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Article 40. Seller's Knowledge of Non-conformity

TEXT OF ARTICLE 40

The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

40A Seller fails to disclose known non-conformity

40B Sanction: seller loses right to rely on articles 38 and 39

40C Other issues concerning non-disclosure


DESCRIPTORS

Lack of conformity known to seller


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites 14 cases in its Digest of Art. 40 case law:

Bulgaria      1           Italy      1           Russian Federation        1
Germany 8 Netherlands      1 Stockholm Chamber        1
ICC      1 TOTAL:   14

Presented below is a composite list of Art. 40 cases reporting UNCITRAL Digest cases and other Art. 40 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 12 July 2000 citation reported below. Cases are coded to the UNCITRAL Thesaurus.

English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available.

For an analysis of Article 40 case law that is more current than UNCITRAL’s Digest, see Sonja A. Kruisinga, "(Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?", Intersentia (2004) 110-117.
 

France 3 February 2009 Cour de cassation [Supreme Court] (Société Novodec / Société Sigmakalon v. Sociétés Mobacc et Sam 7) [translation available]

Netherlands 16 January 2009 Rechtsbank [District Court] Breda (Watermelon case) [translation available]
 

France 16 September 2008 Cour de cassation [Supreme Court] [Supreme Court] (Potato seedling case) 40B [translation available]

Germany 31 March 2008 Oberlandesgericht [Appellate Court] Stuttgart
 

Austria 19 December 2007 Oberster Gerichtshof [Supreme Court] (Laminated glass case) [translation available]

Slovak Republic 25 October 2007 Regional Court [District Court] Zilina (Elastic fitness clothing case) [translation available]

Slovak Republic 27 June 2007 Supreme Court Zilina (Elastic fitness clothing case) [translation available

Switzerland 27 April 2007 Tribunal cantonal [Appellate Court] Valais (Oven case) [translation available]

Belgium 16 April 2007 Hof van Beroep [Appellate Court] Gent (Dat-Schaub International a/s v. Kipco-Damaco N.V.) 40A [translation available]

Austria 23 February 2007 Landesgericht [District Court] Salzberg (Laminated glass case)
 

Switzerland 20 December 2006 Bundesgericht [Federal Supreme Court] (Machines case) 40B [translation available]

France 19 December 2006 Cour d'appel [Appellate Court] Rouen (Potato seedling case) 40A [translation available]

China December 2006 CIETAC Arbitration Award [CISG 2006/03] (Automobile case) [translation available]

Austria 30 November 2006 Oberster Gerichtshof [Supreme Court] (Water-jet cutting machine case) 40B [translation available]

Russia 19 October 2006 Arbitration Award 53/2006

Netherlands 18 July 2006 Gerechtshof [Appellate Court] Arnhem (Potting soil case) [translation available]

Austria 23 January 2006 Oberlandesgericht [Appellate Court] Linz (Auto case) [translation available]
 

Slovenia 14 December 2005 Higher Court [Appellate Court] Lujubljana (Door and door jamb case) 40B [translation available]

France 4 October 2005 Cour de Cassation [Supreme Court] (Engine parts case) 40B [translation available]

Austria 23 May 2005 Oberster Gerichtshof [Supreme Court] 40B [translation available]

Netherlands 17 May 2005 Netherlands Arbitration Institute (Machines case) 40A [English text]

Germany 11 April 2005 Landgericht [District Court] Frankfurt 40A [translation available]

France 25 February 2005 Cour d'appel [Appellate Court] Paris
 

Belgium 4 October 2004 Hof van Beroep [Appellate Court] Ghent (Deforche NV v. Prins Gebroeders Bouwstoffenhandel BV) 40A [translation available]

China 10 September 2004 Higher People's Court [Appellate Court] of Shandong Province (WS China Import GmbH v. Longkou Guanyuan Food Company) 40B [translation available]

Germany 30 June 2004 Bundesgerichtshof [Supreme Court] 40B [translation available]

United States 29 March 2004 Federal Bankruptcy Court [Oregon] (In re: Siskiyou Evergreen, Inc. Debtor) 40B

Belgium 24 March 2004 Hof van Beroep [Appellate Court] Ghent (NV Segers-Van Ingelgem v. NV Axima et al.) 40A [translation available]

Germany 10 March 2004 Oberlandesgericht [Appellate Court] Celle 40A [translation available]

Germany 2 February 2004 Oberlandesgericht [Appellate Court] Zweibrücken 40B [translation available]

Belgium 28 January 2004 Hof van Beroep [Appellate Court] Ghent 40A [translation available]

Switzerland 27 January 2004 Kantonsgericht [District Court] Schaffhausen [translation available]

Germany 23 January 2004 Oberlandesgericht [Appellate Court] Düsseldorf 40A [translation available]
 

Switzerland 29 October 2003 Tribunale d’appello [Appellate Court] Lugano, Cantone del Ticino [translation available]

China 23 July 2003 CIETAC Arbitration Award [CISG 2003/06] (Telephone machine case) [translation available]

United States 11 June 2003 U.S. Circuit Court of Appeals [5th Cir.] (BP Oil International v. Empresa) 40B

Spain 7 June 2003 Audiencia Provincial [Appellate Court] Valencia [translation available]

Austria 27 February 2003 Oberster Gerichtshof [Supreme Court] 40B [translation available]

Switzerland 11 February 2003 Handelsgericht [Commercial Court] St. Gallen [detailed abstract available]

Belgium 15 January 2003 Rechtbank [District Court] van Koophandel [for commercial matters] Veurne
 

Italy 26 November 2002 Tribunale [District Court] Rimini [translation available]

Netherlands 15 October 2002 Netherlands Arbitration Institute Case No. 2319 [English text]

Germany 25 September 2002 Oberlandesgericht [Appellate Court] Rostock [translation available]

Germany 22 August 2002 Oberlandesgericht [Appellate Court] Schleswig 40B [translation available]

Germany 26 July 2002 Oberlandesgericht [Appellate Court] Zweibrücken 40C [translation available]

Germany 1 July 2002 Oberlandesgericht [Appellate Court] München [translation available]

Belgium 10 April 2002 Rechtbank van Koophandel [District Court for Commercial Matters] Tongeren

Germany 20 February 2002 Landgericht [District Court] München [translation available]

Switzerland 17 January 2002 Handelsgericht [Commercial Court] Bern 40A [translation available]

Austria 14 January 2002 Oberster Gerichtshof [Supreme Court] [translation available]

ICC 2002 International Court of Arbitration, Case 11333 (Machine case) 40B [English text]
 

Belgium 27 June 2001 Hof van Beroep [Appellate Court] Antwerpen 40B [translation available]

Germany 29 March 2001 Landgericht [District Court] Trier [translation available]

Austria 24 January 2001 Oberlandesgericht [Appellate Court] Graz (Ice cream robots case) [translation available]

Germany 19 January 2001 Landgericht [District Court] Flensburg [translation available]

Belgium 18 January 2001 Rechtbank van Koophandel [District Court] Turnhout
 

Germany 12 October 2000 Landgericht [District Court] Stendal 40A [translation available]

* Italy 12 July 2000 Tribunale [District Court] Vigevano [translation available]

* Germany 9 May 2000 Landgericht [District Court] Darmstadt 40A [translation available]

Germany 28 April 2000 Oberlandesgericht [Appellate Court] Oldenburg 40A [translation available]

Austria 21 March 2000 Oberster Gerichtshof [Supreme Court] [translation available]

* Russia 24 January 2000 Arbitration award 54/1999 40B [translation available]
 

* Canada 31 August 1999 Ontario Superior Court of Justice (La San Giuseppe v. Forti Moulding Ltd)

ICC August 1999 International Court of Arbitration, Case 9083 40A [translation available]

ICC June 1999 International Court of Arbitration, Case 9187 [English text]

China 30 March 1999 CIETAC Arbitration Award [CISG/1999/16] (Flanges case) 40B [translation available]

China 29 March 1999 CIETAC Arbitration Award [CISG/1999/14] (Flanges case) 40B [translation available]

Germany 24 March 1999 Landgericht [District Court] Flensburg [translation available]

ICC February 1999 International Court of Arbitraton, Case 9474 40B [English text]
 

* Switzerland 30 November 1998 Handelsgericht [Commercial Court] Zürich 40B [translation available]

* Germany 25 November 1998 Bundesgerichtshof [Federal Supreme Court] [translation available]

* Germany 11 September 1998 Oberlandesgericht [Appellate Court] Koblenz 40A [translation available]

Germany 19 August 1998 Oberlandesgericht [Appellate Court] Bamberg

* Stockholm Chamber of Commerce 5 June 1998 Arbitration award (Beijing Light Automobile Co. v. Connell) 40B [English text]

Germany 26 May 1998 Oberlandesgericht [Appellate Court] Thüringer, Jena 40A ; 40B [translation available]

* Germany 11 March 1998 Oberlandesgericht [Appellate Court] München 40B [translation available]

Austria 12 February 1998 Oberster Gerichtshof [Supreme Court] [translation available]
 

Germany 28 October 1997 Landgericht [District Court] Erfurt

Hungary 1 July 1997 Metropolitan Court (Used timber machinery case) [translation available]

* Germany 25 June 1997 Oberlandesgericht [Appellate Court] Karlsruhe 40A [translation available]

Germany 23 June 1997 Landgericht [District Court] München
 

* Germany 21 May 1996 Oberlandesgericht [Appellate Court] Köln 40A [translation available]

* Bulgaria 24 April 1996 Bulgaria Chamber of Commerce Arbitration award 56/1995 40A [translation available]

Germany 19 April 1996 Landgericht [District Court] Aachen

Italy 31 January 1996 Tribunale Civile [District Court] Cuneo [translation available]
 

* Germany 12 October 1995 Landgericht [District Court] Trier 40B [translation available]

* Germany 5 April 1995 Landgericht [District Court] Landshut 40C [translation available]
 

Germany 28 July 1993 Landgericht [District Court] Aachen

China 30 March 1993 CIETAC Arbitration Award [CISG/1993/07] (Talcum block case) 40B [translation available]

Germany 13 January 1993 Oberlandesgericht [Appellate Court] Saarbrücken (Doors case) [translation available]
 

* Netherlands 19 December 1991 Arrondissementsrechtbank [District Court] Roermond 40A

Germany 13 August 1991 Landgericht [District Court] Stuttgart (Women's clothes case) [translation available]
 

Germany 21 December 1990 Amtsgericht [Lower Court] Ludwigsburg
 

Germany 5 July 1989 Bundesgerichtshof [Federal Supreme Court [ULIS precedent] 40B [translation available]

* ICC 1989 International Court of Arbitration, Case 5713 40B [English text]


CASE DIGEST AND ANALYSIS
-   UNCITRAL's case law digest; and
-   An analysis of CISG jurisprudence

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods
[*]

A/CN.9/SER.C/DIGEST/CISG/40 [8 June 2004]
Reproduced with the permission of UNCITRAL

[Text of Article 40
Digest of Article 40 case law
-    Overview of Article 40
-    Article 40 in general
-    Scope and effect of Article 40
-    Requirement that the seller knew or could not
      have been unaware of facts related to a lack of conformity:
       --    In general
       --    Burden of proof
       --    Application (evidence)
       --    Time as of which seller’s awareness is determined
-    Seller’s disclosure of lack of conformity
-    Derogation and waiver
-    Article 40 as embodying general principles underlying the CISG]
ARTICLE 40

The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.

DIGEST OF ARTICLE 40 CASE LAW

Overview of Article 40

1. Article 40 relieves the buyer from the consequences of failing to meet the requirements of articles 38 (which governs the buyer's obligation to examine delivered goods) and 39 (which regulates the buyer's obligation to notify the seller of lack of conformity in delivered goods). The relief provided by article 40 is available only if the buyer's failure to meet its examination and/or notice obligations relates to a lack of conformity that is known to the seller, or of which the seller "could not have been unaware."

Article 40 in general

2. In an arbitral award that discusses article 40 at length, it is asserted that the provision expresses a principle of fair trading found in the domestic laws of many countries and underlying many other provisions of the CISG; that article 40 constitutes "a safety valve" for preserving the buyer's remedies for non-conformity in cases where the seller has himself forfeited the right of protection, granted by provisions on the buyer's timely examination and notice, against claims for such remedies; that the application of article 40 "results in a dramatic weakening of the position of the seller, who loses his absolute defences based on often relatively short-term time limits for the buyer's examination and notice of non-conformity, and instead is faced with the risk of claims only precluded by ... general prescription rules ..."; and that article 40 should be restricted to "special circumstances" so that the protections offered by time limits for claims do not become "illusory."[1] A dissenting opinion from the same arbitration would limit the application of article 40 even further to "exceptional circumstances".[2] It has also been held that article 40 must be applied independently to each separate lack of conformity claimed by the buyer. Thus a seller can be precluded by article 40 from relying on articles 38 and 39 with respect to one non-conformity, but permitted to raise defenses based on articles 38 and 39 with respect to a different non-conformity.[3]

Scope and effect of Article 40

3. According to several court decisions, when its requirements are satisfied, article 40 prevents a seller from relying on a buyer's non-compliance with article 38 and/or article 39;[4] in other cases, a buyer's invocation of article 40 has failed.[5] It has also been found that article 40 applies to contractual examination and notice provisions agreed to in derogation of articles 38 and 39 - i.e., it excuses a buyer who has failed to comply with a contract clause governing examination of goods or a contractual provision requiring notice of non-conformity.[6] Alternatively, it has been posited that, even if article 40 were not directly applicable to such contractual examination and notice provisions, the principle of article 40 would apply indirectly under CISG article 7(2) to fill this gap in the Convention.[7] A court has also concluded that the general principle embodied in article 40 prevents a seller who knowingly and fraudulently misrepresented the mileage and age of a used car from escaping liability under article 35(3), a provision that shields a seller from liability for a lack of conformity of which the buyer knew or could not have been unaware at the time of the conclusion of the contract.[8]

Requirement that the seller knew or could not have been unaware of facts related to a lack of conformity: in general

4. Article 40 applies with respect to a lack of conformity that relates to "facts of which [the seller] knew or could not have been unaware." The nature of this requirement of seller awareness has been examined in several decisions. It was discussed at length in an arbitration decision in which a majority of the arbitrators indicated that the level of seller awareness required by the provision was not clear, although in order to prevent the protections of article 39 from becoming illusory article 40 required something more than a general awareness that goods manufactured by a seller "are not of the best quality or leave something to be desired."[9] The decision states that there is a "general consensus that fraud and similar cases of bad faith" will meet the requirements of article 40, and that the requisite awareness exists if the facts giving rise to the lack of conformity "are easily apparent or detected." With respect to situations in which the seller does not have actual knowledge of a lack of conformity, the arbitration decision indicates that there is a split between those who assert that the requirements of article 40 are met if the seller's ignorance is due to "gross or even ordinary negligence", and those who would require something more, approaching "deliberate negligence".[10] Similarly, according to the tribunal, there is a split between those who argue that a seller is under no obligation to investigate for possible non-conformities, and those who assert that the seller must not "ignore clues" and may have a duty to examine the goods for lack of conformity "in certain cases".[11] A majority of the tribunal concluded that the level of seller awareness of non-conformities that is required to trigger Article 40 is "conscious disregard of facts that meet the eyes and are of evident relevance to the non-conformity". A dissenting arbitrator agreed with the standard, although he believed that it required a higher degree of "subjective blameworthiness" on the seller's part than had been proven in the case.[12] One court has indicated that the requirements of Article 40 are satisfied if the seller's ignorance of a lack of conformity is due to gross negligence.[13] Another decision asserts that article 40 requires that the seller have notice not only of the facts giving rise to the lack of conformity, but also that those facts would render the goods non-conforming.[14]

Requirement that the seller knew or could not have been unaware of facts related to a lack of conformity: burden of proof

5. Severaldecisions have indicated that the buyer bears the burden of proving that the seller knew or could not have been unaware of a lack of conformity.[15] At least two decisions have noted, however, that the "could not have been unaware" language of article 40 reduces the evidentiary burden associated with proving the seller's actual knowledge of a lack of conformity.[16] An arbitral tribunal has asserted that the result of this language is a shifting burden of proof: "If the evidence [adduced by the buyer] and the undisputed facts show that it is more likely than not that the seller is conscious of the facts that relate to the non-conformity, it must be up to the seller to show that he did not reach the requisite state of awareness".[17] According to another decision, the buyer must prove that the seller had notice not only of the facts underlying a lack of conformity, but also that those facts rendered the goods non-conforming.[18]

Requirement that the seller knew or could not have been unaware of facts related to a lack of conformity: application (evidence)

6. Although producing sufficient evidence that the seller knew or had reason to know of a lack of conformity can be a difficult task, buyers in several cases have successfully borne the burden. Where the seller admitted that it was aware of a defect, obviously, a court found that the requirement of article 40 was satisfied.[19] Even without such an admission, a buyer succeeded in establishing the awareness element where the seller, while manufacturing a complex piece of industrial machinery (a rail press), had replaced a critical safety component (a lock plate) with a part that the seller had not previously used for such an application: the fact that the seller drilled several unused trial holes for positioning the substitute lock plate on the rail press evidenced both that it was aware that it was improvising by using a part that did not fit properly, and that it realized proper positioning of the substitute plate was critical, yet the seller never tried to ascertain that the buyer properly installed the plate; as a result, the majority concluded, the seller had "consciously disregarded apparent facts which were of evident relevance to the non-conformity", and article 40 excused the buyer's failure to give timely notice of the defect.[20] The tribunal also indicated that the article 40 "knew or could not have been unaware" requirement would be satisfied where the non-conformity in identical or similar goods had previously resulted in accidents that had been reported to the seller or to the "relevant branch" of the seller's industry.[21] In another decision, a court found that the seller "could not have been unaware" that wine it sold had been diluted with water, because the non-conformity resulted from an intentional act.[22] Another court found that, because of the nature of the non-conformity (some of the jackets that seller had shipped were not the models that the buyer had ordered), the seller necessarily knew of the lack of conformity.[23] In another decision, the court continued the proceedings in order to permit the buyer to prove that the seller knew or could not have been unaware that the cheese it sold was infested with maggots: the court stated that the buyer would carry its burden by proving that the maggots were present when the cheese was frozen before shipment.[24]

7. In several other decisions, however, the court concluded that the article 40 requirement concerning seller's awareness of a lack of conformity had not been met. This was the case where the buyer simply failed to produce evidence that the seller was or should have been aware of the lack of conformity.[25] Where the seller sold a standard product suitable for use in modern equipment, but the product failed when processed by the buyer in unusually-old machinery, the court found that the buyer had not shown that the seller knew or could not have been unaware of the problem because the buyer had not informed the seller that it planned to employ obsolete processing equipment.[26] In another decision, the court relied on the fact that the buyer had re-sold the goods to its own customers in order to conclude that the defects complained of were not obvious; the buyer, therefore, had failed to show that the seller could not have been unaware of the lack of conformity.[27] Another court found that, although some of the picture frame moldings supplied by the seller were non-conforming, it was not clear whether the number exceeded the normal range of defective moldings tolerated in the trade, and there was insufficient evidence to conclude that the seller was aware, or should have been aware, of the defects.[28] Another decision by an arbitral tribunal rejected a buyer's argument that the nature and volume of the defects in the goods and the seller's procedure for inspecting its production established that the article 40 prerequisites relating to the seller's awareness of a lack of conformity were satisfied.[29]

Requirement that the seller knew or could not have been unaware of facts related to a lack of conformity: time as of which seller's awareness is determined

8. Article 40 does not specify the time as of which it should be determined whether the seller knew or could not have been unaware of a lack of conformity. One decision has indicated that this determination should be made as of the time of delivery.[30]

Seller's disclosure of lack of conformity

9. Article 40 states that the relief it provides a buyer that has failed to comply with its obligations under articles 38 and/or 39 does not apply if the seller disclosed the lack of conformity to the buyer. The seller's obligation under article 40 to disclose known non-conformities on pain of losing its protections under articles 38 and 39 has been discussed in only a small number of decisions,[31] and actually applied in even fewer. In one arbitral proceeding, the majority opinion asserted that, "to disclose in the sense of Article 40 is to inform the buyer of the risks resulting from the non-conformity".[32]   Thus where the seller, when manufacturing a complex industrial machine, had replaced a critical safety component (a lock plate) with a different part that required careful installation to function properly, the tribunal found that the seller had not adequately disclosed the lack of conformity for purposes of article 40 where the disclosure to the buyer was limited to a difference in the part numbers appearing on the substitute lock plate and in the service manual: "even if [seller] had informed [buyer] of the exchange as such (and without any further information on proper installation or the risks involved in the arrangement, etc.) this would not be enough ...".[33] In another arbitration proceeding, however, the tribunal held that the seller had made adequate disclosure of a lack of conformity to prevent the buyer from invoking article 40, although the particular facts that supported this conclusion are unclear.[34] Another decision suggested that, although the buyer bears the burden of proving that the seller "knew or could not have been unaware" of a lack of conformity within the meaning of article 40, it is the seller who bears the burden of proving adequate disclosure to the buyer.[35]

Derogation and waiver

10. Nothing in the CISG expressly excepts article 40 from the power of the parties, under article 6, to "derogate from or vary the effect of any of [the Convention's] provisions". An arbitration panel, however, has concluded that, because article 40 expresses fundamental "principles of fair dealing" found in the domestic laws of many countries and underlying many provisions of the CISG itself, a derogation from article 40 should not be implied from a contractual warranty clause that derogates from articles 35, 38 and 39 [36] -- even though the provisions expressly derogated from are closely associated and generally work in tandem with article 40. Indeed, the majority opinion suggests that, despite article 6, "even if an explicit derogation was made -- a result of drafting efforts and discussions that stretch the imagination -- it is highly questionable whether such derogation would be valid or enforceable under various domestic laws or any general principles for international trade".[37] On the other hand, a buyer was found to have waived its right to invoke article 40 when the buyer negotiated with the seller a price reduction based on certain defects in the goods, but did not at that time seek a reduction for other defects of which it then had knowledge.[38]

Article 40 as embodying general principles underlying the CISG

11. Under article 7(2) of the CISG, questions within the scope of the Convention that are not expressly settled in it are to be resolved "in conformity with the general principles on which [the Convention] is based ...".[39] Several decisions have identified article 40 as embodying a general principle of the Convention applicable to resolve unsettled issues under the CISG. According to an arbitration panel, "Article 40 is an expression of the principles of fair trading that underlie also many other provisions of CISG, and it is by its very nature a codification of a general principle".[40] Thus, the decision asserted, even if article 40 did not directly apply to a lack of conformity under a contractual warranty clause, the general principle underlying article 40 would be indirectly applicable to the situation by way of article 7(2). In another decision, a court derived from article 40 a general CISG principle that even a very negligent buyer deserves more protection than a fraudulent seller, and then applied the principle to conclude that a seller could not escape liability under article 35(3)[41] for misrepresenting the age and mileage of a car even if the buyer could not have been unaware of the lack of conformity.[42]


FOOTNOTES

* The present text was prepared using the full text of the decisions cited in the Case Law on UNCITRAL Texts (CLOUT) abstracts and other citations listed in the footnotes. The abstracts are intended to serve only as summaries of the underlying decisions and may not reflect all the points made in the digest. Readers are advised to consult the full texts of the listed court and arbitral decisions rather than relying solely on the CLOUT abstracts.

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

2. Id.

3. CLOUT case No. 251 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 30 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981130s1.html>] (buyer's late notice of non-conformity prevented it from asserting that the color and weight of jackets that the seller had delivered did not conform to the contract; the seller, however, was aware that some jackets were a different model than specified in the contract, and article 40 precluded seller from relying on late notice with regard to this lack of conformity) (see full text of the decision); [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>] (seller admitted pre-delivery knowledge that the goods (clothes) suffered a shrinkage problem, so that art. 40 prevented seller from relying on arts. 38 and 39 as a defense to buyer's claim for this lack of conformity; but buyer failed to prove that seller was aware or could not have been unaware that some items were missing from delivery boxes, and seller could use late notice as a defense as to this non-conformity).

4 . In the following cases, the tribunal found that article 40 precluded the seller from relying on articles 38 and/or 39: CLOUT case No. 45 [ICC Court of Arbitration, case No. 5713 of 1989, available online at <http://cisgw3.law.pace.edu/cases/895713i1.html>]; CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>]; CLOUT case No. 170 [GERMANY Landgericht [District Court] Trier 12 October 1995, available online at <http://cisgw3.law.pace.edu/cases/951012g1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]. In the following cases, the tribunal found that further proceedings were required to determine whether article 40 prevented the seller from relying on articles 38 and 39: CLOUT case No. 98 [NETHERLANDS Rechtbank [District Court] Roermond 19 December 1991, available online at <http://cisgw3.law.pace.edu/cases/911219n1.html>].

5. In the following cases, the tribunal found that the requirements to apply article 40 had not been established: CLOUT case No. 285 [GERMANY Oberlandesgericht [Appellate Court] Koblenz 11 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980911g1.html>]; CLOUT case No. 341 [CANADA La San Giuseppe v. Forti Moulding Ltd. Ontario Superior Court of Justice 31 August 1999, available online at <http://cisgw3.law.pace.edu/cases/990831c4.html>]; CLOUT case No. 232 [GERMANY Oberlandesgericht [Appellate Court] München 11 March 1998, available online at <http://cisgw3.law.pace.edu/cases/980311g1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>] (re some but not all non-conformities); CLOUT case No. 378 [ITALY Tribunale [District Court] Vigevano 12 July 2000, available online at <http://cisgw3.law.pace.edu/cases/000712i3.html>] (see full text of the decision); [BULGARIA Arbitration case No. 56/1995 Bulgarian Chamber of Commerce and Industry 24 April 1996, available online at <http://cisgw3.law.pace.edu/cases/960424bu.html>]; CLOUT case No. 230 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 25 June 1997, available online at <http://cisgw3.law.pace.edu/cases/970625g1.html>]; CLOUT case No. 270 [GERMANY Bundesgerichtshof [Supreme Court] 25 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981125g1.html>].

6. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>].

7. Id.

8. CLOUT case No. 168 [GERMANY Oberlandesgericht [Appellate Court] Köln 21 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960521g1.html>].

9. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

10. Id.

11. Id.

12. Id. (dissenting opinion).

13. CLOUT case No. 232 [GERMANY Oberlandesgericht [Appellate Court] München 11 March 1998, available online at <http://cisgw3.law.pace.edu/cases/980311g1.html>] (see full text of the decision).

14. CLOUT case No. 230 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 25 June 1997, available online at <http://cisgw3.law.pace.edu/cases/970625g1.html>]; CLOUT case No. 270 [GERMANY Bundesgerichtshof [Supreme Court] 25 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981125g1.html>].

15. CLOUT case No. 98 [NETHERLANDS Rechtbank [District Court] Roermond 19 December 1991, available online at <http://cisgw3.law.pace.edu/cases/911219n1.html>]; CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision). Other decisions have implied that the buyer bore the burden of proving that seller was on notice of a lack of conformity with the meaning of article 40: CLOUT case No. 378 [ITALY Tribunale [District Court] Vigevano 12 July 2000, available online at <http://cisgw3.law.pace.edu/cases/000712i3.html>] (see full text of the decision); CLOUT case No. 230 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 25 June 1997, available online at <http://cisgw3.law.pace.edu/cases/970625g1.html>]; [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>]. The last case distinguishes between the burden of proving that the seller knew or could not have been unaware of a lack of conformity (which the buyer bears) and the burden of proving that the seller disclosed the lack of conformity to the buyer (which the court suggests the seller bears).

16. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision); CLOUT case No. 230 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 25 June 1997, available online at <http://cisgw3.law.pace.edu/cases/970625g1.html>] (see full text of the decision).

17. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

18. CLOUT case No. 230 [GERMANY Oberlandesgericht [Appellate Court] Karlsruhe 25 June 1997, available online at <http://cisgw3.law.pace.edu/cases/970625g1.html>].

19. [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>].

20. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

21. Id.

22. CLOUT case No. 170 [GERMANY Landgericht [District Court] Trier 12 October 1995, available online at <http://cisgw3.law.pace.edu/cases/951012g1.html>] (see full text of the decision).

23. CLOUT case No. 251 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 30 November 1998, available online at <http://cisgw3.law.pace.edu/cases/981130s1.html>] (see full text of the decision).

24. CLOUT case No. 98 [NETHERLANDS Rechtbank [District Court] Roermond 19 December 1991, available online at <http://cisgw3.law.pace.edu/cases/911219n1.html>]. In an arbitral award, the tribunal found that article 40 excused the buyer from failing to perform its obligations under articles 38 and 39 because the seller knew or could not have been unaware of the lack of conformity but the decision does not specify the facts that supported this conclusion, indicating only very generally that "it clearly transpires from the file and the evidence that the Seller knew and could not be unaware" of the lack of conformity; see CLOUT case No. 45 [ICC Court of Arbitration, case No. 5713 of 1989, available online at <http://cisgw3.law.pace.edu/cases/895713i1.html>].

25. [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>].

26. CLOUT case No. 285 [GERMANY Oberlandesgericht [Appellate Court] Koblenz 11 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980911g1.html>] (see full text of the decision).

27. CLOUT case No. 232 [GERMANY Oberlandesgericht [Appellate Court] München 11 March 1998, available online at <http://cisgw3.law.pace.edu/cases/980311g1.html>].

28. CLOUT case No. 341 [CANADA La San Giuseppe v. Forti Moulding Ltd. Ontario Superior Court of Justice 31 August 1999, available online at <http://cisgw3.law.pace.edu/cases/990831c4.html>] (see full text of the decision). This situation may illustrate a seller's "general awareness" of defects that, as mentioned in para. 4 supra, an arbitration tribunal has indicated is insufficient to satisfy the requirements of Article 40; see CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

29. [RUSSIA Arbitration Award case No. 054/1999 of 24 January 2000; available at <http://cisgw3.law.pace.edu/cases/000124r1.html>].

30. [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>].

31. CLOUT case No. 285 [GERMANY Oberlandesgericht [Appellate Court] Koblenz 11 September 1998, available online at <http://cisgw3.law.pace.edu/cases/980911g1.html>] (recognizing a seller's duty to warn of known non-conformities under art. 40, but finding no such duty in the case because the goods were in fact conforming); CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision); [BULGARIA Arbitration case No. 56/1995 Bulgarian Chamber of Commerce and Industry 24 April 1996, available online at <http://cisgw3.law.pace.edu/cases/960424bu.html>]. See also [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>], which indicates that the seller bears the burden of proving adequate disclosure.

32. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

33. Id. (see full text of the decision).

34. [BULGARIA Arbitration case No. 56/1995 Bulgarian Chamber of Commerce and Industry 24 April 1996, available online at <http://cisgw3.law.pace.edu/cases/960424bu.html>].

35. [GERMANY Landgericht [District Court] Landshut 5 April 1995, available online at <http://cisgw3.law.pace.edu/cases/950405g1.html>].

36. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

37. Id. (see full text of the decision). Note that, under CISG article 4(a), questions concerning the "validity" of a contract or its provisions are beyond the scope of the Convention, and thus are governed by other law as determined by the rules of private international law.

38. CLOUT case No. 343 [GERMANY Landgericht [District Court] Darmstadt 9 May 2000, available online at <http://cisgw3.law.pace.edu/cases/000509g1.html>].

39. In the absence of general CISG principles that would settle an unresolved issue, article 7(2) directs that the question be settled "in conformity with the law applicable by virtue of the rules of private international law".

40. CLOUT case No. 237 [STOCKHOLM CHAMBER OF COMMERCE Arbitration Award of 5 June 1998, available online at <http://cisgw3.law.pace.edu/cases/980605s5.html>] (see full text of the decision).

41. Article 35(3) provides that a seller is not liable for a lack of conformity under article 35(2) "if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity".

42. CLOUT case No. 168 [GERMANY Oberlandesgericht [Appellate Court] Köln 21 May 1996, available online at <http://cisgw3.law.pace.edu/cases/960521g1.html>].


ANALYSIS OF CISG CASE LAW

Reprinted by special permission of Northwestern University School of Law. 34 Northwestern Journal of International Law and Business (Winter 2004) 299-440.[*]

excerpt from

The Interpretive Turn in International Sales Law:
An Analysis of Fifteen Years of CISG Jurisprudence

Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene,
Virginia Maurer and Marisa Pagnattaro

[...]

3. Effect of Seller's Knowledge: Article 40

Articles 38 [610] and 39 [611] require the buyer to examine the goods and give timely notice to the seller of non-conformities. Article 40, in effect, excuses the buyer from the consequences of failing to make timely examination of the goods and give notice of the non-conformities. If the seller "knew or could not have been unaware" of the non-conformities and then failed to disclose them to the buyer, the seller cannot rely on the buyer's failure of examination and notice. This provision has occasioned discussion in case law [612] and commentary.[613] Some cases turn on whether [page 400] the buyer can provide proof of the seller's knowledge of the non-conformity [614] or on whether the seller disclosed the non-conformity to the buyer.[615] To the latter point, a recent Belgian case characterized Article 40 as the application of "the good faith principle,"[616] noting that if the seller knows of the non-conformity and fails to reveal it, he cannot fall back upon the buyer's failure to tell him what he already knew.[617]

[...]


FOOTNOTES

* For a subsequent text on this subject by these authors, see Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene, Virginia Maurer & Marisa Pagnattaro, "International Sales Law: A Critical Analysis of CISG Jurisprudence", Cambridge University Press (2005) 241 p.

[...]

610. CISG, supra note 4, at art. 38.

611. Id. at art. 39.

612. See La San Giuseppe v. Forti Moulding, Ltd., [1999] O.J. No. 3352, available at <http://cisgw3.law.pace.edu/cases/990831c4.html>; BP Oil Int'l v. Empressa Estalal Petroleos de Excuador, 332 F.3d 333 (5th Cir. 2003), S.r.l. R.C. v. BVBA R.T., Hof van Beroep Antwerp, 1997/AR/1554, Jun. 27, 2001, supra note 91; ICC International Court of Arbitration No. 5713 of 1989, available at <http://cisgw3.law.pace.edu/cases/895713i1.html> [English text]; OLG Zweibrücken 2 U 27/01, Jul. 26, 2002, supra note 567; T.SA v. R. Establlissement, HG Zürich, HG 930634/O, Nov. 30, 1998, supra note 339; ICC International Court of Arbitration No. 9083 of 1999, available at <http://cisgw3.law.pace.edu/cases/999083i1.html> [English text].

613. See Franco Ferrari, Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing, 15 J.L. & Com. 1 (1995), available at <http://cisg.law.pace.edu/cisg/wais/db/editorial/ferrari950308g3.html>.

614. See, e.g., OLG Zweibrücken 2 U 27/01, Jul. 26, 2002, supra note 567; ICC International Court of Arbitration No. 5713 of 1989; T.SA v. R. Establlissement, HG Zürich, HG 930634/O, Nov. 30, 1998, supra note 339.

615. See, e.g., ICC International Court of Arbitration 1999, Case No. 9083; La San Giuseppe v. Forti Moulding, Ltd., [1999] O.J. No. 3352, supra note 612.

616. See S.r.l. R.C. v. BV BA R.T., Hof van Beroep Antwerp, 1997/AR/1554, Jun. 27, 2001, supra note 91; see also , Arbitration Institute of the Stockholm Chamber of Commerce Arbitration Award of Jun. 5, 1998 available at <http://cisg.law.pace.edu/980605s5.html>; Francis Limbach & Brandon Ahearn, Conformity of goods, derogation from Article 40 by the parties and conditions of Art 40 CISG, available at <http://cisgw3.law.pace.edu/cisg/biblio/limbach.html>.

617. Id.

[...]

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