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CISG CASE PRESENTATION

Germany 15 October 1997 District Court Hagen (Socks case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/971015g1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19971015 (15 October 1997)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 22 O 90/97

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

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Socks


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issues: Articles 4 ; 7 ; 78 [Also cited: Articles 39(1) ; 44 ; 53 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

4A [Scope of Convention (issues excluded): court held set-off excluded];

7C23 [Gap-filling by domestic law: set-off];

78B [Rate of interest]

Descriptors: Scope of Convention ; Gap-filling ; Set-off

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstracts: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): CISG online website <http://www.cisg-online.ch/cisg/urteile/311.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: 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); 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]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

District Court (Landgericht) Hagen

15 October 1997 [22 O 90/97]

Translation [*] by Dr. Andrea Vincze [**]

1. FACTS AND PLEADINGS

[Seller] manufactures stockings. [Buyer] is engaged in textile trading, and operates as distributing agent in that industry. The parties have had a business relationship for several years. On a certain order by [buyer], [seller] supplied men's socks to [buyer]. Based on Invoice No. 78/96 of 6 September 1996, [Italian Lira] Itú 10,653,300.00, based on Invoice No. 81/96 of 10 September 1996, Itú 8,951,250.00, and based on Invoice No. 95/96 of 1 October 1996, Itú 12,675,000.00 was charged for the goods by [seller]. The subject of the claim is the total purchase price of Itú 32,279,550.00.

[Seller] requests [payment of the purchase price], in addition to payment of interest at the rate of 11.5%. [Buyer] requests that the claim be dismissed.

      1.1 [Buyer's position]

[Buyer] objects that the claim would be extinguished by means of set-off with regard to its own counterclaim based on its debit note No. 96.259 of 23 October 1996 for DM 39,546.50. In this debit note, [buyer] listed its claim of damages (e.g., for freight charges and storage expenses unnecessarily paid for, costs of cover purchase and claim of damages that [buyer] is bound to pay to its own customer). [Buyer] bases this counterclaim on contracts of sale other than the one subject to the claim, which, according to the statement of [buyer], were performed defectively by [seller]. The following significant facts of the case are undisputed:

On the order by [buyer] on 28 February 1996, [seller] supplied 28,600 pairs of work socks on 10 May 1996. In the invoice for this supply (No. 37/96 of 10 May 1996), [seller] charged [Deutsche Mark] DM 24,524.70 which was paid by [buyer] on 12 June 1996. [Buyer] sold the goods to its own customers. In the fax of 23 August 1996, [buyer] notified Company F, with the purpose to further notify [seller], that [buyer]'s customer had concurrently complained about major differences in the size and required substitute goods. Company F operated as an independent distributing agent, but it had never concluded a contract of agency with any of the parties. In the letter of 27 August 1996, which was forwarded to [buyer] by Company F, [seller] rejected [buyer]'s complaint as being late and substantially unfounded and offered further supplies. On 5 September 1996, a meeting took place at [seller]'s offices between [buyer]'s managers and [seller]'s employee M. The contents and results of this meeting are disputed. Based on the fax of 11 September 1996, Company F stated that it has been agreed that [buyer] would attempt to sell the goods complained about and, should [buyer] not succeed in doing so within three weeks, the goods would be returned to [seller] who would bear the costs of this transaction. In September 1996, a further 10,500 pairs of socks were supplied, for which, according to invoice no. 89/96 of 20 September 1996, DM 8,925.00 was charged. This invoice was settled by [buyer].

[Buyer] states that during the aforementioned meeting on 5 September 1996, employee M had acknowledged the complaint in connection with the sample shown to him and that he had made an obligatory promise to supply substitute goods. (Exhibit: witness statement). The second supply, charged on invoice no. 89/96, was complained about and returned, due to the same lack of conformity as in the first supply (differences in leg-length). [Buyer] also states that the situation concerning damages, appearing on the debit note of 23 October 1996, developed in consequence of the lack of conformity in both cases.

      1.2 [Seller's position]

Rebutting this statement, [seller] asserts that [buyer]'s set-off claim should be denied by the court due to lack of international jurisdiction. In other aspects, incidentally, substantial preconditions of the applicable Italian law are missing for the set-off to be enforceable. Concerning the merits of the case, [seller] states that [buyer]'s complaint of lack of conformity based on Articles 38 and 39 CISG, arrived too late. [Seller] disputes that its employee, M, ever acknowledged the complaint by [buyer] at the meeting on 5 September 1996. In any case, [seller] states that there was an agreement right to the contrary, namely that [buyer] could not return the goods which were already paid for and complained about too late (Exhibit: Witness M). Finally, [seller] disputes that the goods supplied on both occasions lacked conformity.

Because of further details of the presentation by the parties, other exhibits were requested to prove the contents of the legal documents submitted.

2. COURT'S RULING

      2.1 [Seller's claim]

The claim is founded.

The claim subject to the dispute concerning the purchase price (Art. 55 et seq. CISG) which had been charged by [seller] with the invoice nos. 78/96, 81/96 and 95/96 for a total purchase price of Itú 32,279,550.00 is, on itself, not disputed.

      2.2 [Buyer's counterclaim]

The set-off by [buyer] cannot be taken into account in this legal dispute in consequence of problems concerning jurisdiction.

-   Practice of the German Federal Supreme Court (Bundesgerichtshof) assumes that concerning the decision on the counterclaim by [buyer], brought before the court during the course of the judicial set-off process, the court does not have international jurisdiction.
 
Concerning the decision on the debated and inconsistent counterclaim by [buyer], which was brought before the court during the course of the judicial set-off process, international jurisdiction is lacking if the courts of the country of [seller] would have jurisdiction on that certain dispute, and [seller], as happened in this case, referred to the lack of international jurisdiction of the court.

If, lacking jurisdiction, the court is not entitled to make a decision on the counterclaim brought before the court during the course of the judicial set-off process, the set-off by [buyer] cannot be taken into account in those proceedings. Instead, [seller]'s request should be decided upon independently (first few sentences of the judicial ruling of 12 May 1993, in: IPRax 1994, 115). The German Federal Supreme Court found in its reasoning, inter alia, that the Brussels Convention on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters contains no exact provisions on set-off. However, [buyer]'s procedural act on charging is similar to a kind of legal protection where the subject of the counterclaim is incorporated into the pending procedure. In this case, Article 6(3) of the Brussels Convention forbids bringing an inconsistent counterclaim before a court which does not have international jurisdiction. Yet, if such requests are inadmissible in the course of the counterclaim, their enforcement is forbidden exactly during the course of the judicial set-off process.

Legal practice of the German Federal Supreme Court was not overhauled by the European Court of Justice in its decision on 13 July 1995 (NJW [*] 1996, 42). The European Court of Justice did not extend the scope of application of Article 6(3) of the Brussels Convention to such counterclaims which had been initiated in connection with set-off. Yet, the European Court of Justice acknowledges the domestic legal conditions on the fact that procedural set-off process would be an admissible means of legal protection (para 13 of the Court's reasoning). Nothing precludes the domestic courts from making the admissibility of a procedural set-off process dependant on the fact that the court should have international jurisdiction on the main claim, as well as on the admissibility of an incidental procedural set-off process (Jayme/Kohler IPRax 1995, 343, 349).

Based on further criteria of the judicial ruling of 12 May 1993, [buyer]'s set-off claim must be disregarded by the court. Although the Italian courts would have jurisdiction on independent enforcement of [buyer]'s claim of damages (Article 2(1) of the Brussels Convention), this part of the facts of the case is disputed. Furthermore, that claim is "inconsistent", because it derives from another contract of February-May 1996, which is not subject to the request of [the present] claim. Other contracts of sale are not in such a close temporal and factual connection with the disputed contracts of sale of September and October 1996, so that all of these contracts would constitute a natural unit based on the instant business relationship between the parties. Therefore, according to the second option of Article 6(3) of the Brussels Convention, the facts of the cases are not identical.

Yet, even if the District Court of Hagen was considered as having jurisdiction on deciding on [buyer]'s set-off claim, and this objection could be proved substantially, [buyer]'s counterclaim would have to be disregarded in the instant case:

Set-off is not regulated in uniform sales law. Therefore the applicable law on the question of set-off must be determined by virtue of the conflict of laws rules of German private international law. According to Article 32(1) para. 4, Article 28(1) and (2) of EGBGB [*] since the seller is domiciled in Italy, Italian law is applicable on determining the admissibility and effects of set-off. Italian law differentiates between three kinds of set-off. Mutual set-off (Article 1252 C.c.[*]) is not the case here. The subject of the meeting on 5 September 1996 was the lack of conformity of the goods, not charging of mutual monetary claims, and especially not charging for the subject of the claim that the disputed Invoices of 5 September 1996 had not been paid off. Therefore, legal set-off (Article 1243(1) C.c.[*]) and judicial set-off (Article 1243(2) C.c.[*]) remain in question. According to Article 1243(1) C.c.[*], judicial set-off is ipso iure admissible only if the claims are mutually overdue (liquidi), i.e., they are not disputed by the other party or only on an obviously unfounded reason. For a judicial set-off, the counterclaim has to be "easy and quick to describe" (see also Kindler IPRax 1996, 16, 20 et seq.). However, in the present case, the subject of [buyer]'s counterclaim is neither liquid, nor is it possible to admit it without any further costs of procedure.

With regard to the objection on the lack of conformity, made for the first time on 23 August 1996, in conjunction with the supply on 10 May 1996, [buyer] assumes that concerning [seller]'s refutation of default (Article 39(1) CISG), which was sustained by the facts so far, taking further evidence would lead to a decision more favorable for [buyer], for example by making an excuse for having acted too late (Article 44 CISG).

Finally, evidence has to be taken on the breach of contract concerning the supply of the goods, which is disputed by [seller], and on [buyer]'s statement of the oral acknowledgement of its requests by employee M. [Buyer] submitted the copy of a written "Statement" by a witness referred to as Z, which operates as a presentation by one of the parties, but it is not admissible as means of evidence. After all, it is not possible in the current situation to decide immediately and instantly on the claim for set-off, therefore [buyer]'s set-off claim has to be disregarded for substantive reasons as well.

      2.3 [Interest]

According to Article 78 CISG, interest should be paid from the date of accrual, at an interest rate of 10%, as provided in the applicable Italian law (Articles 28(1) and (2) EGBGB [*], Article 1284(1) C.c.[*]). [Seller] did not request payment of additional damages (Article 74 CISG).


FOOTNOTES

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

Translator's note on other abbreviations: EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuch [German Code on Private International Law]; NJW = Neue Juristische Wochenschrift [well-known German Law Journal]; C.c. = Codice civile [Civil Code of Italy].

** Dr. Andrea Vincze received her law degree from the University of Miskolc, Hungary, in 2002. Currently, she is a Ph.D. student at the same university, working on her research project on international commercial arbitration in European legal systems. She has also dealt with cross-border and Internet-related copyright issues in her thesis written in English. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

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Pace Law School Institute of International Commercial Law - Last updated December 7, 2006
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