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CISG CASE PRESENTATION

Germany 15 November 1998 District Court Karlsruhe (Steel case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981115g1.html]

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

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Case identification

DATE OF DECISION: 19981115 (15 November 1998)

JURISDICTION: Germany

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

JUDGE(S): Dr. Morawietz, Horn, Wilser

CASE NUMBER/DOCKET NUMBER: O 39/89 KfH III

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: Steel


Classification of issues present

APPLICATION OF CISG: CISG applicable to formation issue; ULIS applicable to other issues

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 14 ; 74 [ULIS precedent]

Classification of issues using UNCITRAL classification code numbers:

14A1 [Basic criterion for an offer (intention to be bound in case of acceptance): definiteness of key conditions];

74A [General rules for measuring damages: loss suffered as consequence of breach]

Descriptors: Formation of contract ; Damages

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Editorial remarks

Issues addressed in this case include CISG article 14 and ULIS articles 18, 39, 41, 71, 72, 82, 83. The ULIS articles are antecedents to CISG provisions. To assess the extent to which the counterpart provisions track one another, go to:

-   Match-up of CISG article 30 [Summary of the seller's obligations] with ULIS article 18
- Match-up of CISG article 39 [Notice of lack of conformity] with ULIS article 39
- Match-up of CISG article 58 [Time for payment; Inspection of goods] with ULIS articles 71, 72
-   Match-up of CISG article 45 [Remedies available to buyer] with ULIS article 41
- Match-up of CISG article 74 [General rule for measuring damages] with ULIS article 82
- Match-up of CISG article 78 [Interest on sums in arrears] with ULIS article 83.

The source of this concordance is Honnold, Documentary History of the Uniform Law for International Sales, Kluwer Law International (1989) 10-11.

Of the above, the damages match-up is especially relevant as CISG article 74 and ULIS article 82 are substantively the same.

Albert H. Kritzer, Editor

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-online.ch database <http://www.cisg-online.ch/cisg/urteile/620.htm>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

District Court (Landgericht) Karlsruhe

15 November 1998 [O 39/89 KfH III]

Translation [*] by Julian Waiblinger [**]

JUDGMENT IN THE NAME OF THE PEOPLE

The third chamber for commercial matters of the District Court (Landgericht) Karlsruhe [...] ruled:

  1. The Defendant [buyer] is adjudged to pay to the Plaintiff [seller] 14,950.02 Deutsche Mark [DM] along with interest amounting to 1% above the discount rate according to the Deutsche Bundesbank of 799.02 [DM] since 15 November 1987 and of 14,151.00 [DM] since 15 January 1988.

  2. The [seller]'s further claim is dismissed.

  3. The [seller] bears 2%, the [buyer] bears 98% of the costs of litigation.

  4. The judgment is provisionally enforceable against security amounting to 20,000.00 [DM]. The security can be provided by way of an unlimited absolute suretyship of a domestic bank authorized as guarantor for tax or customs duty debts.

I. FACTS OF THE CASE AND PLEADINGS OF THE PARTIES

The [seller], an Italian steel producer claims purchase-money payments from the [buyer], a German company trading in steel, for deliveries of steel, namely according to an invoice of 26 October 1987 (annex K1 and K2):

-   22.06 t of U-steel @ 550.00 [DM] each . . . . . . . . . . . . 12,133.00 [DM]
-   1.56 t un-isosceles angle irons @ 670.00 [DM] each . . .   1,045.20 [DM]
-   Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        60.00 [DM]
-   Altogether . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,238.20 [DM]
-   Charges deducted for 22.06 t of U-steel,
the redelivery of which was agreed upon. . . . . . . . . . . . .
12,133.00 [DM]
-   Residual claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
according to invoice of 7 December 1987 (annex K4 and K5):
  1,105.20 [DM],
17 t of U-steel @ 550.00 [DM] each. . . . . . . . . . . . . . . 14,091.00 [DM]
-   Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        60.00 [DM]
-   Altogether . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,151.00 [DM].

The resulting total claim amounting to 1,105.20 [DM] + 14,151.00 [DM] = 15,256.20 [DM] was claimed by the [seller] who alternatively raised two further claims:

-   Additional transport costs, which are alleged to
have arisen due to the fact that the [buyer], at the
occasion of the back haul, did not notify the [seller]
that the material was not stored completely in Worms
but in parts also in Ludwigshafen/Rhein . . . . . . . . . . . . . .
   500.00 [DM]
-   Incomplete redelivery of the 22.06 t of U-steel:
deficiency 1.65 t @ 550.00 [DM] each. . . . . . . . . . . . . .
   907.50 [DM]
-   Altogether . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,407.50 [DM].

The [seller] petitions to have the Court order the [buyer] to pay to the [seller] 15,256.20 [DM] along with interest amounting to 1% above the discount rate of the Italian national bank of 1,105.20 [DM] since 15 November 1987 and of 14,151.00 [DM] since 15 January 1988.

The [buyer] petitions to dismiss the claim. The [buyer] denies that the [seller] is the creditor of the claims put forward; the contract for supply of goods underlying the invoices had not been concluded with the [seller] but with the [...] limited liability company [...]. As for the rest, the [buyer] pleads that the [seller] failed to enclose a manufacturer's certificate for the delivery of steel as agreed. Moreover, the [buyer] claims the following counterclaims by way of set-off:

-   Damages for non-replacement of 22.06 t of faulty U-steel which were delivered and returned subsequently; after having fixed a final deadline in combination with the threat of repudiation of contract and a covering purchase (writing of 14 November 1988), the [buyer] having given notice of cancellation by way of telex of 21 November 1988.
 
- With respect to the covering purchases that took place, the [buyer] had issued invoice No. 1372 of 7 December 1988 which established damages amounting to 5,060.00 [DM].
 
- Damages for costs (amount of work done, postage rates, telex and telephone charges) in connection with the settlement of the faulty delivery of the 22.06 t of U-steel according to "charge" No. 1340 of 14 November 1988 amounting to 5,129.02 [DM] and "charge" No. 1399 of 31 December 1988 amounting to 985.00 [DM].
 
- Damages for non-delivery of the order of 7 March 1988 subsequent to an offer by the company to the [seller] of 3 March 1988.
 
- According to invoice No. 1341 of 14 November 1988 the damage amounted to 4,500.00 [DM] (difference between the contractual and the covering purchase price).

Moreover, the [buyer] denies the justification of the claim put forward by the [seller] alternatively amounting to 500.00 [DM] (additional transport charges) and 907.50 [DM] (lack of 1.65 t regarding the 22.06 t of U-steel that were returned): With respect to the redelivery of the 22.06 t of U-steel which were resold to a customer in Worms, the [buyer] had initially assumed that the goods to be redelivered were stored in Worms; by the time the [buyer] had afterwards learned that 6 t of the delivery had already been segmented and were placed in Ludwigshafen, the [buyer] had notified the company that very same day by way of telex.

The alleged shortfall regarding the redelivery is denied; as for the rest, the material had been defective and ready for the scrap heap. The [seller] regards the counterclaim put forward by the [buyer] by way of set-off as unjustified: The alleged covering purchase as a substitute for the 22.06 t of U-steel that were taken back is denied; apart from that, the [buyer] was not entitled to a claim for additional supply since the parties had insofar agreed on the cancellation of contract and, moreover, the deficiency claim regarding the 22.06 t of U-steel had not met the requirements of Art. 39(2) ULIS [*]; only for the sake of fairness had the [seller] agreed to take back of the material. The claim for costs regarding the redelivery of the 22,06 t of U-steel is denied. A claim based on the order of the [buyer] of 7 March 1988 did not exist as the earlier "offer" by company [...] of 3 March 1988 which did not offer a certain quantity of goods did not constitute a contractual offer within the meaning of Art. 14(1) of the relevant United Nations Convention on International Sale of Goods (hereinafter CISG). Moreover, the [buyer]īs order regarding the measures of the iron angles to be delivered did essentially differ from the "offer" by the company; the company [...] did not have the power of representation for the conclusion of a contract as questioned here.

For further details of the submissions of the parties, reference is made to the submitted written pleadings including annexes. Since the [buyer] was not represented by an attorney at law at the final hearing before the Court on 25 October 1989, the [seller] petitioned the Court to adjudicate the case on the record according to § 251 a ZPO [*].

II. REASONS FOR THE DECISION

The [seller]'s claim amounting to 14,950.02 [DM] along with interest is legally justified.

The [seller] is entitled to the remaining purchase price of the delivery of October 1987 amounting to 1,049.02 [DM] deducting a counterclaim of the [buyer] amounting to 250.00 [DM] for expenses incurred in connection with the handling of the faulty delivery of the 22.06 t of U-steel; that comes to a still outstanding amount of 799.02 [DM]; the further claims by the parties based on the delivery of October 1987 are not legally justified. The [seller] is entitled to a purchase-money claim amounting to 14,151.00 [DM] stemming from the delivery of December 1987. The damage claim based on the order of 7 March 1988 put forward by the [buyer] by way of set-off is not legally justified.

It is to be elaborated on the following issues:

     1. The [seller] is a party to the contract with the [buyer] with respect to the deliveries at issue of October and December 1987. Certainly, the order No. 6767 of 16 October 1987 (annex B 1) of the [buyer] on which the deliveries are based, is not addressed to the [seller] as the producer but to company [...] in [...], and also the acceptance of the order by way of telex of 22 October 1987 (annex B 1) stems from the company [...]. Considering the circumstances at present, it can only be inferred from the explanations that the [seller], being the producer was supposed to be the seller. As put forward undisputedly by the [seller], it used to be common practice between the parties that the relevant order was directed towards company [...] or company [...] whose subagent the company was, whereas the invoice was then presented by the Italian supplying factory - the company [...], the company [...] or the [buyer].

With a brief lodged on 23 October 1989 - two days before the final hearing - the [buyer] gave explanations regarding the price regulations according to the European Coal and Steel Community and the pricing with respect to the deliveries at issue, apparently to show that not the Plaintiff but the German company [...] was intended to be the party to the contract on the part of the seller. This new submission, however, is not understandable for the Court in detail (for example the term "factory-dimension-extra-charges" which is unknown to the Court is mentioned twice in the brief); apart from that, a possible violation of certain provisions of the Treaty of the European Coal and Steel Community would not be essential considering the generally unambiguous meaning of the invoicing in respect of the determination of the seller customary in trade.

As for the rest, the cited pleadings of the [buyer] are dismissed for grossly careless delay according to § 296(1) s. 2 ZPO [*]. The issue of the right of action as the proper party of the [seller] was controversial from the beginning in the present litigation. As a consequence, the circumstances put forward by the [buyer] now should have been pleaded already in the first or second brief, at any rate, however, in the brief subsequent to the Court Order of 5 July 1989 (compare section 1 a of the order).

     2. The claims and counterclaims in connection with the deliveries of October and December 1987 keep to the regulations of ULIS which is based on the Hague Convention on the Sale of Goods. Italy was a Contracting State to this Convention until the end of 1987.

a) Apart from the counterclaims put forward by the [buyer], the [seller] is entitled to the remaining purchase price amounting to 1,049.02 [DM] for the delivery of October 1987. The invoice of 26 October (annex K 1 and K 2) amounts to 13,238.20 [DM]. The position "22.06 t U-steel", for which the [seller] had charged 12,133.00 [DM], was withdrawn from the goods delivered by mutual consent. This amount to be deducted has to be raised by the proportionate transport costs, namely 60.00 [DM] x 22.06 t: (22.06 t + 2.5 t) = 56.18 [DM]. The remaining purchase money claim therefor amounts to 13,238.20 [DM] - 12,133.00 [DM] - 56.18 [DM] = 1,049.02 [DM].

b) The purchase-money claim for the delivery of December 1987 undoubtedly amounts 14,151.00 [DM]. This claim fell due subsequent to the delivery of the steel. The submission of the [buyer] put forward with the written pleading of 19 June 1989, page 3, saying that the certificates belonging to the goods were due until today, does not conflict with that. The above-mentioned submission of the buyer is not sufficiently substantiated. It cannot be concluded whether the lack of certificates regarding the delivery of October 1987 or the delivery of December 1987 or regarding both deliveries are subject to the rebuke (the brief of 19 June 1989 mentions still outstanding certificates in connection with the claim for subsequent delivery after the delivery of the rusty steel which seems to suggest a connection with the faulty delivery of October 1987). Despite the Court Order of 5 July 1989 (section 1 b), the [buyer] did not even later put the submissions in concrete terms.

Apart from that, a failure to send the corresponding certificates would not have hampered the subsequent maturity of the purchase money claim. According to Arts. 71, 72 ULIS, the maturity of the purchase price only depends on whether the goods to be delivered were tendered to the buyer or handed over for shipment by the seller. The provisions of ULIS do not require that possible certificates belonging to the goods need to be surrendered with the goods; however, it has to be taken into consideration that otherwise, with respect to the seller's duties to deliver, ULIS differentiates between the sold "goods" and the handing over of the relevant "certificates" (compare Art. 18 ULIS). In the case at hand, it can be left open as to whether the provisions of Art. 71, 72 ULIS are to be construed equitably, namely that the principal of mutual performance laid down there also includes such certificates belonging to the goods without which the disposal or the use of the goods was impossible or essentially impaired. The [buyer], however, did not put forward anything in that respect (despite the court order of 5 July 1989, section b). A counterclaim of the [seller] for the failure to deliver subsequently to the delivery of the defective 22.06 t of U-steel which was returned later, is not legally justified. The [buyer] in so far failed to particularize the existence of a damage. In the brief of 3 March 1989, the [buyer] alleged "covering purchases" which were carried out initially and submitted the calculation of damage No. 1372 of 7 December 1988 (annex B 4), assessing a difference between the "cash price according to telex No. 9868" (the [buyer] probably means an alleged covering-purchase price; telex No. 9868 has not been submitted to the court) and the "cash price according to our order No. 6767" amounting to 230,000 [DM] per ton.

When the [seller] then denied a covering purchase, the [buyer] with the following brief of 16 June 1989 submitted a writing of the company (Munich) in which the delivery of October 1987 was offered at a price of 510,000 [DM] per ton (annex B 12). This price ranges under the agreed purchase price between the parties of 550.00 [DM] per ton.

d) A counterclaim of the [buyer] for the costs in connection with the handling of the defective delivery of the 22.06 t of U-steel of October 1987 is essentially justified. The defect "rust" primarily put forward by the [buyer] is undisputed between the parties. The defect was also notified in a way meeting the requirements of Art. 39 ULIS.

As can be inferred from the listing of the measures of the [buyer] submitted with the [buyer]īs brief of 19 June 1989, the delivered steel was unloaded on 27 October 1987. In the evening of 28 October 1987, the following day, the [buyer] "informed" the company as to the "situation at present", pointing to "rust" and recommending examination as soon as possible. This sequence of events was not denied by the [seller] substantively. The delivery of defective goods constitutes a breach of contract which establishes the seller's liability for damages according to Art. 41(2) ULIS (even if the avoidance of contract has been declared). This liability for damages also includes costs which arose for the buyer at the occasion of the reversed transaction of the defective delivery.

The pleading of the [buyer] regarding the amount of damages to compensate is insufficient. Neither the "charges" of 14 November 1988 (annex B 2) and 31 December 1988 (annex B 4) nor the subsequently submitted "listing with respect to invoice No. 1340 of 14 November 1988" (annex B 13) contain particulars regarding the costs that effectively accrued (telephone and telex charges amongst others). It is not even sufficiently clear which treatments were a necessary consequence of the defective delivery. Some positions, as for example "proportionate freight charges", "demurrage" and "damage certificate" are not understandable whatsoever without further explanations. In the "charge" of 14 November 1988, the [buyer] refers to annotations to various annexes which, however, were not submitted to the Court. Not even here did the [buyer] complete the insufficient pleading despite the Court Order of 5 July 1989 (section e). Under these circumstances, the Court cannot assess the damage according to § 287 ZPO [*] at more than 250,000 [DM]. The amount of work done, laid down in the "charges" of the [buyer] cannot be compensated. It concerns shorter, "in between treatments" which do not necessarily allow the conclusion that the additional work caused pecuniary loss to the [buyer].

e) The pecuniary claims put forward alternatively by the [seller] amounting to 500.00 [DM] for alleged additional transport costs at the occasion of the taking back of the 22.06 t of U-steel and 907.50 [DM] for an alleged shortage of 1.65 t allegedly ascertained at the occasion of the redelivery are not legally justified. With respect to the additional transport charges, it can be assumed according to the undisputed submissions of the [buyer] that the [buyer] promptly notified the company [...] after having learned that the material to be collected was not stored at the agreed place in Worms anymore. As for the rest, the [seller] did not explain in which way transport charges could have been saved had the [buyer] given notice earlier. As regards the alleged "non-redelivery" of 1.65 t of U-steel, an explanation of a thereof resulting damage is lacking, regardless of whether a quantity is missing at all. The [buyer] irrefutably put forward that the whole delivery of U-steel was that rusty that it had only scrap value anymore.

     3. Furthermore, the [buyer]īs set-off damage claim for non-delivery in connection with the order of the buyer of 7 March 1988 (annex B 7) is not legally justified. In so far, a valid contract of sale is lacking as the "offer" by company [...] of 3 March 1988 (annex B 6) which preceded the order of the buyer was not a binding contractual offer. As laid down in detail by the [seller] in the brief of 27 July 1989, the contracts of sale between an Italian and a German company keep to the regulations of the United Nations Convention on the International Sale of Goods (hereinafter CISG, published in BGBl. [*] 1989 II p. 586) since 1988. According to Art. 14 CISG, the proposal for concluding a contract constitutes an "offer" if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. Such a proposal is sufficiently definite if it, inter alia, expressly or tacitly contains the quantity to be delivered. The writing of the company of 3 March 1988 does not meet this requirement. The writing only mentions the kind of devices to be delivered and the price, though it does not mention the corresponding quantity. As already due to this fact, a binding contract is not at hand. The further objections of the [seller] in that respect (denied power of representation of the company for a binding offer of the kind; partial divergence between the subsequent order of the [buyer] and the offer of the company [...]) can be ignored completely.

     4. According to Art. 83 ULIS, the seller can claim interest for late payment from the date of maturity of the purchase price regarding the amount not paid amounting to 1% of the official rate of discount of the country in which the seller has his place of business (in the case at hand: the official Italian discount rate). However, according to the adjudication of this Court, Art. 83 ULIS is to be interpreted in accordance with its ratio legis and its purpose. Therefore, in cases where the seller claims payment in the currency of the buyer-country (as in the case at hand: Federal Republic of Germany), the authoritative discount rate is the rate of that country (Germany) and not of the seller-country (Italy). This is to avoid an unjust enrichment of the buyer due to the possibly higher inflation rate in the seller-country: by payment in the buyer's own harder currency, the buyer consequently makes exchange profits possible for the seller and at the same time has to pay interest at the higher interest rate of the seller-country which is just a consequence of the higher inflation rate there which again normally comes along with a collapse of prices of the seller's currency in relation to the buyer's currency (compare LG Karlsruhe, NJW-RR [*] 1987, p. 1145). The Appellate Court Karlsruhe (OLG Karlsruhe) did not follow the adjudication of this Court (Judgment of 27 October 1987, reference No. 8 U 43187). The Appellate Court explained that the loophole in the law considered by the District Court (Landgericht) for the justification of its broad interpretation did not exist: a) since not only a higher but also a lower inflation rate could be expected in the seller-country; this could lead to injustice to the seller. b) since the parties were free to decide in which currency to stipulate the purchase price; moreover they were able to weigh up the advantages and disadvantages considering the provision of Art. 83 ULIS. However, neither of the two arguments is convincing. The interpretation of Art. 83 ULIS of the District Court (Landgericht), namely that where payment of the purchase price takes place in the currency of the buyer-country, also the discount rate of the buyer-country could be assumed at the calculation of interest, does in the case of a lower interest rate of the seller-country not lead to inequitable result: Art. 83 ULIS only stipulates a minimum rate of the interest for late payment which does not conflict with the assessment of exceeding interest damages or loss in prices put forward conclusively by the seller according to Art. 82 ULIS. The argument of a possible farsighted contractual stipulation between the parties does not take into account that the optional statutory law of contract aims to create an appropriate and just solution especially with respect to non-existing farsighted contractual stipulations. Under these circumstances, this Court keeps to the present established case law and still assumes that in case of a purchase-money claim in the currency of the buyer-country a loophole in the law not considered by the authors of ULIS existed which needs to be filled by a ratio legis-interpretation of Art. 83 ULIS.

     5. The costs order is based on § 92(1) ZPO [*]. The orders of provisional enforceability follow from §§ 709, 108(1) ZPO.

[...]


FOOTNOTES

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

Translator's note on other abbreviations: BGB1 = Bundesgesetzblatt [Federal Law Gazette]; NJW-RR = Neue Juristische Wochenschrift-Rechtsprechungs Report [well-known German law journal]; ULIS = Uniform Law on International Sales [1964 Hague International Sales Law antecedent to the CISG]; ZPO = Zivilprozessordnung [Code of Civil Procedure].

** Julian Waiblinger, Humboldt University, Berlin, Faculty of Law since 1999; King's College, London, Diploma in Legal Studies 2001/2002.

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