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CISG CASE PRESENTATION

Germany 23 July 1997 Supreme Court [VIII ZR 134/96] ["Benetton II" (Fashion textiles case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/970723g2.html]

Primary source(s) for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19970723 (23 July 1997)

JURISDICTION: Germany

TRIBUNAL: Bundesgerichtshof [Federal Supreme Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: VIII ZR 134/96

CASE NAME: ["Benetton II"] German case citations do not generally identify parties to proceedings

CASE HISTORY: 1st instance [-]; 2d instance OLG Frankfurt 15 March 1996 [affirmed]

SELLER'S COUNTRY: Italy [plaintiff]

BUYER'S COUNTRY: Germany [defendant]

GOODS INVOLVED: Fashion textiles


Case abstract

GERMANY: Supreme Court 23 July 1997 [VIII ZR 134/96]

Case law on UNCITRAL texts (CLOUT) abstract no. 236

Reproduced with permission from UNCITRAL

An Italian seller, plaintiff, claimed payment for clothes delivered to a German buyer, defendant, under a supply contract.

The buyer refused payment of the purchase price for the goods, alleging that the parties had a void franchise agreement since it violated European and German antitrust laws. The buyer also adduced that the nullity of the franchise agreement affected the validity of their supply contract.

The court held that the CISG was applicable under its article 1(1)(b) since the parties had agreed to the application of German law. The seller's claim was justified under articles 53 and 54 CISG. It was insignificant whether the franchise agreement violated German or European antitrust laws inasmuch as the nullity of the franchise agreement did not affect the validity of the supply contract. However, each supply contract had to be examined separately and the validity of the supply contract was not governed by the CISG in keeping with its article 4(a). The court also held that the buyer was obliged to pay the seller the purchase price and that the buyer was not entitled to claim damages under article 45(1)(b) CISG.

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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 issues: Articles 4(a) ; 6 [Also cited: Articles 45(1)(b) ; 53 ; 54 ]

Classification of issues using UNCITRAL classification code numbers:

4A [Issues covered by Convention: separate sales under distributor agreement];

4B1 [Validity under domestic law: court held validity of framework contract a matter of domestic law but, even if invalid, seller entitled to recover price for sales under it in accordance with the Convention];

6B [Agreement to apply Convention: agreement during course of trial]

Descriptors: Scope of Convention ; Distributorship agreements ; Choice of law ; Validity

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Editorial remarks

Excerpt from commentary by Peter Schlechtriem on Uniform Sales Law in the Decisions of the Bundesgerichtshof*

         * Commentary on CISG issues considered by the BGH, presented in "50 Years of the Bundesgerichtshof [Federal Supreme Court of Germany]: A Celebration Anthology from the Academic Community". Click here for the full text of this commentary.

Scope of Convention ; Distributorship agreements ; Validity. "Deliveries over national borders frequently occur within the bounds and on the basis of framework agreements such as distribution contracts, franchising contracts or agency contracts. The regulation particularities of such forms of distribution are quite familiar to the German lawyer 35 and since the uniform sales laws came into effect, the decisions of the Bundesgerichtshof have led to a clear distinction between framework agreements and sales contracts concluded in the performance of such agreements.36 In one of the well-known Benetton cases,37 the disputed claims concerning the purchase price were based on the CISG while the framework agreement on the cooperation of the parties was classified as a 'franchising contract or at least similar to a franchising contract,' which was to be treated separately. Due to a convenant not to compete, the invalidity of the framework agreement had to be considered pursuant to the GWB [Gesetz gegen Wettbewerbsbeschränkungen (Act against Restraints of Competition)] and Art. 85 EWGV a. F. [Vertrag zur Gründung der Europäischen Wirtschaftsgemeinschaft (EEC Treaty)] but this had no effect on the individual sales contracts. A first possible combination of the framework agreement, which is subject to domestic law, and the sales contracts made in the performance of this agreement, which are to be judged under the Convention, becomes clear here. The Court had to examine whether the eventual invalidity of the franchising contract pursuant to § 139 BGB [partial nullity of a legal transaction] could extend to the sales contracts. Since § 139 BGB belongs to the provisions on contract validity, which under application of the Convention are left to domestic law pursuant to Art. 4(a) CISG, such an extension of invalidity to the sales contracts would have been possible. However, the Bundesgerichshof did not find the prerequisites of § 139 of the (BGB) to be satisfied since it determined that the matter concerned independent legal transactions and that the parties did not intend for them to constitute a unified legal transaction. The lower courts have also followed the Bundesgerichtshof concerning such framework agreements.38

"Of course, the border between framework agreements together with the sales contracts concluded in their performance on the one hand, and requirement contracts, on the other hand, can be fluid. For instance, without going further into the question of the legal nature of the parties' relationship, an American federal district court confirmed an arbitration award in which the CISG was applied to the contract between an American distributor and an Italian supplier.39 Decisive in this issue is the determination of what rights and duties besides the purchase of goods the distributor has undertaken. In order to avoid possible doubts, the parties are quite at liberty to agree to the application of the CISG for the framework agreement as well. However, in this case, as with any broadening of the Convention's sphere of influence, one must carefully consider whether the Convention's provisions envisaged for the delivery of goods are actually suitable for service-character obligations and their breach."

        35. This familiarity is certainly not to be found in all legal systems, as shown in the difficulties during the preparation of the distribution directive. See Rittner, Die EG-Kommission und das Handelsvertreterrecht - Zum geplanten EG-Recht über Vertikalverträge, DB 1999, 2097 sub I. 1. b).
        36. See BGH of 4 April 1979, BGHZ 74, 136, 139 f. (application of the ULIS on individual sales contracts made within the framework of a distribution contract concluded before the ULIS went into force); BGH of 26 November 1980, NJW 1981, 1156-57.
        37. BGH of 23 July 1997, NJW 1998, 3309 (Benetton II).
        38. See OLG Hamburg of 5 October 1998, TranspR-IHR 1999, 37 [case presentation also at <http://cisgw3.law.pace.edu/cases/981005g1.html>] (exclusive sales agreement between a German company and a Chinese supplier; choice of German (European) law for the framework agreement led to application of the CISG for the individual sales contracts). Accord Obergericht des Kantons Luzern [High Court of the Canton of Lucerne] (Switzerland) of 8 January 1997, TranspR-IHR 1999, 53 [case presentation also at <http://cisgw3.law.pace.edu/cases/970108s1.html>].
        39. See Medical Marketing Int'l Inc. v. Internazionale Medico Scientifica, S.r.l., 1999 WL 311945 (E.D.La. 17 May 1999) [case presentation also at <http://cisgw3.law.pace.edu/cases/990517u1.html>]; Schlechtriem, Vertragsmäßigkeit der Ware und öffentlich-rechtliche Vorschriften, IPRax 1999, 388. But see Helen Kaminski Pty. Ltd. v. Marketing Australien Products Inc., 1997 WL 414137 (S.D.N.Y. 1997) [case presentation also at <http://cisgw3.law.pace.edu/cases/970721u1.html>] (the CISG not applicable to distribution contracts).

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Citations to other abstracts, case texts, and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: [1999] Transportrecht, Beilage "Internationales Handelsrecht" (TranspR-IHR) 23-24; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=259&step=Abstract>

German: Schweizerische Zeitschrift für Internationales und Europäisches Recht (SZIER)/Revue suisse de droit international et de droit européen, 1998, 86-87

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/276.htm>; Neue Juristische Wochenschrift (NJW), 1997, 3309-3311; Entscheidungen zum Wirtschaftsrecht (EWiR) 1997, 958; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=259&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [217 n.714 (implicit selection of CISG), 225 n.785 (scope of CISG: validity issues)]; Honnold, Uniform Law for International Sales (1999) 67 [Art. 4 (scope of CISG; unfair competition laws)]; Schlechtriem, in: Uniform Sales Law in the Decisions of the Bundesgerichtshof (2001), at nn.26, 37, 70, 100, 102; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 2-5 n.37; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 1 para. 16a Art. 11 para. 7 Intro. 14-24 para. 7; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 139

French: Witz, Receuil Dalloz Sirey (1998) Som. 308-309

German: Schlechtriem/Schmidt-Kessel, Entscheidungen zum Wirtschaftsrecht (EWiR) 1997, 985-986; Wolf, [1998] Wertpapier-Mitteilungen (WM) No. 47 Special Suppl. 1998/2, 41

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Case text (English translation of CISG contents of case)

Queen Mary Case Translation Programme

German Federal Supreme Court 23 July 1997
"Benetton II"

Docket No. VIII ZR 134/96

Translation [*] by Alexander P. Imberg

Translation edited by Ruth M. Janal

Facts of the case

The Italian [seller] is the company "Benetton", which inter alia manufactures clothing. Benetton sells those clothes via independent retailers, such as the German [buyer]. The second defendant is the [buyer’s] general partner, who is personally liable for the debts incurred by the [buyer]. The [seller] invoiced the [buyer] a total of 110,970.20 DM [Deutsche Mark] for goods delivered to the [buyer] between 30 September 1993 and 4 October 1994. [Seller] is seeking payment of the purchase price from the [buyer] and its general partner.

Between 1998 and January 1995, the [buyer] was running several clothing retail shops. In their lay-out and furnishing, those shop were geared towards the [seller's] products and only the [seller's] clothing was sold. The [buyer] was non-exclusively and revocably entitled to use the [seller's] trademark “Benetton” without adding its own name, as long as the [seller] was delivering to [buyer]. It was only by mistake that the [buyer's] general partner did not sign a corresponding declaration of 16 September 1987, which had been drawn up by the [seller]. The [buyer] and its general partner argue that a franchise agreement was implicitly formed between the [seller] and the [buyer], which violated German and European anti-trust regulations and was therefore invalid. The nullity of this franchise agreement also rendered void the individual contracts for the sale of goods which formed the basis of the [seller’s] claim.

In the alternative, the [buyer] and its general partner submit a set-off with a claim for damages based on Benetton’s shocking world-wide advertisement campaign. Since 1991, the [seller] has chosen pictures for Benetton’s campaign that show the suffering in the world and contain the remark "United Colors of Benetton". The [buyer] alleges that it suffered a slump in sales and a resulting loss of profit in the amount of 655,322 DM through the [seller’s] advertisements, which became the topic of heated public discussions [cf. BGH in "Benetton I"].

In a further alternative, the [buyer] submits a set-off with an alleged compensation claim resulting from an analogy to § 89b HGB [compensation claim of commercial agents under the German Commercial Code]. The [buyer] calculates this claim at 217,251 DM.

The Regional District Court (Landgericht) ruled in favor of the [seller], denying the validity of all of [buyer's] defenses and counterclaims. Upon appeal by the [buyer] and its general partner, the Court of Appeals (Oberlandesgericht) affirmed the decision of the Court of First Instance. The [buyer] and its general partner then lodged an appeal on points of law.

Grounds for the decision

[…]

II.

A) Without any error of law, the Court of Appeals granted the [seller] a claim for payment of the purchase price based on Arts. 53, 54 CISG in the amount of DM 110,970.00 for textiles delivered to and billed to the [buyer] between September 1993 and October 1994. With regard to the [buyer's] general manager, the claim is based on §§ 161(2), 128 sent. 1 HGB.[*]

      1.  The Appeal Court’s finding that the parties chose the applicability of German law (Art. 27 EGBHG [*]), without excluding the application of the CISG, does not contain a mistake of law. The [buyer's] appeal argues that by choosing German law, the parties excluded the applicability of the CISG under Art. 6 of the Convention. In doing so, [buyer] overlooks that an agreement on the applicability of substantive German law by itself cannot be seen as an exclusion of the CISG. The reference to German law [as the applicable law] includes the CISG as a part of the same (cf. Schlechtriem/Herber, CISG, 2d ed., Art. 6 n. 16; and, with regards to ULIS,[*] BGHZ [*] 96, 313, 322 et seq.). While an implicit exclusion of the Convention is generally possible if the parties correspondingly refer to specific provisions of German national sales law (BGHZ [*] 96, 313 (321)), there is no room for such an assumption in the present dispute. The Court of Appeals held -- unchallenged by the [buyer’s] appeal -- that the [buyer] and its partner explicitly agreed to the application of the CISG during the oral hearing before the Court of Appeals.

      2. The Court of Appeals rightfully left open the question of whether individual or all of the further distribution agreements between the parties, which were ascertained by the Court as they had been alleged by the [buyer], violated German (§§ 15, 18, 34 GWB [*]) or European (Art. 85(1) EEC Treaty) Antitrust Law. The appeal challenges without success the Appeal Court's finding that the individual contracts -- which form the basis of [seller's] claim -- are valid even if the distribution agreements were not.

According to Article 4(a), the CISG is not concerned with the validity of contracts to sell. Therefore, the causes of nullity and invalidity [i.e., the defenses to the formation of a contract] of German domestic law, as the applicable law by virtue of the rules of private international law (Arts. 27, 31(1) EGBGB [*]), take effect (Schlechtriem/Herber, id. Art. 4, n. 4, 6; Hoyer, in Hoyer/Posch, Das Einheitliche Wiener Kaufrecht, p. 39 et seq.). Accordingly, the Court of Appeals concluded without error of law that the sales contracts which form the basis of the [seller's] claim are not affected by a possible nullity of the parties' distribution agreements under § 139 BGB.[*]

[…]

Translator’s note: The Court then enters into a discussion strictly of the findings of the Court of Appeals and substantive German law. No more articles of the CISG are discussed. The Court affirms the Appeal Court's decision and enters a ruling in favor of the [seller].


FOOTNOTE

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Italy 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: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGHZ = Entscheidungen des Bundesgerichtshof in Zivilsachen [Official Case Reporter of the German Federal Court in Civil Matters]; EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; GWB = Gesetz gegen Wettbewerbsbeschränkungen [German Antitrust Law]; HGB = Handelsgesetzbuch [German Commercial Code]; ULIS = 1964 Hague Convention [Uniform Law on International Sales], the antecedent to the CISG that was in effect in Germany prior to the CISG.

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Pace Law School Institute of International Commercial Law - Last updated November 17, 2006
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