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CISG CASE PRESENTATION

Germany 24 March 1998 District Court Berlin (Knitwear case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980324g1.html]

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

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Case identification

DATE OF DECISION: 19980324 (24 March 1998)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 102 O 59/97

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: Knitwear


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7 ; 39(1) ; 57(1)(a) ; 78 [Also cited: Articles 3(1) ; 14 ; 18 ; 35 ; 38(1) ; 45(1)(b) ; 53 ; 58(1) ; 59 ; 62 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Scope of Convention (issues excluded): agency issues];

7C22 [Problems governed by Convention but not expressly settled (recourse to general principles on which Convention is based): whether general principle that seller's place of payment determines all questions relating to payment vs. view that currency governed by gap-filling domestic law: court did not resolve as result the same];

39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

57A [Place for payment: in absence of agreement, payment at seller's place of business];

78A [Interest on delay in receiving price: court ruled rate determined by domestic law otherwise applicable to contract]

Descriptors: Scope of Convention ; Agency issues ; Payment, place of ; General principles ; Currency issues ; Lack of conformity notice, timeliness ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=440&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=440&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: 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) Berlin

24 March 1998 [102 0 59/97]

Translation [*] by Jan Henning Berg [**]

FACTS

Plaintiff [Seller] is a producer of knitwear, having its place of business in Capri, Italy. It requests from Defendant No. 1 [Buyer] of Germany payment of Italian lira [Lit] 18,620,500 from invoice no. 94 of 17 October 1996.

The parties entertained a constant business relationship. To process each transaction, [Buyer] used the services of Witness Höger, who was competent with the Italian language and forwarded [Buyer]'s orders to [Seller].

[Seller] had demanded payment of invoice no. 94 by way of an attorney's letter dated 13 December 1996 and appointed a target date. [Buyer] responded on 20 December 1996 and asked for a deferral of payment "until mid-February at the latest". Further details of this correspondence are referred in the Court's file.

POSITION OF THE PARTIES

Position of [Seller]

[Seller] submits that [Buyer] ordered the knitwear mentioned in invoice no. 94. The goods had been delivered and invoiced in the amount agreed upon.

Initially, [Seller] had requested payment of 10% interest per annum resulting from the primary claim. Following a partial withdrawal, [Seller]'s request now corresponds to that which is stated in the judgment.

Position of [Defendants]

[Defendants] request dismissal of the action. They submit that [Buyer]'s letter of 20 December 1996, in which it asked for the granting of a deferral, had been a standard letter which was sent to all creditors.

Alternatively, [Defendants] expressly rely on a set-off with counterclaims of [Buyer] against [Seller] in the amount of DM 17,088.98. [Defendants] allege, by virtue of a detailed substantiation, that several orders issued by [Buyer] led to continuous delivery of non-conforming goods by [Seller]. These goods were either fully non-merchantable or at least required efforts for a rectification of defects. Because of the lack of merchantability of the goods, [Buyer] claims lost profit. Concerning the goods that required rectification, [Buyer] claims the costs necessary for this. The details are referred to in [Buyer]'s memorandum of 4 July 1997. [Buyer] further asserts that it gave notice of non-conformity in each case to Witness Höger, being agent of [Seller].

[Seller] submits to the contrary that Witness Höger acted as an agent for [Buyer].

The file of District Court of Neukölln, case docket 11 b C 146/97, has been presented for the Court to consider at its oral hearing.

According to resolution of 31 July 1997, the Court had also asked for information regarding questions of Italian law. This request was answered by letter from the Embassy of the Federal Republic of Germany in Rome of 10 November 1997. This correspondence and the information given at that date will be referred to.

Additionally, by way of resolutions of 29 July 1997 and 14 November 1997, the Court has taken evidence through interrogation of Witness Höger. For the results of this taking of evidence, reference is directed to the session protocol of the District Court of Heidenheim of 10 December 1997, which had been asked to conduct the interrogation.

Further reference is directed to the parties' memoranda, the attached exhibits and to the session protocols of the Court.

REASONING OF THE COURT

A. The [Seller]'s action is admissible and fully justified on the merits.

I. [Admissibility; jurisdiction of the District Court Berlin]

The District Court Berlin takes international jurisdiction over the present dispute according to Art. 1 in conjunction with Art. 2(1) Brussels Convention. This set of rules is applicable as it entered into force on 1 March 1995 for Germany in relation to Italy (BGBl [*] II of 8 February 1995, p. 221) and the present case constitutes a commercial dispute in terms of Art. 1(1) Brussels Convention. Pursuant to Art. 2 Brussels Convention, the Court at the defendant's place of business is granted jurisdiction.

II. [Justification on the merits]

Furthermore, the action is justified on the merits. [Defendants] are obliged to pay the purchase price to [Seller] according to invoice no. 94 of 17 October 1996 under Arts. 53, 62(1) CISG.

      1. [Applicability of CISG]

      The provisions of the CISG are applicable. It is required by Art. 1 CISG that the parties have their places of business in different Contracting States. The parties have their places of business in the Federal Republic of Germany and in Italy. Both countries are Contracting States (Palandt/Heldrich, 55th ed., Art. 28 EGBGB [*]).

      2. [Conclusion of sales contract]

      Following the taking of evidence, the Court is convinced under 286 ZPO [*] that a contract had been concluded between [Seller] and [Buyer] for the sale of knitwear mentioned in invoice no. 94 of 1996 and that the goods were delivered to the [Buyer].

It must be considered that a contract is being concluded by offer and acceptance in accordance with Arts. 14, 18 CISG. Witness Höger has convincingly stated that [Seller] delivered the goods according to [Buyer]'s order invoiced on 17 October 1996. There is no reason to cast doubt on what the witness testified; her statements are coherent. Further support for the conclusion of contract is [Buyer]'s letter of 20 December 1996, which would not have been issued, had [Seller]'s claim -- reminded by its attorney on 13 December 1996 -- against [Buyer] not existed. As the contract had been properly concluded, obligations and rights have been established unto the parties to this dispute.

The Court assumes that both [Seller] and [Buyer] are fully able to exercise rights and to create obligations each on its on own behalf. The German private international law does not contain any express provisions in order to determine the law applicable to legal relations affecting corporate bodies (Palandt/Heldrich, Anh. zu Art. 12 EGBGB [*] para. 1). The preponderant notion looks to the seat of a corporation's headquarters to determine the applicable law (BGHZ [*] 78, 318 (334); Staudinger/Großfeld, 13th ed., IntGesR para. 33). In general, this also applies to corporations that have been founded under the law of a Member State of the European Union, as long as the link to the seat will not lead to barriers following a relocation of the seat (Staudinger/Großfeld, paras. 117 and 120). This cannot be assumed in the case at hand.

            a) Therefore, the capacity to sue and to be sued is provided by 124 HGB [*] for [Buyer] and by 128 HGB for Defendants No. 2 and No. 3, whereas these parties are liable as joint debtors.

            b) With due consideration to the evidence at hand, the Court is sufficiently convinced that [Seller] is able to bear rights on its own behalf. This question must be answered under the law of the Republic of Italy which had to be determined to the discretion of the Court under 293 ZPO [*] (BGH [*] WM [*] 1997, 1245 (1246); Zöller/Geimer, ZPO, 19th ed., 293 para. 20).

[Seller] acts in the form of legal entity "società in nome colletivo", whose provisions are codified in Art. 2291 et seq. C.c. [*]. This type of corporation usually corresponds to a partnership (cf. the bilingual edition of the C.c., published by Athesia-Verlag). In accordance with Arts. 2298, 2293 and 2266(2) C.c., such a corporation is able to exercise legal rights on its own behalf through its managing partner. These findings correspond to information provided by the Embassy of the Federal Republic of Germany on 10 November 1997 and are further supported by Hoffmann, Gesellschaftsrecht in Italien, p. 54.

      4. [Seller]'s claim against [Buyer] has become mature. This follows Art. 58(1) in conjunction with the second alternative of Art. 59 CISG. Generally, payment of the purchase price is due when the seller passes the goods to the buyer. However, the time of maturity may also be otherwise appointed by the parties. This was effected by virtue of the invoice dated 17 October 1996, which determines a target period of sixty days. It can be assumed that [Buyer] tacitly accepted that proposal.

      5. [Seller] rightfully demands payment by [Buyer] in Italian currency. It need not be determined whether this result follows Art. 57(1)(a) CISG founded on Art. 7(2), first alternative, CISG (Magnus, RabelsZ [*] 53, 116 et seq., 130) or whether a determination must be made under Art. 7(2), second alternative, CISG and rules of private international law (Schlechtriem/Herber, Art. 7 para. 39). Following the first notion means considering the law of the seller as relevant. Under the second notion, it must be geared to Arts. 27, 28 EGBGB [*] with the consequence that the legal presumption of Art. 28(2)(1) EGBGB will be applied because the seller is the party effecting the characteristic performance (Schlechtriem/Herber, Art. 7 para. 32). According to Art. 1277 C.c. [*], monetary debts must be paid in Italian lira. This corresponds to information provided by the German Embassy on 10 November 1997.

      6. The claim for interest is well-founded under Art. 78 CISG in conjunction with Art. 1284 C.c. The claim for the purchase price has been subjected to interest by the time of its maturity (cf. Schlechtriem/Eberstein/Bacher, Art. 78 para. 10). The question as to the relevant interest rate is not regulated by the CISG and therefore to be settled under the premise presented under the abovementioned item 5. This means that provisions of the seller's law will be relevant. The interest rate is designated by Art. 1284 C.c., which provides for 5 % per annum.

B. [No set-offs in favor of Buyer]

Moreover, the claim for the purchase price has not partially perished by way of a set-off.

      1. However, a set-off is not excluded by Art. 6 No. 3 Brussels Convention under the assertion that the claim employed in order to justify the set-off would not be connected to [Seller]'s claim at hand. The notion of connection underlying Art. 6 No. 3 Brussels Convention does not apply to a set-off (EuGH [*] NJW [*] 1996, 42 et seq.; of different opinion: BGH [*] NJW 1993, 2753). Its admissibility as a procedural defense must be determined under domestic (procedural) law (EuGH, ibidem).

      2. Any possible damages claims which could be derived from Arts. 3(1), 35, 45(1)(b), 74 CISG do not exist in favor of [Buyer] against [Seller]; failing any submissions to the contrary, the Court assumes that [Buyer]'s assertions refer to goods which were to be manufactured from the products delivered by [Seller], meaning that the CISG is applicable under its Art. 3(1).

However, [Buyer] will be able to establish rights from non-conformity of the goods only if it has examined the goods in due time and given notice of non-conformity within a reasonable time, Art. 38(1), 39(1) CISG.

The [Defendants], bearing the burden to prove that timely notice of non-conformity had been given, have failed to substantiate such notice. They are relying on notices which had been given to Witness Höger. In light of the apparent and demonstrated circumstances, the Court is not sufficiently convinced ( 286 ZPO [*]) that Witness Höger had acted as agent for [Seller], meaning that notices given to that person would have been apportioned to [Seller]. It has not been demonstrated before the Court that Witness Höger forwarded any notices of non-conformity to [Seller] within the required time.

            a) In order to determine whether Witness Höger acted as an agent for [Seller], the applicable law on agency is relevant. That law governs any questions concerning the granting and the extent of authority (MüKo/Spellenberg, vor Art. 11 EGBGB [*] para. 262). The impact statute will be insofar relevant. It means that it must be geared to the law of that country in which the authority will be effective (MüKo/Spellenberg, vor Art. 11 para. 249). In order to do so, it must be geared to the law of the place where the agent actually uses his authority (MüKo/Spellenberg, vor Art. 11 para. 257). The place of use is determined by the place of its receipt (MüKo/Spellenberg, vor Art. 11 para. 258).

Therefore, the law at the residence of Witness Höger must be considered, being German law. This means that the burden of proof for a certain power of authority of the addressee of a declaration of intent is on the party relying on its existence (cf. Palandt/Heinrichs, 164 para. 18 with further references). The burden of proof is thus on [Buyer]. However [Buyer] failed to substantiate its allegations.

The result that Witness Höger acted not as agent for [Seller], but for [Buyer], is corroborated by [Buyer]'s letter to [Seller] dated 20 December 1996 in which Witness Höger is referred to as "our agent". The object of the proceedings before the District Court Neukölln, case docket 11 b C 146/97, which Witness Höger initiated against [Buyer], had been her claim for payment of provisions from her acting for [Buyer] and against foreign producers, among them [Seller]. In this dispute, the plaintiffs inter alia submit that Witness Höger had observed Italian producers. However, the corresponding task cannot be effectively rendered if the observing person acts as agent of the party to be observed. Finally, Witness Höger testified that she acted against [Seller] as an agent for [Buyer] rather than an agent for [Seller] against [Buyer].

            b) Finally, a factual basis is neither apparent nor was it substantiated that [Seller] had tolerated a conduct of Witness Höger in a way that it let her appear as an agent or in such a way that any such appearance by Witness Höger could have been attributed to [Seller].

C. The decision on costs and expenses is based on 92(2), 269(3) ZPO [*]. The decision on preliminary enforcement follows 709(1) ZPO (concerning the composure of the decision on preliminary enforcement, cf. KG [*] NJW [*] 1977, 2270).


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Italy is referred to as [Seller] and Defendant No. 1 of Germany is referred to as [Buyer]. Amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM]. Amounts in the former currency of Italy (Italian lira) are indicated as [Lit].

Translator's note on other abbreviations: BGBl = Bundesgesetzblatt [German Federal Law Gazette]; BGH = Bundesgerichtshof [German Federal Supreme Court]; BGHZ = Entscheidungen des Bundesgerichtshofes in Zivilsachen [Collected decisions of the German Federal Supreme Court in Civil Matters]; C.c. = Codice civile; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; EuGH = Europäischer Gerichtshof [European Court of Justice]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [German law journal]; RabelsZ = Rabels Zeitschrift für ausländisches und internationales Privatrecht [German law journal]; WM = Wertpapiermitteilungen [German law journal on bonds]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].

** Jan Henning Berg is a law student at the University of Osnabrück, Germany and participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück.

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