform as stated in Art. 48(1) CISG. However, this can only apply in cases in which the delivery of defective goods amounts to a fundamental breach of contract in the sense of Art. 49(1)(a) CISG and Art. 25 CISG. This again depends not only on the gravity of the defect, but also on the seller's willingness to remedy the defect without causing unreasonable delay or inconvenience to the buyer. Even a severe defect may not constitute a fundamental breach of contract in the sense of Art. 49 CISG, if the seller is able and willing to remedy without causing unreasonable inconvenience to the buyer (see von Caemmerer / Schlechtriem, ibidem, Art. 48 note 20 with further references). [Seller] expressed its sincere intention to remedy in the sense of the provision to [Buyer] in the conversation of 28 January 1994. [Buyer] was not justified to refuse [Seller]'s offer to remedy without giving any reason. [Buyer] merely argued that [Seller] had breached the exclusive distribution agreement. But, as [Buyer] failed to declare the contract avoided, [Buyer] lost its right to rely on this breach of contract by [Seller]. [Buyer]'s chosen strategy to unfairly keep to itself all options available -- to the other party's detriment -- must not pay off. Irrespective of whether or not the delivered blankets had been deficient, [Seller]'s delivery did not constitute a fundamental breach of contract.

[...]

Also, [Buyer] may not claim a reduction of the purchase price under Art. 50 clause (1) CISG. Clause (2) of Art. 50 CISG provides that the buyer may not reduce the price if the buyer refuses to accept performance by the seller in accordance with Art. 48 CISG. As explained above [Buyer] did exactly this.

[Buyer] is not entitled to set-off with any of its claimed positions.

As concerns damages due to lost profits which may be recoverable under Art. 45(1)(b) and (2) CISG and Arts. 74 to 77 CISG, [Buyer]'s claim is barred by Art. 80 CISG (see v. Caemmerer / Schlechtriem, ibidem, Art. 48 note 32). As [Buyer] unjustifiably refused to accept [Seller]'s remedy, [Buyer] caused [Seller]'s failure to perform by its own conduct. Art. 80 CISG does not require negligent or wilful wrongdoing. [Buyer]'s counterclaim did not entail any other recoverable damages.

[...]

[Buyer]'s counterclaim for the amount of 5,571.94 DM due to an offset agreement between the parties cannot be sustained. This must be concluded irrespective of the question how the applicable Dutch law regulates this issue -- the Convention does not regulate on this question; Art 32(1) No. 4 and Art. 27 and 28 of the German Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch; EGBGB) point to the national law of [Seller]'s place of business, who in this case would owe the characteristic performance under the agreement -- provides for such an agreement. However, [Buyer] could not substantiate what contents this agreement actually had.

[...]

Therefore the Court of First Instance's decision to grant [Seller]'s claim is correct.

Payment was due -- at the latest -- on 4 February 1994 (Arts. 58 and 59 CISG). From that time on, [Buyer] owed interest according to Art. 78 CISG. The Convention does not determine the applicable interest rate. Arts. 27 and 28(1) and (2) of the German Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch; EGBGB) point to the law of the country where the party that owed the specific performance under the contract was seated. As under the sales contract at issue [Seller] owed the characteristic performance, i.e., delivery of the blankets, Dutch law applies. According to paras. 119(1) and 120 of the Dutch Civil Code in conjunction with other relevant provisions, interest was due in the amount claimed by [Seller].

The decision on the costs relies on para. 97(1) of the German Code of Civil Procedure (Zivilprozessordnung; ZPO). The decision on the provisional enforceability is based on paras. 708 Nos. 10 and 711 of the German Code of Civil Procedure (Zivilprozessordnung; ZPO).

Taking into account all positions of [Buyer]'s counterclaim the Court has assessed the value in dispute to be 144,540.54 DM. [Buyer]'s gravamen consists in this amount.

[...]


FOOTNOTES

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

** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.

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