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CISG CASE PRESENTATION

Germany 3 December 1999 Appellate Court München (Window production plant case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/991203g1.html]

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

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Case identification

DATE OF DECISION: 19991203 (3 December 1999)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 23 U 4446/99

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

CASE HISTORY: LG Passau (1 HKO 1200/98) 1 July 1999 [reversed]

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Italy (defendant)

GOODS INVOLVED: Window production plant


Case abstract

GERMANY: Oberlandesgericht München, 3 December 1999

Case law on UNCITRAL texts (CLOUT) abstract no. 430

Reproduced with permission from UNCITRAL

Abstract prepared by Rudolf Hennecke

The decision concerns both paragraphs of article 3 CISG, i.e. the sale of goods to be manufactured as well as the supply of additional services by the seller. The buyer, a German manufacturer of windows, had ordered from the Italian seller, a window manufacturing unit. It was agreed that some parts for the unit should be provided by the buyer. Moreover, the unit was to be modified according to the buyer's specifications and to be delivered to the buyer's place of business, where it was to be assembled by the seller's technicians.

When the seller declared that it would not be able to deliver the manufacturing unit by the agreed time, the buyer fixed an additional period of time for delivery and, after that time had passed, declared the contract avoided.

The seller filed suit in Italian court for damages arising out of the avoidance of the contract. The buyer filed suit in Germany for lost profit and the cost of a substitute transaction. The seller contested the jurisdiction of the German court, asserting that the suit should be brought in Italy, the place of performance, pursuant to article 5(1) of the Brussels Convention.

The Oberlandesgericht München (Higher Regional Court of Münich) found that the German court of first instance had jurisdiction. As an initial matter, the Court stated that the CISG was applicable pursuant to article l(l)(a) CISG since the two parties had the places of business in Contracting States. The Court then applied article 31 CISG, finding that the place of performance of the delivery of the manufacturing unit was the buyer's place of business in Germany, since according to the contract the unit was to be assembled there by the defendant's technicians. A clause in the contract stating the net price "at the seller's place of business" was considered immaterial in this respect, since it only clarified that the transport costs had to be borne by the buyer.

The Court observed that the contract was a contract for the sale of goods pursuant to article 3(1) CISG, since the parts for the unit to be provided by the buyer were not substantial in value or function. Finally, the Court concluded that the application of the CISG was not excluded by article 3(2) CISG. The mere fact that the machine was to be assembled by the seller's technicians at the buyer's place of business did not constitute a preponderant part of the seller's obligations. The value of the labour of the installation only amounted to a small part of the total value of the contract, and the main interest of the buyer was still the machine itself and not its installation.

The Oberlandesgericht München (Higher Regional Court of Münich) remanded to the court of first instance for a decision on the merits (pending a prior decision on jurisdiction by the court in Italy pursuant to the Brussels Convention).

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 3(1) and (2) ; 31 [Also cited: Articles 14 ; 15 ; 18 ; 21 ; 22 ; 23 ; 27 ]

Classification of issues using UNCITRAL classification code numbers:

3A ; 3B [Goods to be manufactured: buyer did not supply substantial part of necessary materials; Services not a preponderant part of obligation];

31B1 [Place for delivery: goods to be placed at buyer's disposal at known place]

Descriptors: Scope of Convention ; Services ; Installation services ; Delivery

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=499&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): Click here for the original German text of this case; see also cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/585.htm; Recht der Internationalen Wirtschaft (2000) 712-714; [February 2001] Internationales Handelsrecht (IHR): Zeitschrift für die wirtschaftsrechtliche Praxis 25-26; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=499&step=FullText>

Translation (English): Text presented below; see also 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 130-136

CITATIONS TO COMMENTS ON DECISION

English: Schroeter, 5 Vindobona Journal of International Commercial Law and Arbitration (2001) 74-86; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 3 paras. 3a, 6a, 7a Art. 31 para. 84; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at pp. 42, 47

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Case text (English translation)

Queen Mary Case Translation Programme

Oberlandesgericht München 3 December 1999

Translation [*] by Ulrich G. Schroeter [**]

Translation edited by Dr Loukas Mistelis [***]

Translator's note: This decision by the Oberlandesgericht München, a German Court of Appeals, was handed down by the 23rd Civil Senate of the court on 3 December 1999 under the Docket No. 23 U 4446/99. It reversed a first-instance judgment of the Landgericht Passau of 1 July 1999 (Docket No. 1 HKO 1200/98) and remitted the case back to the Landgericht for further findings.[1]

In the present decision, the Oberlandesgericht interprets Articles 3(1), 3(2) and 31 of the United Nations Convention on Contracts for the International Sale of Goods (CISG).[2]

Facts of the case

The Claimant [buyer] is a manufacturer of windows in S. near Passau, Germany, and claims by way of a partial complaint from the Defendant as legal successor of S. S.p.A. [seller], both with place of business in Rimini, Italy, damages in the amount of 100,000 DM [Deutsche Mark] based on the non-delivery of a window production plant.

On the basis of an offer by the legal predecessor of the Defendant [seller] dated 24 November 1994 and some modifications [added by the buyer], the [buyer] by letter dated 29 March 1995 ordered a window production plant of the standard model "System 5 S". The [seller] confirmed this order in writing on 11 April 1995. The parties agreed on a total net price of DM 1,245,000.00. According to the "Conditions of Sale", this was a "price quotation ex works Rimini/Italy" and the goods were to be delivered by end of February 1996, whereas "all technical specifications resp. final drawings of the types of windows to be produced" were to be supplied by the [buyer] before end of May 1995. An acceptance test was to take place at the [seller]'s factory in Rimini, the tools which were to be supplied by the [buyer] should arrive "in Rimini at least 20 days before the acceptance test", and under the heading "Putting into Operation" "the plant's assembly and putting into operation at [the buyer]'s place of business by [seller]'s mechanics for the period of six weeks inclusive" was agreed.

By telefax of 20 December 1995 the [seller] informed the [buyer] that production of the plant was "now scheduled for October/November 1996". The [buyer] objected and, by legal counsel's letter dated 4 April 1996, fixed an additional period of time for the delivery of the plant until 30 April 1996. Finally, through letter of 23 September 1996, he declared the contract avoided.

The [seller] in turn brought action against the [buyer] before the Tribunale di Rimini. In the statement of claim, which was served to the [buyer] on 17 December 1997, the [seller] seeks declaration that the contract has been avoided. Additionally, he claims damages from the [buyer] alleging that the [buyer] neither supplied the drawings of the types of windows to be produced by the plant nor the tools in time. Furthermore the [buyer] in March 1996 allegedly called the payment guarantees and revoked the advance payments of DM 124,500.00 and DM 249,000.00. The Tribunale di Rimini has to date not ruled on its jurisdiction over the dispute.

The [buyer] claims to have suffered loss of profit in the amount of DM 886,150.00. Furthermore he allegedly had to purchase a replacement plant, the price for which exceeded the price for the [seller]'s qualitative better plant by DM 355,000.00.

The [seller] contests the international jurisdiction of the Landgericht in Passau where the [buyer] has commenced his proceedings. [Seller] alleges that the requirements for its special jurisdiction under Article 5 No. 1 of the Brussels Convention are not fulfilled. The place of performance of the contractual obligation according to Article 31 CISG is Rimini. Additionally, [seller] alleges that the proceedings pending before the Tribunale di Rimini bar the jurisdiction of the German court.

The Landgericht Passau reached the same conclusion as the [seller] with respect to its jurisdiction and dismissed the claim on 1 July 1999. Based on the contractual clause "price quotation ex works Rimini/Italy", the [seller] did not have the obligation to deliver the plant to S. Furthermore a transfer of the dispute to the court in Rimini was impossible.

By way of his appeal the [buyer] pursues his claim further.

Reference is made to the facts outlined in the first-instance judgment, to the parties' memoranda and to the protocol on the oral hearing before the court on 12 November 1999.

Grounds for the decision

The [buyer]'s appeal is successful. The Landgericht Passau has international jurisdiction over the present dispute.

1. Article 2(1) and (2), Article 3 and Article 5 No. 1 of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels Convention) as amended by the Third Accession Convention of 26 May 1989, which entered into force in Italy on 1 May 1992 and in the Federal Republic of Germany on 1 December 1994 - the Fourth Accession Convention only entered into force in Italy on 1 June 1999 - allow the [buyer] to make use of the Landgericht Passau's special jurisdiction for the place of performance, as the [seller]'s obligation to deliver the window production plant was be performed in S.

     a) According to Article 5 No. 1 of the Brussels Convention, a person domiciled in a Contracting State may be sued in another Contracting State, in matters relating to a contract, in the courts for the place where the obligation was performed or should have been performed. In case of a legal person like the [seller], the seat of the company shall according to Article 53(1) of the Brussels Convention be treated as its domicile.

The decisive place for the determination of this special basis of jurisdiction is according to the case law of the European Court of Justice (Case 14/76 - De Bloos, in NJW 1977, 490, 491; Case C-420/97 - Leathertex v. Bodetex, in ZIP 1999, 1773, 1776 - nos. 31 and 32 -) the place where the disputed obligation was performed or, like here, should have been performed. The relevant obligation is the one on which the Claimant bases his claim; as far as a claim for damages is concerned, the obligation which the Defendant allegedly has failed to perform is decisive.

Where this obligation should have been performed must, according to the European Court of Justice (Case 12/76 - Tessili, in NJW 1977, 491 et seq.; Case C-288/92 - Custom Made Commercial, in NJW 1995, 183, 184 - no. 26 -; Case C-420/97 - Leathertex v. Bodetex, in ZIP 1999, 1773, 1776 - no. 33 -), be determined in accordance with the law governing the obligation at issue, according to the rules of conflict of the jurisdiction in which the action was brought. The governing law can also be a uniform law, as the European Court of Justice has held with respect to the Hague Convention of 1 July 1964 relating to a Uniform Law on the International Sale of Goods (NJW 1995, 183, 184 - no. 27 -).

     b) Consequently, the relevant obligation in the present case is the obligation to deliver the window production plant, which is governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG).

This Convention is according to its Article 1(1)(a) applicable to contracts of sale between parties who have their places of business in different States, if these States are Contracting States. This is the case for Italy and the Federal Republic of Germany. In Italy the Convention has been in force since 1 January 1988, in the Federal Republic of Germany since 1 January 1991.

Contracts for the supply of goods to be manufactured or produced are according to Article 3(1) CISG to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. Accordingly, the Convention is also applicable to the contract calling for the delivery of a window production plant concluded between the [buyer] and the [seller] according to Articles 14, 15(1), 18 and 23 CISG. The few tools which were to be supplied by the [buyer] are neither with respect to their value nor their function essential ones - the French text of the Convention speaks of "part essentielle" - nor "substantial parts" - as stated in the English text - of the plant to be delivered (compare Herber in v. Caemmerer/Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht, note 4 on Art. 3 CISG). This is particularly true as the plant ordered is, as has been argued by both parties, a standard model.

The supply agreement between the [buyer] and the [seller] is furthermore not excluded from the scope of the Convention by virtue of Article 3(2) CISG. The [seller]'s "inclusive" obligation to assemble the plant and put it into operation at the [buyer]'s place of business does not constitute the preponderant part of the [seller]'s obligations under the contract. Whether certain obligations constitute the preponderant part of obligations depends primarily on the relative value of each element. Additionally, the particular interest that the purchasing party places on an obligation, i.e., the characteristic obligation can be decisive (Herber, ibid., note 5 on Art. 3 CISG; Staudinger/Magnus, BGB, 13th ed., note 21 on Art. 3 CISG). An approximately identical value of the different obligations is sufficient to render the Convention applicable (Staudinger/Magnus, ibid., note 22). In the present case, the value of the agreed services of several mechanics for the period of six weeks merely constitutes a small part of the total costs for the plant of DM 1,245,000.00. Additionally, the characteristic obligation to manufacture the plant does not carry less weight than its assembly and putting into operation.

     c) The place of performance for the obligation to deliver the window production plant is the [buyer]'s place of business in S.

The place of performance for the obligation to deliver the goods is governed by Article 31 CISG. According to this provision the contractual agreement prevails. In the present case, the [seller] had, according to the "Conditions of Sale", to assemble the plant and to put it into operation at the [buyer]'s place of business in S. This means that the [seller] was only able to perform his contractual obligations in S.

Contrary to the trial court's opinion, the fact that S. is the place of performance is not affected by the contractual clause "price calculated ex works Rimini". This clause only means that the [buyer] was to bear the costs for the transport from Rimini to S. The meaning of this clause is, in turn, limited by the express stipulation that the assembly and putting into operation at the [buyer]'s place of business is "inclusive".

2. As the trial court in the decision under appeal only had to decide on parts of the jurisdictional issues, the case is remitted to the court of first instance according to 538(1) No. 2 ZPO. The Senate considered a decision on further issues by the Oberlandesgericht itself to be inappropriate ( 540 ZPO).

Before a judgment on the merits it will be necessary to decide on the continuation of the proceedings according to the principle of strict priority under Article 21 of the Brussels Convention or according to Article 22 of the Brussels Convention. In this context, it will be particularly decisive whether the Tribunale di Rimini, in the oral hearing scheduled for 28 January 2000, will rule on its jurisdiction over the dispute pending before that court.

3. [] [The concluding section of the decision deals with the interpretation of Article 21 of the Brussels Convention and is not translated here.]


FOOTNOTES

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

** Ulrich Schroeter is a Ph.D. candidate at the Freie Universität Berlin and member of the Graduiertenkolleg "Europäisches Privat- und Wirtschaftsrecht" at the Humboldt-Universität zu Berlin.

*** Loukas Mistelis is Clive M Schmithoff Senior Lecturer in International Commercial Law at the School of International Arbitration and the Chair, Graduate Studies Committee, School of Law, Queen Mary, University of London.

1. Translator's note on the general jurisdiction of the courts mentioned in this decision: The Oberlandesgericht (OLG) is a German Court of Appeals and exercises jurisdiction over appeals against first-instance decisions by the Landgericht; the Landgericht (LG) is a German Regional Court and has jurisdiction over disputes involving a value exceeding DM 10,000 at first instance as well as over appeals against decisions by the Amtsgericht (German Local Court); the Tribunale (Trib.) is an Italian Regional Court exercising jurisdiction over disputes involving a value exceeding ITL (Italian Lira) 20,000,000 at first instance as well as over appeals against decisions by the Giudice di Pace (Italian Justice of Peace) and the Pretore/Pretura (Italian District Court).

2. Translator's note on abbreviations used in the decision: BGB = Bürgerliches Gesetzbuch [German Civil Code]; NJW = Neue Juristische Wochenschrift [weekly German law review]; ZIP = Zeitschrift für Wirtschaftsrecht [German law review]; ZPO = Zivilprozessordnung [German Code of Civil Procedure]; Brussels Convention = 1968 European Community Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.

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Pace Law School Institute of International Commercial Law - Last updated February 21, 2007
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