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CISG CASE PRESENTATION

Germany 27 December 1999 Appellate Court Dresden (Chemical products case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/991227g1.html]

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

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Case identification

DATE OF DECISIONS: 19991227 (27 December 1999)

JURISDICTION: Germany

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

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 2 U 2723/99

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

CASE HISTORY: 1st instance LG Zwickau 19 March 1999 [affirmed]

SELLER'S COUNTRY: Netherlands (plaintiff)

BUYER'S COUNTRY: United States [branch office in Germany] (defendant)

GOODS INVOLVED: Chemical products


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 8(2) and 8(3) ; 71(1) ; 78 [Also cited: Articles 53 ; 54 ; 61 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

6B [Agreements to apply Convention: choice of Dutch law understood to incorporate the CISG law of The Netherlands];

8B ; 8C [Interpretation of party's statements or other conduct based on objective standards; Interpretation in light of surrounding circumstances;

71A1 [Grounds for suspension of performance];

78B [Rate of interest]

Descriptors: Choice of law ; Intent ; Reasonableness ; Suspension of performance ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=441&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/511.htm>; [2000] Transport- und Speditionsrecht "Internationales Handelsrecht" 20-22; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=441&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 1 para. 25 Art. 8 paras. 20, 29 Art. 71 para. 4

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Case text (English translation)

Queen Mary Case Translation Programme

Oberlandesgericht Dresden 27 December 1999

Translation [*] by Christian P. Alberti [**]

Translation edited by Ruth M. Janal [***]

FACTS OF THE CASE

The essential dispute between the parties is whether the trade accounts receivable (Warenforderung) claimed by [seller] can be settled by [buyer] by the counter-shipment of its goods in exchange for the goods [seller] delivered.

[Seller] is a company in the chemical industry domiciled in The Netherlands. [Buyer], a company situated in the United States, produces preliminary stages of animal food materials. [Buyer] maintains a branch office in Plauen [Germany]. Business relations between the parties go back for some time.

On 24 February 1997, the balance in favor of [seller] amounted to DM [Deutsche Mark] 11,466.10. Further shipments from [seller], including three invoices brought the balance in favor of [seller] to DM 41,651.10; the last invoice was dated 20 November 1997. Additionally, [seller] demands collection costs in the amount of DM 1,909.10. With regard to the amount in dispute, [buyer] received an order of payment (Mahnbescheid) on 27 March 1998.

[Seller] contends it was never stipulated between the parties that [buyer] could settle outstanding balances with the counter-shipment of goods. [Seller] has on one occasion allowed an account balance to be settled by [buyer]'s shipment of such goods but contends this did not create a presumption allowing [buyer] to settle all outstanding bills with counter-shipments. In response to [buyer]'s damages claim, [seller] argues that there was no breach of fiduciary duty by conduct because a fiduciary relationship does not come into existence merely by a request to deliver. After the disclosure of the conditions, [seller] did not see any possibility to purchase the counter-products from [buyer]. The asserted collection expenses are reimbursable. [Seller] also submits that the interest for delay is justified both with regard to the merits and amount.

[Seller] is seeking DM 41,651.10 with interest as well as an additional DM 1,909.10 in collection costs. [Buyer] is asking the court to dismiss the claim.

[Buyer] contends that it was stipulated between the parties that in case of [buyer]'s debit balance, [buyer] could settle the balance with counter-shipments of goods. [Buyer] is still positioned to provide to the [seller] counter-product chemicals for the fabrication and preparation of food. Accordingly, [buyer] contends [seller]'s claim is premature and therefore only contemporaneous performance (Zug-um-Zug-Verurteilung) can be demanded. [Buyer] further argues that, at best, this case deals with an alternative obligation according to §262 BGB.[*] Moreover, [buyer] alleges that it is entitled to a claim for damages because [seller] terminated the contractual negotiations concerning a shipment of ethyl acetate without cogent cause. Relying upon [seller]'s order, [buyer] pre-ordered an adequate quantity of ethyl acetate that was never taken. [Seller]'s asserted collection costs and interest damages are challenged both with regard to the merits and amount. Only from the day of [buyer]'s receipt of the order of payment (Mahnbescheid) can [seller] demand the interest for delay.

GROUNDS FOR THE DECISION

A. The [buyer]'s admissible appeal (Einspruch [see § 341 ZPO [*]]) to the judgment by default that was handed down by the Court on 15 November 1999 is unfounded. The Court upholds the judgment in favor of [seller].

      I.   The Court makes a judgment on the merits (Sachurteil) because the law suit -- which falls within the international competence of German courts -- is ready for adjudication on the remand requested by [buyer]; regardless of whether procedural mistakes occurred at the lower instance (cf. Zöller/Gummer, ZPO,[*] 21st ed., § 540 n. 1 with further references [quoting more authorities]).

      II.  As the Court of First Instance (Landgericht) correctly decided, [seller] is entitled to payment of the purchase price in the amount of DM 41,651.10 plus interest.

  1.  [Seller]'s claim for the purchase price is based on Articles 53 and 54 of the United Nations Convention on Contracts for the International Sale of Goods (CISG).

       a) If German law governs the relation between the parties, the CISG applies according to Art. 1(1)(a) CISG (in connection with the provisions of the enabling legislation (Vertragsgesetz) [*] because the parties are domiciled in Contracting States (see for The Netherlands: announcement, dated 11 April 1991, [BGBl. II [*] 675]; for the United States of America: announcement, dated 23 October 1990, [BGBl. II 1477 at 1480]), and their places of business were in different States when the contract was concluded.

       b) The business relations of the parties are also governed by the CISG if one follows the [buyer]'s assertion that the parties effectively agreed upon Dutch law (cf. BGH NJW [*] 1999, 1259 at 1260). In this case, the provisions of the CISG, which have been ratified by The Netherlands without reservations (see announcement, dated 11 April 1991, id.), would also be included in the contractual relationship due to Art. 1(1)(b) CISG. In particular, choice of Dutch law would have to be understood as a reference to the entire Dutch law, including the CISG, which takes precedence over the Dutch provisions for domestic commerce (cf. BGH NJW 1999, 1259 at 1260; Herber in: von Caemmerer/Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht [Commentary on the UN Convention on the International Sale of Goods (CISG)], Art. 6, n. 16 with further references; Maskow in: Enderlein/Maskow/Strohbach, Internationales Kaufrecht [International Sale of Goods], Art. 6 CISG, n. 1.3.; Piltz, NJW [*] 1996, 2768 at 2769 quoting more authorities in footnotes 19-23; OLG [*] Bamberg OLG Report 1999, at 149 and 313 at 319; with regard to the EKG [ULIS] see also BGHZ [*] 96, 313 at 323). The fact that the parties at first instance based their dispute on national German law does not lead to a different result. The exclusion of the CISG is possible according to Article 6 CISG. However, nothing in the record indicates either an implied choice of German law (cf. BGH NJW 1999, 950 at 951; BGH RIW [*] 1995, 410 at 412) or a conclusive exclusion of the CISG (cf. Piltz, NJW 1996, 2768 at 2770 with further references in footnotes 27-29; OLG Bamberg, id.).

  2.  According to the CISG, as well as under the parties' agreements, the claim for the purchase price is due because [seller] delivered to [buyer] the purchased goods at the agreed place (cf. OLG Karlsruhe NJW 1993, 1316; Piltz, NJW 1994, 1101 at 1104). The maturity of the claim is not affected by the [seller]'s letters of 8 January 1997 and 5 March 1997 in which [seller] permitted [buyer] to settle the open balance "either by shipment of counter-products or with money payment" (that is, with the statement, "to be settled against purchase MEG from …").

       a) Already the wording of [seller]'s letter which -- according to Art. 8(2) CISG, is the primary source of interpretation -- shows that the claim for purchase price was due at the end of the agreed period for payment. Only within this period, was [buyer] allowed to propose a compensation transaction (Kompensationsgeschäft) as provided in the contract. The offer would have given [buyer] a respite in payment while the performance of the compensation transaction would have fulfilled [buyer]'s obligation to pay the purchase price.

       b) The parties' interests also point in favor of such an understanding of their agreements (see Art. 8(2) CISG). While [buyer] would have benefited from reciprocal shipments which allowed [buyer] to set-off its payment obligation against the [seller]'s, it was evidently important for the [seller] to receive a [monetary] equivalent for its goods no later than at the expiration of the payment period. In particular, [buyer] could not have been unaware that it would have been commercially unreasonable for [seller] (cf. Art. 8(3) CISG) to grant [buyer] a respite in payment beyond the agreed period only upon [buyer]'s announcement of a compensation transaction.

       c) Despite repeated requests by the [seller], the [buyer] only effected one reciprocal business transaction in the amount of DM 13,110.00 on 24 February 1997 (recorded under No. 216). The accounts receivable in the dispute arising out of [seller]'s shipments, dated 18 March 1997 (No. 71510 in the amount of DM 23,100.00), 18 April 1997 (No. 71568 in the amount of DM 2,560.00), and 20 November 1997 (No. 71924 in the amount of 4,525.00), were not settled by the [buyer]'s shipments of goods. Most significantly, [buyer], who bears the burden of submission and proof, failed to conclusively submit that it offered the [seller] conforming compensation transactions within the period agreed for payment. There are no comprehensive submissions regarding the time the alleged offer was made to [seller], the goods involved and the amounts concerned. Full particulars of [buyer]'s arguments would have been all the more necessary as the authority for implementation of compensation transactions (Kompensationsgeschäfte), according to the agreements between the parties, existed only within thirty days. At least after 20 December 1997, (thirty days after the last shipment, dated 20 November 1997), a settlement of the claims for the purchase price by means of a compensation transaction would have been possible only with the agreement of [seller].

  3.  [Buyer] does not possess a right of retention (Zurückbehaltungsrecht) against the matured claim for the purchase price. According to Art. 71 CISG, [buyer] would have been entitled to suspend its performance only if it had become apparent that [seller] would not perform a substantial part of its obligations. There is no indication of that in [buyer]'s submissions.

       a) First of all, the [buyer]'s claim for damages in connection with the deliveries of ethyl acetate does not stand in a reciprocal relation to the [seller]'s claims, as required by Art. 71(1) CISG (cf. Leser in: Caemmerer/Schlechtriem, id., Art. 71, n. 4).

       b) In addition, [buyer] does not substantiate its claim that it suffered damages due to breach of contract on the part of the [seller]. [Buyer]'s claim for damages based on Articles 61 and 74 CISG fails because [buyer] does not explain what the [seller]'s alleged breach of contract consists of. This is all the more important in view of the [seller]'s uncontested submission that -- following preliminary negotiations on 25 November 1996 -- it ordered ethyl acetate from the [buyer] and subsequently took delivery of the goods. Moreover, it is absolutely unclear how [buyer] determines its damages in the amount of "at least DM 40,000.00" respectively "in the amount of [seller]'s claim."

      III.  According to Art. 78 CISG, [seller] is entitled to interest on the accounts payable (cf. Piltz, NJW [*] 1996, 2768 at 2773 with further references; Piltz, NJW 1994, 1101 at 1105). The applicable interest rate reaches at least 5% per year. Under German law, an interest rate of 5% would be reasonable according to §§ 352, 353 HGB.[*] Under Dutch Law, the statutory interest is 6% (since 1 January 1998) according to Articles 119 and 120 of the 6th book of the Dutch Civil Code in connection with the Ministerial Decree of 18 December 1997.

B.  The order regarding the costs is based on an analogous application of § 97(1) ZPO.[*] The decision on provisional enforceability is based on §§ 708 No. 10, 711, 713 ZPO.

C.  The Court does not allow the possibility of an appeal to the BGH [*] under § 546(1) sent. 2 ZPO because, contrary to [buyer]'s opinion, the case raises no legal issues of fundamental significance. Neither the application of the CISG nor the interpretation of the payment arrangements between the parties raises questions of law that need clarification.


FOOTNOTES

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

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGBl. II = Bundesgesetzblatt II [German Federal Law Gazette II]; BGH = Bundesgerichtshof [Federal Court of Justice, the highest German court in civil and criminal matters]; BGHZ = Entscheidungen des Bundesgerichtshofs in Zivilsachen [Case Reporter on decisions of the Federal Court of Justice in civil matters]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [German law journal]; OLG = Oberlandesgericht [German Court of Appeals]; RIW = Recht der internationalen Wirtschaft [German law journal]; RpflAnpG = Rechtspflegeanpassungsgesetz [Law regarding the adjustment of justice administration]; Vertragsgesetz = Gesetz zu dem Übereinkommen der Vereinten Nationen vom 11 April 1980 über den internationalen Warenkauf [German Law on the UN Convention on Contracts for the International Sale of Goods]; ZPO = Zivilprozessordnung [German Civil Procedure Code].

** Christian P. Alberti, Associate, Institute of International Commercial Law of the Pace University School of Law, is an LL.M. candidate at Tulane University School of Law, New Orleans, LA, U.S.A.

*** Ruth M. Janal, LL.M. (UNSW), is a PhD candidate at Albert-Ludwig-Universität Freiburg.

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