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CISG CASE PRESENTATION

Austria 11 March 1998 Appellate Court Graz (Timber case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980311a3.html]

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

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Case identification

DATE OF DECISION: 19980311 (11 March 1998)

JURISDICTION: Austria

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

JUDGE(S): Dr. Schemitsch (Vorsitz), Dr. Kostka, Dr. Rothenpieler

CASE NUMBER/DOCKET NUMBER: 4 R 283/97p

CASE NAME: Austrian case citations do not generally identify parties to proceedings

CASE HISTORY: 1st instance LG Klagenfurt (26 Og 70/95-30) 26 March 1997 [partly reversed]

SELLER'S COUNTRY: Austria (plaintiff)

BUYER'S COUNTRY: Italy (defendant)

GOODS INVOLVED: Timber


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 27 ; 38 ; 39 ; 44 ; 78 [Also cited: Articles 6 ; 50 ; 58 ]

Classification of issues using UNCITRAL classification code numbers:

27A [Dispatch of communications by appropriate means];

38A [Buyer's obligation to examine goods: time for examining goods];

39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required];

44A [Excuse for failure to notify pursuant to art. 39(1)]:

78B [Rate of interest: compound interest]

Descriptors: Communications, risk of ; Examination of goods ; Lack of conformity notice, timeliness ; Lack of conformity notice, specificity ; Reasonable excuse ; Interest

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Editorial remarks

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CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

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CITATIONS TO TEXT OF DECISION

Original language (German): Go to CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/670.htm> for link to pdf presentation of case text

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Oberlandesgericht) Graz

11 March 1998

Translation [*] by Florian Arensmann [**]

Translation edited by Veit Konrad [***]

The Oberlandesgericht of Graz is acting in its capacity as a Court of Appeals and is represented by the Judges of the Court Dr. Schemitsch (Presidency), Dr. Kostka and Dr. Rothenspieler.

In the dispute between:

Plaintiff Philipp Q___, trading with and exporting timber, hereafter referred to as [Seller], domiciled in Austria, represented by Dr. Christian Tschurtschenthaler, attorney in Klagenfurt

vs.

Defendant Gottfried M___, tradesman concerning timber and owner of the company A___L___N____ , hereafter referred to as [Buyer], domiciled in Italy, represented by Dr. Dieter Stromberger, attorney in Villach,

the Appellate Court Graz reached the following decision concerning Buyer's appeal (Berufung) against the judgment of the Regional Court (Landesgericht) Klagenfurt dated 26 March 1997, 26 Og 70/95-30, with a value in dispute of 4,931,656.84 S [*] (see case record):

The appeal is justified.

The decision appealed against is repealed concerning the allowing Part 1 (Point I) of the finding whereas its dismissing Part 2 (Point II) remains unaffected. To this extent, the case is referred back to the Court of First Instance to be dealt with and decided on again. The costs of the appellate proceedings constitute further expenses of these proceedings. Recourse to the Supreme Court (Oberster Gerichtshof) is admissible. The proceedings of the first instance are to be continued only after the decision of repeal coming into force.

REASONING

With its suit filed on 24 May 1994, Seller initially requested Buyer to pay 4,836,656.84 S plus interest of 10 % on the amount of 4,186,718.84 S since 1 May 1994 and interest of 4 % on the amount of 649,938.00 S since 24 May 1994. Seller submitted that he had sold and delivered timber to Buyer for prices which were not only agreed upon but also appropriate. Buyer owed Seller the callable, invoiced amounts of 1,458,225.60 S out of 1991, of 2,208,523.10 S out of 1992, and of 473,035.50 S out of 1993. Effectively and legally connected to this were advance payments for sales taxes in the amount of 10,822.00 S, costs for transport services performed for Buyer in the amount of 29,000.00 S and the expenses for diesel fuel in the amount of 7,112.64 S; all this arose to 4,186,718.84 S. Further, Buyer owed interest on late payments of 10 % each since due date and capitalized until 30 April 1994, namely for the invoices of 1991 amounting to 296,621.00 S, for the invoices of 1992 amounting to 324,698.00 S and for the invoices of 1993 amounting to 28,619.00 S -- altogether 649,938.00 S.

Buyer argued for the time being that Seller did not sell and deliver timber to him in the years 1991 to 1993. Therefore, Buyer was neither obliged to pay sales taxes nor was Seller entitled to the other claims. Buyer further disputes the amount of the requested interest on late payments and the legitimacy of the capitalization (ON 5). Buyer established together with Seller's son, Günther Paul Q___, the company A___ L___ in Italy with domicile in Buttrio. Only this company had a business relationship with Seller. As this company is not domiciled in Austria, this case was, according to Buyer, not subject to the competent jurisdiction; and Buyer had not passively authorized such jurisdiction. Buyer admits that Seller had delivered timber to the company A___ L___. The deliveries of timber that were properly conducted were paid for when due. Several deliveries were, however, not conducted properly by Seller. Buyer alleges that Seller delivered timber of low quality, the invoiced prices were too high; and that invoices were issued for timber that was actually not delivered. For that reason, several of the invoices issued by Seller were objected to on the merits as well as by the amount. By order of Seller, company A___ L___ bought and used timber from Italian companies several times which was objected to and not accepted. In this regard, it was agreed with Seller that the difference between the purchase price and the proceeds of sale of this timber would be offset against the deliveries of timber by Seller (obviously meant: to the company A___ L___). The deviation resulting from these "transactions" exceeded the amount claimed by Seller and was objected as an offset. Company A___ L___ made payments to Seller in the amount of 44,000,000.00 Lire for timber which actually had never been delivered. This amount is also brought as a counterclaim (ON 17).

As a consequence, Seller itemized his claim taking into account a partial payment by Buyer in the amount of 509,722.00 S which Seller credited against the oldest claims. Seller further alleges that the deliveries of timber were conducted free of defects. Seller points out that Buyer neither objected to the quality nor to the quantity nor did Buyer complain about the invoices. According to Seller, there had never been an agreement concerning an offset of any deviation of proceeds with his receivables. Company A___ L___ was a sole proprietorship of Buyer to which Seller's son took a share as silent partner with a capital invested of 51,000,000.00 Lire. On the occasion of a delivery of oak-timber from France, Seller granted Buyer a loan of 95,000.00 S on 23 May 1991 in settlement of the costs of that delivery. Seller expanded his claim in this amount resulting in total to 4,931,656.84 S, including interest of 10 % on 95,000.00 S since 24 May 1991 till 30 April 1994 and on 4,281,718.84 S since 1 May 1994 as well as interest of 4 % on 649,938.00 S since 24 May 1994 (ON 18).

Subsequently, Buyer alleged that he had established a civil law partnership. Consequently, he was only liable in that proportion which represents his share of the main stock being 60 % in this case (ON 20). By reasons of age, Buyer intended in the year 1990 to hand over Company A___ L____ to Seller without mentioning any point of time for this transfer. The parties in dispute, however, agreed to cooperate in the export business and to bear the business risk together in the future. It was agreed that Seller provided his Italian customers via Buyer's company and that Seller issued the invoices for this company. However, the Italian customers should transfer the payments for the delivery of timber directly to Seller.

Buyer asserts that he objected to every delivery immediately on the occasion of the takeover, with the Seller or his representative being present. Buyer stored the timber which was not accepted by the Italian customers according to Seller's instructions in his [Buyer's] hall in Buttrio and processed it partly. Still today, timber in the value of 1,800,000 S was stored there which was available at Seller's disposal at any time. By reason of the obvious grievances, Buyer pressured Seller to change his business practices. Seller objected to that that Buyer had no disadvantages, the more as Seller would takeover his company anyway. The deliveries of timber from France were neither meant for Buyer nor for his company. In this connection, Buyer did not take out a loan from Seller. Rather, Seller refunded the amount of 95,000.00 S which Buyer advanced on loan for Seller. Seller did not provide Buyer with payments for sales taxes nor transport services; Buyer did not gas up any vehicles at Seller's gas station (ON 22). In his written submission ON 22, Buyer also commented in detail on the invoices according to attachments ./B through ./D and stated which defects the individual deliveries of timber were afflicted with.

In the course of the timber trade between the parties in dispute, it was agreed upon that the invoices were not to be paid until the handover of Buyer's hall in Buttrio "against compensation in value"; the takeover of the hall was made dependent on its release of charges and on proper cooperation in the export and import of timber. Buyer's objections were noted by Seller with the remark that it "does not matter" because the final invoice would be issued at the time of the hall's handover. On this occasion, possible deviations would be balanced. In December 1993, it became obvious that this procedure could not be followed as the cooperation did not work out well and too many objections were raised. In modification of the original agreement, it was agreed upon that the timber still stored in Buttrio and near G___ would be sold together and the entire revenue would be accorded to Seller; afterwards, a "compensation in value" should take place. According to Buyer, this agreement was violated by Seller (ON 26). Seller contested these objections and submitted on his part that Buyer ordered all deliveries of timber dealt with in this proceeding on his own behalf and for his own account. Seller alleges that he did not instruct Buyer to store the timber delivered in his (Buyer's) hall and to process it partly. Neither was it agreed upon that Seller would takeover Buyer's company. In the contract dated 19 December 1990, it was only agreed upon that Seller would buy Buyer's realty in Buttrio together with the storage. However, Buyer did not comply with this agreement. There is a legal dispute concerning this pending in Italy. For the first time, Buyer objected to timber deliveries -- in a late manner -- in his writing of 4 March 1994 (ON 23). The "hall-deal" was absolutely independent of the current business concerning timber. And a "compensation in value" between these two transactions was not agreed upon (ON 26). On the occasion of an informative interrogation by the Judge of First Instance, Buyer asserted that Seller delivered timber to company A___ L___ and also presented the invoices to this company. The timber was taken by A___ L___ in Buttrio. Defects were objected to orally whereas -- due the cooperation and the fact that Seller or, respectively, his son was meant to take over "the business" (obviously meant: Buyer's company in Italy) -- "a somehow informal approach was displayed" in doing so. Buyer did not sign some deliveries "since the timber was bad". However, Buyer generally accepted "bad deliveries" because Seller's son was meant to "takeover everything" (ON 23). As long as the cooperation was working and Buyer was expecting to give his company to Seller, no problems occurred and a "compensation" for the defective deliveries was not necessary. For this reason, it was originally not necessary to object to the defects "in great detail", the more as Seller was anyway supposed to get the whole company. It was absolutely imaginable that -- "in this situation" -- the objections were raised "incompletely". After termination of the cooperation and after it became clear that Seller would not get the hall and the company, old scores should have been settled "regularly" between the parties in dispute which means Seller "should have got that" which he delivered to Buyer; however, there also should have been an "off-set". In doing so, the actual extent of the particular deliveries was to be checked whereas about one-third of the deliveries was not conducted or, respectively, was defective. Moreover, Buyer had considerable additional expenses amounting to "about one-third" in "compensating" Seller's defective deliveries and forwarding to customers as well as further charges which were meant to be settled. According to Buyer, there is still timber in stock (ON 26).

In the oral proceedings on 3 October 1996, Buyer agreed that Seller was allowed to collect timber which was stored at a company in Casacco; Buyer obliged himself to issue an invoice for that in the amount 181,656.84 S. It was agreed that the requested amount of the suit would be reduced by about that amount to 4,750,000.00 S after receiving the invoice. In the judgment of the First Instance appealed against, the Court of First Instance -- after rejecting the plea of lack of jurisdiction (I) -- ordered Buyer to pay 4,837,929.84 S (see case-record) and rejected the excess demand in the amount of 92,727.00 S (see case-record) (it was not decided about an amount of 1,000.00 S) (II). The judgment is based on the conclusions which are expressed on pages 9 to 16 of the dispatch. In legal respect, the Court of First Instance argued that Buyer operated a sole proprietorship in Italy without ownership rights and that it is therefore not relevant for the legal relationship that a silent partner takes a share in this company. Buyer was solely and personally liable for all debts of his company. Buyer, who did not dispute having received the deliveries, was obliged to have objected to defects of the individual deliveries immediately, which Buyer, however, failed to do. The objections raised in the proceedings or, respectively, by writing ./0 were therefore time-barred. The invoices of the year 1990 were paid by partial payments which were to be credited against the oldest invoices for lack of another dedication. The remaining amount of 99,462.00 S was to be credited to the first invoice of the year 1991 in the amount of 149,775.00 S. Following that, this invoice was settled except for 50,313.00 S. This invoice fell due on 6 May 1991 which is more than three years before the suit was filed. Consequently, the remaining part of that invoice as well as the resulting interest in the amount of 43,414.00 S was prescribed. The capitalized interest was to be reduced be the latter amount. The loan in the amount of 95,000.00 S granted by Seller to Buyer was only set due on 17 July 1995. The Court of First Instance justified the rejection of the witnesses suggested by Buyer for proving the notices of defects by reason of Buyer's intent to delay the proceedings. It was considered impossible that witnesses were able to remember single deliveries without further indications. Observably, Buyer's appeal is addressed to granting part of this judgment for reasons of deficiency in procedure, incorrect fact finding, incorrect consideration of evidence and error of judgment requesting the Court to rescind the judgment appealed against and to refer the legal matter back to the Court of First Instance for rearguing after procedural supplement; alternatively, an amendment for the entire dismissal of the claim is filed.

Seller requests the Court to dismiss the appeal. The appeal -- which was to be decided about in a non-public session for lack of a request for setting of an oral proceeding as well as for lack of such a proceeding being necessary according to 492 ZPO [*] -- is justified in favor of the request for repeal. Before going further into detail of Buyer's bases of appeal, the -- in first instance undiscussed -- question of which law is to be applied is to be examined with respect to the foreign relations -- Seller's contractual obligations were to be performed in Italy -- of this legal dispute. The omission of such an examination constitutes a particular deficiency in procedure which the Court of Appeal has to consider ex officio in case of a (at least partly) legitimate constitutionally conducted objection on a point of law (Kodek in Rechenberger, ZPO, 471, para. 6 with further evidence). As stated, Seller who is domiciled in Austria delivered timber to Buyer's sole proprietorship seated in Italy in the years 1990 to 1993. The legal actions concerning deliveries of timber between the parties in dispute are therefore to be qualified as international sales of goods between business people. For lack of an express or implied choice of law ( 35(1) IPRG [*]) or an exclusion according to Art. 6 CISG, the provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG) are to be applied as both Austria and Italy are Contracting States to that Convention (Art. 1(1)(a) CISG). The fact that Buyer has his domicile in Austria does not conflict with the application of the CISG, especially as according to the CISG only the place of business is relevant. The place of business is that location where -- visibly for a third party -- business transactions are conducted by one party to a commercial treaty (Posch in Schwimann, ABGB [*] , Art. 1 CISG, para. 12). This was the case in the instant matter at the registered office of Buyer's sole proprietorship in Italy.

According to Art. 38(1) CISG, the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. The buyer loses the right to rely on a lack of conformity 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, Art. 39(1) CISG. The reasonable time meant in this provision commences to run at that point of time when the buyer actually has discovered the lack of conformity. This will regularly be the case at the examination according to Art. 38 CISG. Thus, the short period for the examination (cf. Posch, loc. cit., Art. 38 CISG, para. 5,6; Resch, Zur Rüge bei Sachmängeln nach UN-Kaufrecht, ÖJZ [*] 1992, p. 470 et seq., especially p. 473) is followed by a reasonable time for giving notice of a lack of conformity. If the examination has been delayed, the notice of defect can nevertheless be in time if it is given within a reasonable time from that point on at which the examination had to be done at the latest. The reasonable time for giving notice in case of undetectable hidden lacks of conformity commences to run at that point of time when they appear (Posch, loc. cit., 39 CISG, para. 4). The preponderant part of the German jurisprudence (cf. the citations at Posch, loc. cit.) considers one month as a reasonable time for giving such a notice. Complete failure of or delay in giving notice leads to the entire loss of the buyer's rights (Resch, loc. cit., p. 474; Posch, loc. cit., 39 CISG, para. 2). The notice has to specify the lack of conformity in detail. Global statements and generally formulated objections do not comply with the requirements of a notice as regards content (Posch, loc. cit., 39 CISG, para. 7 with further evidence of the German jurisprudence). The duty to specify the lack of conformity operates for the protection of the seller who should be able to realize which claims come to him. Moreover, the seller should be protected from abuses like too late objections to defects by the buyer. The lack of conformity is considered to be sufficiently specified if the skilled seller knows what is meant; the notice must enable the seller to conduct a follow-up examination and to initiate the necessary steps for the removal of defects. However, the requirements for the description of the defect -- especially with regard to the radical legal consequences -- must not be overdrawn. If the defect is detected because of an examination according to Art. 38(1) CISG, the notice should comprise the basic results of that examination. The notice has to include all information about which goods are affected by the defect, of which kind the defect is in detail, under which attendant circumstances the defect occurred and to which extent the delivered goods are defective. General expressions -- like, e.g., that the goods are of minor quality or that they do not comply with the buyer's expectations -- do not suffice for a valid notice of defect (Resch, loc. cit., p. 475 with further evidences). According to Art. 27 CISG, it is sufficient to have sent the notice off. A posting in time suffices to comply with the time limit (Resch, loc. cit., p. 476; Posch, loc. cit., 39 CISG, para. 6). Art. 27 CISG does not define what is required for oral statements as its wording can only refer to statements between absentees. However, to be effective, oral statements also have to be carried out audibly and in an understandable manner for the other party (Posch, loc. cit., Art. 27 CISG, para. 12). Oral notices of defect are also valid if they comply with the above-mentioned requirements, the more as Art. 39 CISG does not require a certain form for the notice.

With his appeal, Buyer contests mainly the (negative) conclusion of the Court of First Instance that it is not proven that Buyer has actually objected to the individual deliveries as to quantity, quality or the price. With deficiency of procedure as reason for appeal, Buyer refers in this context to the defaulted interrogation of the witness who he suggested to bring evidence in this regard. As already mentioned, the Court of First Instance has justified its refusal of these witnesses with Buyer's intent to delay the proceedings as it was considered impossible that witnesses could remember single deliveries without any further indications. However, this justification of the Court of First Instance in fact violates the prohibition of anticipated consideration of evidence as it anticipates that evidence's lack of authenticity (Rechberger in Rechberger, ZPO [*], 275, para. 1 with further evidences). The Court can only reject a proposal for evidence in terms of 275(2) ZPO (in the version before the WGN 1997 [*] which is to be applied here) ex officio or upon request, if the Court is convinced that this proposal was only made with the intent to delay the proceedings (Rechberger, loc. cit., 275, para. 4). However, such intent to delay cannot solely be justified with anticipated consideration of evidence. The fact that Buyer failed to present documents which he proposed for the same topic of evidence may be considered -- as the Court of First Instance did -- as intent to delay the proceedings concerning that documentary evidence. However, Buyer proposed the witnesses for this topic of evidence already at a time when the proceeding at the Court of First Instance -- after referral from the District Court Salzburg -- has just begun and evidence have not been taken at all (ON 17 and 22). Under such circumstances of the proceeding, it cannot be assumed with respect to the possibility of preclusion according to 179, 275 ZPO having to be applied carefully and responsibly (RZ [*] 1976/27; Fucik in Rechberger, ZPO, 179, para. 2) that Buyer apparently intended to delay the proceedings with the evidence by witnesses concerning the question of a duly provided notice of defect. Before the taking of this evidence, the Court of First Instance will have to discuss with Buyer his contradictory submissions concerning this matter. While Buyer initially (ON 17 and 22) and also later (On 26) alleged that the notices of defect regarding each single delivery had been given immediately, he deviated from this statement at the occasion of the informative interrogation (ON 23 and 26). The statements made in the informative interrogation conducted by the Court are also considered as a party's submission (Fasching II, 872; SVS1g 33.932; SVS1g 34.006). Insofar, Buyer is to be induced by the Court of First Instance to a short, complete and consistent submission regarding the question when and how each notice of defect with respect to the -- alleged by Buyer -- non-conforming deliveries was given, which content they had and who gave them to whom. Should Buyer's -- in this respect amended -- submission show after completion of evidence that notices of defect were given in time, conclusions to the necessary extent will -- after taking evidence concerning that -- have to be also drawn about the defects claimed in ON 22.

The conclusions drawn by the Court of First Instance are not the result of a proceeding free of defects because there are no reasons in the judgment appealed against why the Court of First Instance did not take the evidences proposed by Buyer to prove the alleged agreements between the parties in dispute. As will be shown, Buyer's submission of facts is also of legal relevance. However, Buyer is again to be induced by the Court of First Instance to a consistent and complete submission. Buyer claimed in the First Instance several agreements which cannot be brought in line, whereas he did not uphold only these agreements where it was agreed that Seller's deliveries of timber would be paid directly by the Italian customers. Therefore, only the contentions of the Buyer are still to be discussed:

   -    That Buyer bought and processed timber of minor quality which was not accepted by the Italian customers on behalf of Seller;
 
   -    That the difference between the sales price and the (smaller) revenue of the above-mentioned transaction should be set-off against the deliveries of timber by Seller;
 
   -    That this difference exceeds the value claimed by Seller (ON 17);
 
   -    That it was agreed in the course of the timber-trade that invoices for the deliveries of timber were not to be paid until the handing over of Buyer's hall in Buttrio and that only at the time of the handing over a "compensation in value" should have been made (ON 26).

By modification of the original agreement, the parties consented to sell the timber still stored in Buttrio as well as at G___ together, with Seller getting the whole revenue and afterwards a "compensation in value" would be done (ON 26). At the informative interrogation, Buyer submitted concerning this matter that everything should have been a "totally normal settlement" after the termination of the cooperation and after it became clear that Seller would not get Buyer's hall and company. According to Buyer, "totally normal settlement" meant that Seller would "get that what he delivered" to Buyer whereas "also an offset would be made" (ON 26). With respect to this contradictory and also vague submission of facts, it will have to be discussed with Buyer which of these agreements with which content and at which time were arranged. Art. 58 CISG does only contain regulations which decide about the due-date for the payment of the sales price if the parties failed to agree on this matter (Posch, loc. cit. 58 CISG, para. 1). If the parties, however, have made a deviating agreement, this agreement is relevant for the determination of the sales price's due-date. With these contentions about different agreements between the parties, Buyer also disputed the Seller's claims concerning the deliveries of timber being due. Thus, it depends on the content of this agreement to which extent a liquidation of the claimed amount by an offset occurred and from which time on Seller is entitled to -- capitalized -- interest on late payments for the sales prices invoiced. Also in this respect, the proceedings of first instance are thus in need for an amendment in terms of the notice of defect and the given principles.

In this context, it is reminded of the fact that compound interest can be claimed only since the date of service of process and not already since filing an action at the Court; they are justified if they were expressly agreed upon or if due interest is claimed (Reischauer in Rummel, ABGB, 1333, para. 3; Schubert in Rummel, ABGB, 999, para. 6; 4 Ob 84/97z with further evidence).

The proceeding of the First Instance is also inadequate with regard to the conclusions concerning deliveries of timber by Seller to Buyer from France as well as concerning Seller's granting of a loan to Buyer in the amount of 95,000.00 S as the Court of First Instance rejected the witness proposed by Buyer (AS 97) to prove the contrary without giving any reason. In the First Instance, Buyer never did make a definite contention whereby the parties in dispute agreed bindingly upon the taking over of Buyer's company by Seller and whereby the parties established a corporation. In fact, Buyer merely alleged indefinitely that he explained his intent concerning this matter to Seller and that he agreed with Seller upon a cooperation in the export business as well as upon the future common bearing of the business risk (ON 22).

If Buyer in his objection as to law now assumes that a civil law partnership has been established between the parties in dispute, he violates the prohibition to advance fresh evidence and new matters of fact during the appeal proceedings (so-called Neuerungsverbot). This is even more the case because Buyer substantiated his own contention concerning the cooperation of the parties in dispute in ON 22 by merely submitting the parties' agreement that Seller supply his Italian customers through Buyer's company and that Seller issue his invoices in the company's name whereas the Italian customers should transfer the payments for the delivery of timber directly to Seller. However, the Court of First Instance did -- undisputedly (page 11 of the judgment) -- not consider an agreement of a "cooperation" on this note as proven. In its submission (in the course of the informative interrogation), Seller himself understood that a takeover of Buyer's company by Seller did not occur and that the "cooperation was terminated" (ON 26).

Buyer's submission that Seller faced Buyer's concerns regarding obvious grievances with the argument that Buyer would not have any disadvantages as Seller would take over the company A___ L___ anyway and thus, there could not occur any damage for both of them, can at the most be of relevance in terms of Art. 44 CISG. Prerequisite for this would be that Buyer -- with regard to these assurances -- did either not at all or only insufficiently give notices of defect (Buyer argues towards this in the informative interrogation by the Court of First Instance). Notwithstanding Art. 39(1) CISG, the buyer may reduce the price in accordance with Article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice, Art. 44 CISG. Such "reasonable excuse" for the failure to give a (timely and complete) notice of defect may also be seen in the behavior of a seller who indicates to the buyer that he is not at all interested in a (detailed) notice of defect or certain reasons. Whether a taking of evidence is necessary or not will depend on Buyer's allegations concerning timely notices of defect being provable or not. In this context, it is to be considered that the time limit of two years determined in Art. 39(2) CISG remains unaffected by Art. 44 CISG (Posch, loc. cit., Art. 44 CISG, para. 8.).

It does not constitute a deficiency in procedure if the Court of First Instance rejected to call an official expert to prove that the Austrian trade usages are not applicable to the contracts of the parties in dispute because this is not a matter of fact but a question of law which is only to be solved by the Court. Furthermore, this question has already been solved in terms of the afore-mentioned considerations of the Court of Appeal concerning the applicability of the CISG. It is of no relevance for the legal appraisal whether Buyer paid in time for the properly conducted deliveries of timber, particularly as it is undisputed that Buyer made only partial payments in the amount of 509,772.00 S on the claimed invoices and that the remaining amount invoiced is unsettled so far. An amendment of evidence concerning this submission of facts is therefore unnecessary. By reason of the demonstrated lacks in procedure, an extensive amendment of the proceedings of the First Instance is necessary. Thus, Buyer's objection on a point of evidence is not required to be dealt with. The Court of Appeal was allowed to refer this legal dispute back to the Court of First Instance in terms of 496(3) ZPO due to the unforeseeable extent of the amendments (ÖJZ [*] 1987/19, SZ [*] 59/134, RZ 1992/40 et al.).

The following is to be added to Buyer's objection on a point of law: If Buyer wanted conclusions concerning the timber's value, he ignores that he -- except for invoices No. 10/91, 6/92 and 24/92 -- did expressly not dispute the extent of the invoiced amounts which Seller describes as according to the agreement (written submissions ON 22). In the continued proceedings, the Court of First Instance will therefore have to deal only to that extent with the content of the agreement on price of the parties in dispute. According to the undisputed conclusions, Buyer operates the sole proprietorship "A___ L___ di M___ G___" trading with timber in Italy". In 1992, Seller's son signed a contract concerning silent partnership where he obliged himself to a contribution of one million Lire to Buyer's company as well as of his manual and intellectual manpower without any subordination except that of coordination. Seller's son accepted that only Buyer as owner of the company (which Seller's son joined as a silent partner) was entitled to the management as well as to the corporate governance. Whether this agreement came into force at all -- what the Court of First Instance, disputed by the Court of Appeal, could not determine -- is of no relevance. According to the -- insofar applicable -- Italian law (as well as according to Austrian law: 335(2) HGB [*]), such silent partnership does not lead to a restriction of the trader's liability for his corporate debts in the external relationship (Art. 2551 Code civile). In the First Instance, Buyer never alleged the coming into being of a civil law partnership with Seller. Rather, Buyer submitted (ON 20) - not considered as proven by the Court of First Instance - that he established an undisclosed civil law association with Seller's son of which Buyer held a share of only 60 %. However, Buyer did not uphold such allegation in the appellate proceedings. It cannot be considered as incorrect legal conception if the Court of First Instance -- under these circumstances -- assumes the exclusive liability of Buyer for the debts of his sole proprietorship resulting from business transactions with Seller.

In its rendition of judgment anew, the Court of First Instance will also have to consider that Buyer enforced counterclaims on which is to be decided in the finding in case of a dictum concerning the (partly) justified claim of the Seller ( 391 in MGA [*] ZPO' E 80). For the demonstrated reasons, Buyer's appeal is to be allowed, the judgment appealed against is to be rescinded and the legal matter is to be referred back to the Court of First Instance to be reargued and decided on again. The decision as to the costs of the appellate proceedings is based on 52 ZPO. Recourse to the Supreme Court (Oberster Gerichtshof) according to 502(1), 519(1) (sentence two), (2) ZPO is admissible as -- as far as known by the Appellate Court -- no case-law of the Supreme Court (Oberster Gerichtshof) concerning 27, 38, 39 and 44 CISG is available.

Graz, 11 May 1998

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Austria is referred to as [Seller] and Defendant of Italy is referred to as [Buyer].

Translator's note on other abbreviations: ABGB = Allgemeines Bürgerliches Gesetzbuch [Austrian General Civil Code]; HGB = Handelgesetzbuch [Austrian Commercial Code]; IPRG = Bundesgesetz zum Internationalen Privatrecht [Austrian Conflict of Laws]; MGA = Große Manz Ausgabe [Austrian Commentary]; ÖJZ = Österreichische Juristenzeitung [Austrian Law Journal]; RZ = Österreichische Richterzeitung [Austrian Law Journal]; S = Schilling [former Austrian currency]; SZ = Entscheidungen des österreichischen Obersten Gerichtshofes in Zivilsachen [Decisions of the Austrian Supreme Court in Civil Matters]; WGN 1997 = Wertgrenzen-Novelle 1997 [Austrian Act of Law, modifying several other Acts]; ZPO = Zivilprozeßordnung [Austrian Civil Procedure Code];

** Florian Arensmann is a law student at the University of Osnabrück, Germany, and participated in the 13th Willem C. Vis International Commercial Arbitration Moot with the team of the University of Osnabrück.

*** 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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