Austria 15 December 1998 Supreme Court (Construction materials case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/981215a3.html]
Primary source(s) for case presentation: Case text
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 1 Ob 289/98a
CASE HISTORY:1st instance Landesgericht Salzburg [a regional court] (GZ 3 Cg 254/97b-7) 6 April 1998; 2d instance Oberlandesgericht Linz [an appellate court] (GZ 1 R 132/98g-13) 8 July 1998
SELLER'S COUNTRY: Germany (defendant)
BUYER'S COUNTRY: Austria (plaintiff)
GOODS INVOLVED: Construction materials
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
79B [Impediments excusing party from damages]
79B [Impediments excusing party from damages]
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1535.pdf>; CISG-Austria website <http://www.cisg.at/1_28998a.htm>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
15 December 1998 [1 Ob 289/98a]
Translation [*] by Tobias Koppitz [**]
Translation edited by Veit Konrad [***]
The Oberster Gerichtshof [Supreme Court], through presiding judge Dr. Schlosser as chairman and Dr. Schiemer, Dr. Gerstenecker, Dr. Rohrer and Dr. Zechner as further judges in the legal matter of plaintiffs 1. Max P*****, and 2. Maria P*****, both *****, represented by Dr. Rudolf Watschinger and Dr. Gernot Schweiger, lawyers in Ried im Innkreis, against defendants 1. M***** private limited company and 2. M***** limited partnership, the general partner being a private limited company, both represented by Lirk-Ramsauer-Perner & Partners, lawyers in Salzburg, for 2,730,000 Austrian schillings [sA] and declaration by judgment (amount in controversy 50,000 sA) following the appeal of the defendants against the decision of the Oberlandesgericht of Linz as Appellate Court of 8 July 1998, GZ 1 R 132/98g-13, by which the partial interlocutory judgment of the Landesgericht [Court of First Instance] of Salzburg of 6 April 1998, GZ 3 Cg 254/97b-7, has been reversed, has reached the following
The defendants' appeal is not followed.
The defendants jointly owe the plaintiffs the costs of the appeal, determined at 30,135.60 sA (5,022.60 sA value added tax included), payable within 14 days.
Statement of Reasons
The plaintiffs, as real estate owners, had a mining law concession for the exploitation of quality gravel and were planning the construction of a gravel and grit exploitation plant. They were also looking for a partner, who was supposed to establish on the spot a transport concrete plant for the processing of the exploited material. After an examination of the material, the "managing partner" of a limited partnership, the general partner being a private limited company, with its seat in the Federal Republic of Germany showed his interest and put a contractual concept at the plaintiffs' disposal; they handed it over to their lawyer for examination and the construction of a draft contract. As the lawyer knew about the tight financial situation of the plaintiffs, he wanted to emphasize in contrast to the concept of the negotiating party, that the establishing of the transport concrete plant and the purchase commitment had to be realized as quickly as possible. He thus constructed a draft contract, which was modified in that regard. Prior to the later agreement, the production manager of the German company already warned the manager without success, that the draft contract did not sufficiently pay attention to due changes of the market situation. On 10 May 1995, the plaintiffs concluded a written lease and grit delivery contract with the German company. Upon an agreement of 2 October 1995, the secondary defendant entered into the lease and grit delivery contract of 10 May 1995 instead of the German company, with the consent of the plaintiffs.
This contract has the following - here relevant - wording:
The ... (German company) ... intends to establish a transport concrete plant on the site of the ... (plaintiffs) ... and to obtain the supplementary goods necessary for the supply of the transport concrete plant from the lessor. The parties therefore conclude the following contracts:
1.) Lease contract
After the expiry of the time of option, the contract is extended by two years each, if the contract is not terminated obeying a time limit of nine months.
The lessor is justified to terminate the contract before the agreed date, should the following reasons be met (extraordinary right of termination):
- In case of default in payment with two consecutive installments of rent. Other rights, e.g., the compensation for damages for default, remain in existence.
- In case of the suspension of the business enterprise of the lessee, with the exemption of a company vacation.
1.7 Rent. The rent amounts to 3.50 sA per square meter monthly plus the value added tax designated for business rents of currently 20%. The evaluation of the rent has to be undertaken in accordance to the factually used area, which has to be stipulated by mutual consent.
1.16 The lessee is obliged to operate the business on the leasehold property uninterruptedly, company vacation excepted.
2.) Grit delivery contract
An annual minimum purchase quantity of 60,000 tons plus turnovers from the business with the company ... is agreed upon.
In case of non-compliance with this minimum purchase quantity, a conventional penalty in the amount of 20% of the purchase price of the reduced quantity is agreed upon.
2.2 Quality of the material. The buyer examines the quality of the material. The requirements for the processing, and/or the production of supplementary goods according to the adequate Austrian regulations B 3304 (quality grade I) have to be met.
If the material is not in conformity with the above-cited regulations, the buyer is justified to obtain the material from other suppliers, after prior complaint about the quality and the granting of an extension of time of 14 days.
2.3 Modus of delivery. The sellers commit themselves to the continuous delivery of the quantity determined by the buyer, which is adjusted to the needs and capacities of the buyer. The sellers commit themselves to permanently keep such a large quantity of raw material available on their premises, so that operational interruptions can be bridged for up to eight days. The sellers overtake the filling of the mixing facility with supplementary goods via wheel loader or conveyor belt.
2.4 Purchase by the buyer. As long as the sellers fully comply with their obligations according to subsection 3, the buyer is obliged to obtain its need of sand and grit exclusively from the sellers (under observance of 2.2).
Should the sellers not fully comply with their obligation according to subsection 2.3, the buyer is justified to satisfy its needs of sand and grit for the duration of the obstruction in another way, after a single written reminder with fixing of a period of time of 14 days.
For the duration of justified external procurement, the obligation to pay the rent according to 1.7 is cancelled.
2.5 Purchase price (including delivery). For the period of time from the beginning of the contract until March 1996 the following prices apply: For sand 0-4, 110 sA per ton; for trickle 4-8, 8-16, 16-32 65 sA per ton; each free plant and each plus value added tax.
For the period of time from April 1996 on, the price is determined by the regular prices of offer of other suppliers minus a bulk buyer discount of a maximum of 10%, provided that at least four comparative offers of Austrian suppliers within a distance of up to 100 km are to be gathered. The average price of the comparative offers gathered is to be used as the basis. Two comparative offers are to be gathered by the lessors, two by the lessee.
The adjustment takes place once a year in March of each year and applies for the current year.
The deliveries are invoiced twice a month. Payment is effected by way of crossed cheque or bank transfer to the account No. ... within eight days after receipt of the invoice with 2% discount or within 30 days without discount.
2.6 Duration of contract. This grit delivery contract is linked with the lease contract. It therefore ends at least at that time, in which the lease of the object according to 1. of this contract, which exists between the parties, ends.
2.7 Extraordinary termination. The sellers are justified to terminate the contractual relation prematurely without observance of notice periods and dates, if the buyer is in default in payment for the delivered sand and grit for a month despite prolongation of time of at least 14 days or ... .
In case of default in payment of the buyer, the sellers are furthermore justified to immediately discontinue further deliveries.
2.8 Restraint of competition clause. The sellers and their legal successors commit themselves not to allow further competing plants (transport concrete plants) on any of their properties for the duration of this contract.
3.) General final provisions
3.4 The validity of this contract is subject to the suspensive condition of the granting of all official permits for the business of the lessee. With the granting of the permits, the rent is to be paid from 1 July 1995 on. The lessee commits itself to vigorously pursue the procurement of the required permits."
At the time of the agreement, the contractual partners assumed that the German company would erect the transport concrete plant as soon as possible, start the operations, and comply with the agreed obligation to accept delivery of the goods. According to the parties' intent, the start of operations should be possible in spring 1997 the latest. The plaintiff's counsel as the drafter of the contract refrained from fixing a certain point of time for the completion of the transport concrete plant and the coming into force of the obligation to accept delivery of the goods, as such a date was not certain, due to official permits to be obtained.
In light of the lease and grit delivery contract of 10 May 1995, the plaintiffs were granted a credit in the amount of 15,000,000 sA for the erection of a gravel and grit exploitation plant; they arranged for the building of such a plant "as soon as possible" and had therefore created the prerequisites to fulfill their contractual delivery obligation. The official permits for the transport concrete mixing plant are dated 14 June 1996 (trade authority), 25 June 1996 (building authority) and 7 May 1997 (preservation authority). As the market situation in the gravel and concrete branch deteriorated "scarily" from mid-1996 on, due to decreasing demand and dropping prices, the defending parties did not vigorously make an effort to obtain the missing permit of the preservation authority, after the permits of the trade authority and the building authority had been granted. Despite the presumption that such a permit was a mere formality, so that since the granting of the other authority permits the erection of the transport concrete plant could have been started from July 1996 at the latest, the defending parties did nothing in that direction, but turned to excuses, however, without ever finally denying the erection of the plant. They doubted a report of the structural engineering experimental and research institute Salzburg of 5 December 1996, which confirmed that the quality of the material to be delivered meets the Austrian regulations B 3304 (quality grade I) obtained by the plaintiffs with the argument, that they did not have the opportunity to be present at the sampling. A second report obtained by the plaintiffs, which again confirmed the existence of quality grade I was provided on 2 April 1997. In a conversation on 16 April 1997, that a geologist and a mining inspector on request of the plaintiffs had with the manager of the defending parties and their plant manager, the managers referred to the difficult market situation and also especially to the unprofitable prices of the plaintiffs. Even though they would have agreed on the reduced prices worked out in this conversation, the defending parties still did not make any moves to erect the transport concrete plant. By letter of 5 April 1997, the counsel of the plaintiffs pointed out to their contractual partner, that due to the official permits present already since the summer of 1996 and following the first report of the mentioned structural engineering experimental and research institute, the plant could in any case have been completed by the beginning of 1997, so that from then on the contractual obligation to accept delivery of the goods applied. In the letter of reply of 7 May 1997, the defending parties referred to an allegedly still outstanding building permission and to guarantees, which had to be provided by virtue of official imposition, for the financing of the deconstruction of the plant and the removal of the concrete foundation in case of a close-down of business. After the defending parties did not undertake anything to erect the transport concrete plant and to comply with their obligation to accept delivery of the goods even after that, they were requested by the plaintiff's letter of 21 May 1997 to immediately start the building works and to confirm in writing this circumstance until the end of May 1997 the latest. This letter remained unanswered, so that the counsel for the plaintiff by letter of 10 September 1997 to the defending parties and their managers pronounced the rescission of the lease and grit delivery contract declared "the contract annulled with immediate effect" and reserved the assertion of compensation claims. Counsel for the defendant took notice of this rescission of contract by letter of 22 September 1997, however he denied compensation claims.
The plaintiffs had declared the annulment of the contract because they could not meet their financial obligations anymore due to the lack of earnings out of the agreed taking delivery of the material. A notable sale of material to third party purchasers failed, so that the plaintiffs were forced to find under pressure either a new partner instead of the secondary defendant or a real estate buyer. They finally sold the entire property intended for the gravel exploitation in January 1998. Due to the lack of the taking delivery of material by the secondary defendant, the plaintiffs' assets were at least in the time from April until the end of 1997 damaged in an amount that cannot be calculated yet.
The plaintiffs requested judgment against the defending parties for compensation of their damages calculated at 2,730,000 sA as well as 8% interest thereon from 1 November 1997 and the declaration that the defending parties are liable for future damages that would occur out of the faulty and non-performance of the lease and grit delivery contract of 10 May 1995. The plaintiffs submitted that it had been the basis of the agreement, that the defending parties would set about erecting and operating the transport concrete plant immediately after the granting of the required official permits. After the presence of the permit of the trade authority and the building authority, the erection of the plant could already have begun, as the still missing permit of the preservation authority had been a mere formality. The defending parties had not complied with their contractual obligation to vigorously pursue the granting of the permit of the preservation authority as well. They had possibly even delayed or frustrated such a permit, so that this permit - usually obtainable immediately and without any problem - had only been granted on 7 May 1997. Even after its presence, the defending parties had unmistakably expressed their lack of willingness to perform the contract within the already granted sufficient additional period of time. Had there been an immediate pursuit of the required official permit and the fast erection of the transport concrete plant, a supply of material would have been possible from the presence of the second report of the structural engineering experimental and research institute Salzburg on at the latest. Consequently, the loss in delivery of the plaintiffs until October 1997 inclusively and on the basis of the agreed annual minimum purchase quantity and a two months winter-rest amounts to 6,000 tons per month, thus 42,000 tons altogether. On the basis of a mix price of 77 sA per ton minus a saving of 12 sA per ton, this amounts to a compensable deficiency in profits of 65 sA per ton or 2,730,000 sA altogether. Due to the duration of the contract of 15 years, a legal interest exists in the declaration of the liability of the defending parties for all future damages out of the non-performance or faulty performance of the lease and grit delivery contract.
The defending parties objected that the asserted exclusive delivery right or their exclusive purchase commitment contradicted provisions of the antitrust law. They had also not taken the obligation to erect the transport concrete plant by a certain date. The lease and grit delivery contract merely served to secure the location. An obligation to erect the plant was dropped due to a dramatic deterioration of the market situation in the transport concrete branch. The excessive prices of the plaintiffs did not economically allow the erection of the plant. The grit delivery contract was invalid because it presupposes the erection of a transport concrete plant. The effectuation of the purchase commitment required the commencement of operations of the plant on the lease premises and the proof of the suitability of the grit material for the concrete production. The agreed quality was first reached according to the report of 2 April 1997, the administrative decision of the preservation authority as the suspensory condition for the validity of the contract had only been delivered on 26 May 1997. Due to the unlawful annulment of the lease contract by the plaintiffs on 10 September 1997, a purchase commitment was in any case dropped. Additionally, the claim was excessive, because an erection of the plant prior to the guarantee of quality from April 1997 could under no circumstances be considered due to the time required for that. As the grit delivery agreement did furthermore not come into effect due to the lack of the erection of the plant, the plaintiff did also not have a claim to positive interest. Besides, for the case of non-compliance with the minimum purchase commitment a conventional penalty of 20% of the sales price of the minimum quantity was agreed upon, so that a compensatory claim exceeding that was also therefore unjustified. As a consequence of an already possible request for performance, the request for declaration was inadmissible.
Decision in First Instance
The Court of First Instance pronounced that the request for performance was basically founded. Item 3.4 of the lease and grit delivery contract was to be construed in a way that the defending parties would have had to set about erecting the transport concrete plant after the presence of the official permits regardless of the market situation at that time. The defending parties could have complied with this obligation since the presence of the permit of the preservation authority - even at the granting of a short period for the obtaining of the officially required bank guarantee - at least from end of May/beginning of June 1997 on. However, they remained inactive and had explicitly referred to the frustration of the contract by letter of 22 September 1997. As the defending parties did not hold out the erection of the plant within a reasonable time despite the fulfillment of all prerequisites since the end of May 1997, the plaintiffs were justified and on account of their obligation to mitigate damages rather obliged to annul the contractual relation and to look for another partner. Even though the point of time from which damages in the plaintiffs' property were to be assumed was not yet finally clarified, the occurrence of damages caused by the default of the defending parties was already certain, because in case of the contractual commencement of the erection of the plant, the plaintiffs could have already exploited gravel sooner for the making of profits.
Decision in Second Instance
The Court of Appeal reversed this judgment and pronounced that the recourse to the Supreme Court was admissible. In a legal aspect, the Court of Appeal considered that the asserted claim for damages relied on the alleged violation of a contractual purchase commitment. As the defending parties had overtaken the rights and obligations out of the lease and grit delivery contract concluded with a German company, the question as to the applicable law is posed regardless of the seat of the defending parties in Austria, as - following the taking over of the contract - the entirety of the reciprocal rights and obligations out of the obligatory relation had been passed over to the defending parties without change of content. The taking over of the contract agreed between the German company and the second defendant with the consent of the plaintiffs has to be judged according to § 42 IPRG [*] by the provisions of substantive law of that State whose provisions of substantive law are decisive for the lease and grit delivery contract. According to § 42 IPRG, contracts of lease are subject to the law of the State, in which the immovable object to be used is situated. The provision of § 36 IPRG refers the grit delivery contract on the basis of the principle of a "characteristic performance" also to Austrian law.
As both the Republic of Austria as well as the Federal Republic of Germany acceded to the United Nation Convention for the International Sale of Goods (CISG), effective as of 1 January 1989 and 1 January 1991, the applicability of the CISG to the grit delivery contract has to be examined. According to legal literature, the CISG is applicable to contracts on necessary supplies, which commit to the delivery on demand of the party entitled, furthermore to contractual relations which provide for a delivery of goods in installments, as well as to frame agreements and options with sales law content. However, the Convention does not finally govern all rights arising out of the delivery of goods. As far as provisions are missing or certain provisions do not operate back to excluded matters and thus govern them indirectly, the excluded matters of law are to be judged by Austrian law according to the mentioned statutes regarding international private law.
According to Art. 4 CISG, the Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. As Art. 79 CISG does also contain elements to be qualified as frustration of contract, a party could only refer to this provision, but not to national provisions. According to Art. 79 CISG, a party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.
According to Art. 8(1) CISG, statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. According to Art. 8(2) CISG, if paragraph (1) is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. According to Art. 8(3) CISG, in determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
The contract to be interpreted does not determine the beginning of the purchase commitment by any date, explicitly governed is merely the beginning of the time of lease on 1 July 1995. Contrary to the opinion of the defending parties, in regard of the special circumstances of the case, the lease and grit delivery contract constitutes a uniform contractual system. The lease of fractional tracts of land of the plaintiffs' property was recognizably intended for the erection of a transport concrete plant; the effectiveness of the contract of lease was explicitly subject to the suspensive condition of the granting of all official permits required for the operation of the plant of the lessee, and the obligation to pay the rent was subject to the presence of these permits. The defending parties were furthermore freed from the obligation to pay the rent as long as the plaintiffs should not comply with their delivery commitment according to item 2.3 of the contract. On the other hand, the plaintiffs had let area with the intent recognizable for the contractual partner to create a concurrent source of income by the delivery of supplementary goods to the transport concrete plant on the object of lease. The lessees had committed themselves to obtain all supplementary goods required for the operation of the plant on the object of lease exclusively from the lessors, under penal sanction to purchase an annual minimum quantity and to vigorously pursue the procurement of the permits required for their plant. The purchase commitment referred to the time limit of 15 years imposed on the lease relation, whereas the lessees did not have a contractually agreed possibility to prematurely annul the obligation, as in item 2.6 of the contract it was merely stated that the grit delivery contract in any case ended with the termination of the lease relation. If one also paid attention to the fact that the rent of value-secured 3.50 sA per square meter and month was, according to the agreement, subject to the area factually used by the lessee and to be determined by mutual consent, there could be no doubt, that the lessees were not only obliged to vigorously pursue the procurement of the permits required for the operation of the transport concrete mixing plant, but also to immediately erect such a plant on the lease premises in accordance with the legal possibilities - thus, after the presence of the required official permits. The contractual obligation of the lessees, to obtain the official permits required for the operation of the plant as soon as possible, has not been object in itself, but was, according to the intent of the lessors recognizable for the lessees, supposed to secure the prompt erection of such a plant in order to ensure the lessors as fast and long as possible a yearly minimum purchase quantity of grit and gravel to be exploited and thus a minimum degree of utilization of their exploitation plant. The defending parties had thus been obliged to set about erecting a transport concrete mixing plant immediately after the presence of the official permits and after its prompt completion to obtain all supplementary goods required for the operation of the plant exclusively from the plaintiffs.
Even though after the granting of the permit of the preservation authority on 7 May 1997, all official permits for the plant of the lessee were present and therefore the suspensive conditioned lease and grit delivery contract gained legal validity, the defending parties had nevertheless - regardless of a respective request of the plaintiffs by letter of 21 May 1997 - refrained from immediately setting about building the concrete plant and had refused to confirm this intent in writing until the end of the month the latest. Definite building measures did not take place. The plaintiffs were not even notified about a specific date for the commencement of construction, the defending parties had rather by letter of 22 September 1997 alleged, that due to drastic changes in the building trade and the building industry, they were no longer obliged to erect the transport concrete plant and to purchase supplementary goods. The defending parties could, however, not successfully rely on a frustration of contract as a consequence of a changed market situation. They had not submitted, in the sense of Art. 79 CISG, that they had been unable at the time of the conclusion of the lease and grit delivery contract to take into account a change in the market situation. The production manager had rather explicitly warned the manager of the German company and the first defendant prior to the signing of the contract, that the intended agreement did not sufficiently pay attention to due changes in the market situation. The defending parties were thus in any case denied reliance on a changed market situation as a reason for the annulment of the contract, because the long-term contract for the purchase of a minimum quantity of gravel and grit here relevant had been unreservedly concluded, regardless of this warning. The same results from the grounds of the doctrine of the frustration of contract according to purely national law and its adjudication, as the contractual basis only comprises its typical legal prerequisites. These are those, which everybody relates to a certain legal act and which do not need a special agreement first. They have to be distinguished from the individual prerequisites, which could only come into effect as explicit conditions, due to the irrelevance rule of section 901 second sentence ABGB [*]. Only the cessation of a (typical) prerequisite, which both parties together presumed at the conclusion of the contract, thus "an imagination of the existence or the occurrence of certain circumstances, which became obvious at the conclusion of the contract and which were understood in their meaning by the other party", which was the basis of the contract, could be judged as frustration of contract. On the contrary, circumstances in the sphere of interest of the party, which relies on the changed situation, do not belong to that. After all, the change in the contractual basis had to be unpredictable for the person asserting its cessation. Frustrated expectation concerning the development of a shopping centre (SZ [*] 59/17), the economical situation (MietSlg [*] 34, 129), a change of commodity prices, a decrease of purchasing power and down-sizing of companies (MietSlg 29, 102) do not justify an annulment of contract. This is also decisive here, because the mistake about the predictable future change of the economic trend in the building trade is nevertheless an immaterial mistake as to motivation. If a party unconditionally concludes a contract regardless of such a possibility of change, that party bears the risk of the cessation of such a "contractual basis" (cf. SZ 59/17). The lease and grit delivery contract of the parties in dispute only takes into account a change in demand in the trade sector insofar as the price for the supplementary goods from April 1996 on would have had to orientate itself at the prices of other suppliers influenced by the respective economic trends.
According to § 30(a) KartG [*], vertical distribution ties are contracts between a binding entrepreneur and one or more economically independent bound entrepreneurs, through which the latter are limited in the purchase and distribution of goods or in the requisition or performance of services. The lease and grit delivery contract is such a vertical distribution tie, as the defending parties are limited in the purchase of supplementary goods for the transport concrete plant due to their contractual purchase commitment.
According to § 30(b) KartG, the binding entrepreneur has to give notice of vertical distribution ties to the Cartel Court prior to their implementation. According to § 30(c)(2) KartG, the Cartel Court has to interdict the implementation at the request of one person, should the prerequisites of § 30(c) KartG be met. According to § 30(d)(1) KartG, the complete or part implementation of a vertical distribution tie is forbidden, as far as the Cartel Court has interdicted it by way of absolute decree or by interlocutory injunction. According to § 30(d)(2) KartG, such distribution ties are invalid, as far as their implementation is forbidden.
Due to the lack of a precise presentation, it is to be assumed here, that the vertical distribution tie of the parties in dispute was not interdicted by the Cartel Court, but that it was also not notified about it. Thus, the question - not yet answered by the adjudication, controversially answered by legal writers - of the civil law consequences of an omitted notice, is posed. According to a part of the legal writers, material contracts are provisionally invalid due to the intent of the obligation to give notice; another part of the legal writers treats the obligation to give notice as a pure administrative rule. Thus, according to § 142 Z 1(a) KartG, the omission to give notice could lead to the imposition of a regulatory fine, however without touching the civil law validity of the agreement, because § 30(d)(2) KartG links the civil law nullity to an interdiction of implementation and the obligation to give notice also applies to such vertical distribution ties, which on the one hand lack an interdiction reason and where on the other hand it would often be "unreasonable" to sanction the mere violation of the obligation to give notice with civil law nullity. Due to the unambiguous statutory language, the latter opinion is to be preferred. The omitted notice of a vertical distribution tie therefore does not lead to civil law invalidity of an agreement, whose implementation has - as is the case here - not yet been interdicted by the Cartel Court.
Since the coming into force of the agreement on the European Economic Area on 1 January 1994, the European provisions regarding Cartel law are directly applicable and mandatory also in Austria. Art. 53 EWRA [*] corresponds in its wording with Art. 85 EG-V [*]. Its competition code is therefore also in Austria unrestrictedly applicable since 1 January 1994 (EvBl 1997/171 with further reference). However, Art. 85 EG-V is only applicable if a measure impairs or is suitable to impair the trade between contracting states (intergovernmental clause). The defending parties have not even alleged this in first instance, even though the Republic of Austria had already been a member of the European Economic Area and the European Union at the time of the end of the oral hearings of first instance. The defending parties did also not doubt that on the basis of the petty announcement of 3 September 1986 ABl C 231/2 the agreement to be judged here does not fall under the interdiction of Art. 85(1) EG-V.
Regardless of that, it cannot be finally judged yet, since when the defending parties would have had to comply with their purchase commitment of supplementary goods in compliance with the lease and grit delivery contract. In contrast to the opinion of the Court of First Instance, the defending parties were neither justified nor obligated to erect the plant prior to the effectiveness of the lease and grit delivery contract, which only became effective by the permit of the preservation authority to erect a transport concrete mixing plant by decision of 7 May 1997. The defending parties rather could and had to set about the erection of the plant only after the presence of the permit of the preservation authority and after the bailment of the deposit imposed by the appropriations committee. In that regard, the discussion of questions relevant to the issue had been omitted in the proceedings in first instance. It has to be investigated, what period of time for the erection of the officially authorized plant would have been necessary, as far as the defending parties would have vigorously pursued it. It is obvious, that such a plant could equally not be erected overnight. It requires supplementary findings as to the need of time for the erection of the officially authorized plant for the clarification of a violation of the contractual purchase commitment in the period of time from April until October 1997, which is the basis of the performance claim. In the light of the presentation of the plaintiffs, that the defending parties had not pursued the granting of the permits of the preservation authority with the required vigor, another question not finally answered by the Court of First Instance gains importance, which is if and how much in advance the permit of the preservation authority could have been granted, should the defending parties have pursued the granting of the said permit - in accordance with the explicit agreement in the lease and grit delivery contract. Only after such findings it will be answerable, whether the defending parties will be liable for the non-performance damage - also disputed in its amount - following the violation of a purchase commitment in the months April to October 1997, while the agreement of a contractual penalty does not exclude the claiming of an exceeding damage according to Art. 8 No. 3 EVHGB [*].
Reasoning of the Supreme Court
The recourse is admissible; it is however not justified.
The asserted defectiveness of the appellate procedure is not present, which according to § 528a ZPO [*] in connection with § 510(3) ZPO does not require any further reasoning. In the recourse procedure, the defending parties do not keep up their previously supported position that the basis of the lease and grit delivery contract of 10 May 1995 had ceased to exist. Insofar, it can be referred to the - also with regard to the conflict of laws - adequate statement of reasons of the Court of Appeal. It has to be emphasized, that it does not make any difference in the end, whether the in that regard decisive questions of law have to be judged according to the United Nations Convention for the International Sale of Goods of 11 April 1980 BGBl [*] 1988/96 or according to purely national civil law, because the frustration of contract has to be denied in any case after the established circumstances of the particular case, no matter what legal basis has to be consulted.
In their appeal the appellants firstly oppose the opinion of the Court of Appeal, that the permit of the preservation authority of 29 September 1997 "for the erection of a building plant above ground" (gravel manufacturing plant) on premises of the plaintiffs (attachment D) could not be considered as a suspensory condition for the validity of the lease and grit delivery contract of 10 May 1995, as the defending parties had brought forward this permit as an inadmissible novelty in the procedure of second instance only. The appellants are eager to portray this argument as a significant "legal objection", because the plaintiffs could not have set about the erection of the gravel exploitation plant prior to 29 September 1997 and thus the supply of a transport concrete plant of the defending parties with supplementary goods would not have been possible in the period of time from April to November 1997:
This argument cannot be successful, as it is established, that because of the lease and grit delivery contract of 10 May 1995 the plaintiffs were granted a credit in the amount of 15,000,000 sA for the building of a gravel exploitation and grit plant, that they erected such a plant (afterwards) "as soon as possible" - and thus obviously even before the granting of the permit of the preservation authority - and that by doing so they created the prerequisites for the fulfillment of their contractual delivery commitment. Through that, however, - lacking restrictive findings of facts - the performance ability of the plaintiffs has to be assumed. Facts and circumstances, which could have opposed such findings, would have had to be alleged and proven by the defending parties already in the proceedings of first instance. Only then would the plaintiffs have had to present - according to their submission in the appellate proceedings - that the permit of the preservation authority for the erection of their gravel manufacturing plant, after the (only) hearing of 27 February 1996, being the basis for the passing of the order, would have been obtainable substantially sooner without any problem, if the defending parties had obtained the permit of the preservation authority for their transport concrete plant following their efforts in conformity with their contract.
It has to be concurred with the Court of Appeal in the point that the lease and grit delivery contract of 10 May 1995 stipulates a vertical distribution tie in the sense of § 30(a) KartG [*]. In the opinion of the appellants, prior to its notice to the Cartel Court, such a distribution tie is ineffective with regards to civil law. They do not allege, however, that the vertical distribution tie by virtue of the lease and grit delivery contract of 10 May 1995 violates the interdiction of Art. 85(1) EG-V [*] due to the inapplicability of the petty announcement of the commission of 3 September 1986 ABl C 231/2. Furthermore, no facts have been submitted in the proceedings of first instance that could suggest an inapplicability of the cited petty announcement. Such facts and circumstances have also not appeared in the proceedings for the introduction of evidence.
The facts of the case to be judged here do also not underlie the executive order of the federal Minister of Justice regarding the exemption of vertical distribution ties BGBl [*] 1995/148 in the version of BGBl 1995/868. As far as this source of law according to § 1 Z 2 also refers to the executive order (EWG) No. 1984/83 of the commission of 22 June 1983 regarding the applicability of Art. 85(3) EG-V to groups of solus agreements ABl L 173/5, its applicability is frustrated by the fact, that this executive order regarding the group exemptions after an announcement of the commission of 3 September 1986 in the valid version (printed under consideration of an announcement of change with indications to the announcement in Roniger/Punz, Das österreichische Kartellrecht <1996> 191 et seq.; cf. also SZ [*] 69/238) does not apply to agreements regarding the delivery or the supply of goods, which the obtaining contractual partner processes or reprocesses or which he - as is the case here - uses or consumes at the manufacturing of other products (Roniger/Punz id. 193).
According to § 30(b) KartG [*], however, any vertical distribution tie is subject to the obligation to give notice. According to the majority of scholars, this obligation also applies to minor or such distribution ties, for which according to the cited executive order of exemption of the federal minister of Justice no reason for prohibition is present (Barfuß/Wollmann/Tahedl, Österreichisches Kartellrecht <1996> 73; Liebmann, Vertriebsverträge in der EU <1998> 99; Roniger/Punz id 19). However, the civil law consequences of a violation of the obligation to give notice are disputed. According to Koppensteiner (Österreichisches und europäisches Wettbewerbsrecht <1997> § 9 No. 25), who the defending parties rely on, "factual contracts are provisionally invalid until the notification", which is why prior to that the agreed performance commitments were also unenforceable. The "systematic connection between § 30(d)(2) and (1) (KartG), where § 30(b) (KartG) is not mentioned" does not allow an opposite conclusion, because the intent of the obligation to give notice could be reached "only incompletely", "if the implementation of distribution ties could also be enforced without a civil law notice". The Supreme Court as Court of Appeal in matters of Cartel law agreed with that in an - only consisting of a reference to that expression of opinion - orbiter dictum (decision of 23 June 1997 to 16 Ok 5/97). Of a contrary opinion are Barfuß/Wollmann/Tahedl (id) and Liebmann (id 101), according to whom the legal obligation to give notice is a mere administrative rule, whose violation by way of omission could have the consequence of the imposition of a regulatory fine according to § 142 Z 1(a) KartG. Gugenbauer (Kommentar zur KartG2 § 30(d) No. 1) should be of the same opinion, as this author stresses - however, without explicit reference to the obligation to give notice - that vertical distribution ties are valid as long as the Cartel Court has not "made use of its competence according to § 30(c) (KartG)". In contrast, a contradictory opinion is stated by Knecht (Kartellrecht - Österreich und EU <1995> 28 et seq.), who denotes on the one hand only "unappealably prohibited distribution ties" as "forbidden and invalid" and the violation of the obligation to give notice as "threatened with a regulatory fine", but on the other hand mentions under the "severe consequences" of an omission to give notice also the "invalidity of the distribution contract".
The opinions of Barfuß/Wollmann/Tahedl (id), Liebmann (id), and (obviously also) Gugenbauer (id) are peripherally supported by the materials to the Cartel law reenactment 1993 BGBl 693 (RV 1096 BlgNR 18. GP, 24), according to which the Cartel Court should now punish "less severe violations of the Cartel law and regulatory offences (emphasis by the discerning senate) in Cartel proceedings" by regulatory fines "without penal character". This is, however, of little weight in the argument with the conflicting doctrines. The attempt Koppensteiners (id) to explain § 30(d) KartG by focusing on its purpose, concluding that the purpose of an obligation to give notice contradicts a civil law validity - deducible from § 30(d) KartG - of vertical distribution ties in case of an omission of their notice to the Cartel Court, does not convince for several reasons.
Initially, it is to be stressed, that already § 30(d)(2) KartG [*] only declares vertical distribution ties invalid, without mentioning the performance of the obligation to give notice, so far as the Cartel Court prohibited their implementation according to § 30(c) KartG. The invalidity of the distribution tie could only then be linked to the omission of the notice, if it is to be assumed, that it would actually be the purpose of the notice, to deny every distribution tie, not given notice of, civil law validity. Such an assumption is however already therefore forbidden, as any vertical distribution tie, of whatever kind, would have to be given notice of, even such distribution ties, for which according to the explicit order of the federal minister of Justice by virtue of his power to give orders according to § 30(e) KartG no reason for inhibition according to § 30(c) KartG is present. Subject to the obligation to give notice are furthermore all other vertical distribution ties, which are not burdened by a reason for inhibition. In all such cases, the purpose of the violation of the obligation to give notice effects - if one were to follow Koppensteiners (id) opinion - an obstruction of the civil law business dealings, without being able to find an economical justification for that. It is furthermore presumed, that only a fraction of the existing vertical distribution ties was given notice of (Knecht id 29; Wollmann, ecolex 1996, 687), which elucidates the order of magnitude of civil law follow-up problems of such contractual relations at the time of liquidation, when a violation of the obligation to give notice would have the consequence of the invalidity of all such vertical distribution ties. But even for vertical distribution ties, which are burdened by a reason for inhibition according to § 30(c) KartG, there are no reasonable grounds to sanction the omission of their notice with civil law invalidity. If a vertical distribution tie in its contents violates a legal prohibition or is against public morals, then the bound entrepreneur can nevertheless rely on that in the civil proceedings, so that just the civil law invalidity would be declared, which according to Koppensteiner (id) should already be the legal consequence of an omitted notice. However, if a vertical distribution tie is economically unjustified and if therefore unwanted macroeconomic effects threaten, then due to the factual influencing of the market relations this cannot remain concealed to those persons, who - according to § 30(c)(2) KartG - are legitimized to introduce a motion for prohibition, but who can also prompt the enforcement of the performance of the obligation to give notice through the Cartel Court (cf. in that regard 16 Ok 16/97; SZ 69/43 = ecolex 1996, 687 <Wollmann>).
The discerning Panel of the Supreme Court therefore follows in agreement with the Court of Appeal the doctrines of Barfuß/Wollmann/Tahedl (id), Liebmann (id) and Gugenbauer (id) and comes in conclusion to the result, that vertical distribution ties according to § 30(d)(2) KartG [*] are only insofar invalid with respect to civil law, as the Cartel Court prohibits them according to § 30(c)(1) KartG. Accordingly, the obligation to give notice pursuant to § 30(b) KartG is a mere administrative rule, whose violation cannot influence the answer to the question of the civil law validity of vertical distribution ties.
The defending parties did not rely on any facts in the proceeding of first instance that could suggest a qualification of the lease and grit delivery contract of 10 May 1995 as contrary to a prohibition or against morals, which is why such a performance hindrance in any case was not present.
On the basis of the discussed factual and legal position, the requests made to the Court of First Instance in the order of reversal prove to be correct, so that in that respect an addition or correction of the opinion of the Court of Appeal is also not required.
Success of the appeal is therefore denied in its entirety.
The order for costs is based on § 41 and § 50(1) ZPO [*]. The appeal of the defending parties remained unsuccessful in light of all the mentioned reasons, so that the claiming party is entitled to the compensation of the costs for their answer to the appeal.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, currency of Austria (Austrian schillings) is indicated as [sA]. Translator's note on other abbreviations: ABGB = Allgemeines Bürgerliches Gesetzbuch [Austrian Civil Code]; BGBl = Bundesgesetzblatt [Austrian Federal Law Gazette]; EG-V = ; EVHGB = Verordnung zur Einführung handelsrechtlicher Vorschriften im Lande Österreich [Implementation of German Commercial Code in Austria in 1938]; EWRA = ; IPRG = Gesetz über das Internationale Privatrecht [Austrian Code on Private International Law]; KartG = ; MietSlg = ; SZ = Sammlung der Entscheidungen des Obersten Gerichtshofs in Zivilsachen [Official collection of decisions of the Austrian Supreme Court]; ZPO = Zivilprozessordnung [Austrian Code of Civil Procedure].
** Tobias Koppitz holds a degree in law. With the team of Humboldt University Berlin, he won the Frédéric Eisemann Award for third place in the 8th Willem C. Vis International Commercial Arbitration Moot 2000/2001. He was coach to the team of Humboldt University Berlin in the 9th Willem C. Vis Moot 2001/2002.
*** 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.Go to Case Table of Contents