Germany 5 December 2000 Appellate Court Oldenburg (Tiller case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/001205g1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 12 U 40/00
CASE HISTORY: Unavailable
SELLER'S COUNTRY: [ - ] (plaintiff)
BUYER'S COUNTRY: [ - ] (defendant)
GOODS INVOLVED: Tiller (machine to loosen and break up soil)
Case law on UNCITRAL texts (CLOUT) abstract no. 431
Reproduced with permission from UNCITRAL
This decision deals with the examination period under article 38(1) CISG, as well as the standard of reasonable time for giving notice of a lack of conformity under article 39 CISG.
The buyer (defendant) ordered a machine from the seller (plaintiff). Fifty-eight days after delivery, the buyer gave notice to the seller about a deficiency of the machine. Finally, the buyer declared the contract avoided. The seller sued for payment of the full contract price.
The court of first instance ruled in favour of the seller. On appeal, the Higher Regional Court upheld the decision, ruling that the buyer had failed to give notice of the deficiency within reasonable time under article 39(1) CISG and had accordingly lost its right to rely on the lack of conformity. The Court stated that the notification period under article 39(1) CISG begins at the end of the short period of examination of goods according to article 38(1) CISG.
The Court noted that the circumstances of the individual case must be taken into account in determining the length of the examination period. The main purpose of the examination and notification duties is to enable the seller to remedy a lack of conformity of the goods. Therefore, the method of examination must be of such nature as to disclose recognizable defects. The buyer of complicated machinery is thus expected to conduct a test run in order to confirm that the machine functions properly. In the view of the Court, a period of two weeks was sufficient to conduct the test run. The Court also pointed out that the period starts to run upon delivery, irrespective of the point of time when the machine is intended to be used in actual business. In the case at hand, the buyer had failed to examine the machine within two weeks after delivery.
According to article 39(1) CISG, notice has to be given within a reasonable time after the lack of conformity had been discovered or ought to have been discovered. The Court observed that, although the standard of reasonable time for giving notice is subject to dispute, in the case at hand it was unnecessary to decide upon this question, since the buyer had given notice only approximately six weeks after the end of the examination period, i.e. eight weeks after delivery. This was considered by the Court to be too late under any standard commonly applied pursuant to article 39 CISG.
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APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
38A [Buyer's obligation to examine goods: time for examining goods] 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within
reasonable time]; 44A [Excuse for failure to notify: remedies preserved]
38A [Buyer's obligation to examine goods: time for examining goods]
39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];
44A [Excuse for failure to notify: remedies preserved]
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CITATIONS TO OTHER ABSTRACTS OF DECISION
English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=500&step=Abstract>
French: Recueil Dalloz (17 January 2002) No. 3, 314
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/618.htm>;  Recht der International Wirtschaft 381-383; OLG Reports Oldenburg 22-24;  NdsRpfl 128-130; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=500&step=FullText>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
English: Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 4-9 n.129; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion);  S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 85, 107;  Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 7 paras. 13, 18 Art. 38 paras. 2, 14 Art. 39 paras. 17, 33
French: Schneider, Recueil Dalloz (17 January 2002) No. 3, 314-315Go to Case Table of Contents
Queen Mary Case Translation Programme
5 December 2000 [2 U 27/01]
Translation by [*] Julian Waiblinger [**]
Translation edited by Camilla Baasch Andersen [***]
The Appellate Court (Oberlandesgericht) Oldenburg ruled:
|-||The default judgment issued on 10 October 2000 is upheld.|
|-||The defendant has to bear further costs of the litigation.|
|-||The judgment is provisionally enforceable.|
Value of the matter being litigated and value of the cause of complaint: Deutsche Mark [DM] 43,802.76.
I. FACTS OF THE CASE
The Plaintiff [seller] claims payment from the Defendant [buyer] of the purchase price for the delivery of a tiller [machine/tool to loosen and break up soil] for the working of sports grounds.
On the occasion of a demonstration of tools in autumn 1998, the general manager of the [buyer] orally ordered a S-RTL 2000 V/6/9 tiller from the [seller] at a gross purchase price of DM 43,802.76. The [seller] sent the [buyer] a corresponding acknowledgement of an order on 26 October 1998, which referred to the [seller]īs standard terms. The machine was delivered on 21 April 1999. By telefax of 18 June 1999, the [buyer] notified of non-conformities and demanded that the [seller] remedy the defects. In a writing of the same day, the [seller] denied the existence of non-conformities, yet offered to carry out a course by one of his employees at the [buyer]īs premises for refund of costs. At no time, not even after an employee of the [seller] had checked the machine at the [buyer]īs building site, did the [buyer] pay the purchase price. By writing of 13 August 1999, the [buyer] declared the contract of sale avoided with as remedy to the notified non-conformities.
In the challenged judgment, the District Court (Landgericht) ordered the [buyer] to pay to the [seller] DM 43,802.76 along with 6.75% interest since 3 July 1999. The District Court dismissed the [buyer]īs counterclaim, which was aimed at the ascertainment of the delay of the taking delivery with the taking back of the tiller. The claim for payment of the purchase price did not conflict with the alleged defects. According to Art. 39 CISG, the [buyer] lost his right to plead breach of contract since he had failed to give notice of defects within a reasonable period of time subsequent to the delivery of the machine. This also applied to any objections that the tiller delivered was of a different type of construction than the tiller demonstrated and ordered.
Almost two months had passed between the delivery of the machine on 21 April 1999 and the notification of defects on 18 June 1999. Even if the [buyer] had not noticed the alleged defects until mid-June at the first starting up of the tiller, he had violated his obligation under Art. 38 CISG to examine the goods within as short a time as practicable. The obligation according to Art. 38 CISG applies to all breaches of contract, thus also to an alleged mistaken delivery. The [buyer] had been obliged to carry out a trial run at least within two weeks after the delivery of the machine, at the occasion of which the alleged defects could have been discovered.
The [buyer] objects to that by way of his appeal lodged and justified in time. The [buyer] repeats and extends his submissions at first instance and, moreover, sustains the opinion that, contrary to the understanding of the District Court (Landgericht), an earlier notification of the defects had not been possible. It had been agreed upon with the [seller] that the machine was to be delivered at the end of 1998, but not later than 31 March 1999.
In fact, the machine was not delivered until 21 April 1999. At that time, the work coming up in spring, for which the machine was supposed to be used had already been completed. Therefore, the next use of the machine had not been necessary until June 1999. Only then had the Defendant [buyer] noticed the defects and informed the Plaintiff [seller] by telefax of 18 June 1999. An earlier examination of the machine could not have been expected of [buyer]. A trial run had not been possible since a normal lawn, contrary to a sports ground, was not as homogeneous and the subsoil normally rather stony and therefore not suitable for the use of a tiller. The [buyer] had fulfilled his duty to an examination according to the circumstances within time. As for the rest, the [buyer] maintains that the [seller] could not plead a delayed notification of defects since [seller] had tacitly waived this objection. As evidenced by the submitted pre-procedural correspondence, the [seller] had confined himself to negotiate about the existence of defects and the capability of functioning of the tiller, without having reserved the right to plea delay, which had been raised for the first time at the filing of the objection of 10 February 2000.
The [buyer] did not make his appearance at the judicial hearing on 10 October 2000. On application of the [seller], the Court dismissed the [buyer]īs appeal by default judgment. On 27 October 2000, the [buyer] raised objections against the default judgment which was served upon [buyer] on 13 October 2000.
The [buyer] petitions to reverse the default judgment and (1) to modify the challenged judgment and dismiss the claim; (2) moreover, to establish in respect of the counterclaim that the [seller] is overdue regarding the repurchase with the taking delivery of the S-RTL 2000/V/6/9 tiller.
The [seller] petitions to maintain the default judgment. [Seller] essentially defends the challenged judgment and points out that the alleged problems with the use of the tiller on 17 / 18 June 1999 were to be attributed to the inappropriate use of the machine by the [buyer]īs employees.
II. REASONING OF THE APPELLATE COURT
The [buyer] lodged an objection to the default judgment on time (§ 341 ZPO [*]). The default judgment was to be maintained according to Art. 341 s 1 ZPO since the appeal is admissible, yet not legally justified.
I. The District Court (Landgericht) held that the [buyer] had forfeited his right to plead (an alleged) breach of contract of the purchased tiller according to Art. 39(1) CISG, since he had failed to give notice of the [seller]īs breach of contract on time. The [buyer] objects to that without success.
According to Art. 39(1) CISG, the buyer forfeits the right to rely on any breach of contract based on a non-conformity of goods, if he fails to give notice within a reasonable time after he discovered or aught to have discovered the non-conformity in question. In order to determine the time in which the buyer should have discovered the non-conformity (at the latest), Art. 38(1) CISG is to be taken into account. According to that provision, the buyer is obliged to examine the goods within such short a period of time that is practicable under the circumstances. This duty to examine represents an incumbancy upon the buyer, the non-compliance with which can lead to the loss of his rights arising from the goods possibly constituting breach of contract, since in default of an examination within time, he [buyer] regularly will miss the time for claims under Art. 39(1) CISG (comp. Herber/Czerwenka, Internationales Kaufrecht, 1991, Art. 38 CISG No. 2; Schlechtriem-Schwenzer, Kommentar zum Einheitlichen UN-Kaufrecht - CISG, 3rd edition, 2000, Art. 38 No. 5). The time limit of Art. 39(1) CISG therefore begins to run at the end of the period of time to examine, thus at the time at which the buyer could have established the reprimanded defects, had [buyer] examined the goods correctly and in time (comp. Schlechtriem-Schwenzer, Art. 39 No. 9).
The question at what time and in which manner the due examination according to Art. 38(1) CISG must be made essentially depends on the circumstances of the individual case and the adequate possibilities of the parties (comp. OLG Düsseldorf, DB 1994, pp. 2492-4; Schlechtriem-Schwenzer Art. 38 No. 16). Following the established case law regarding the Einheitliches Gesetz über den internationalen Kauf beweglicher Sachen (EKG) [hereinafter referred to as ULIS] [*] of 17 July 1973 (BGBl. I 856), the Court holds that yet higher demands are to be made thereon (also OLG Düsseldorf DB 1994, pp. 2492-4; Herber/Czerwenka, Art. 38 No. 9). The Court does not fail to appreciate that the amendments to the CISG in contrast to ULIS in all reveal the tendency to make provisions more favourable for the buyer. Therefore, the severe adjudication regarding the ULIS -- often inspired by §§ 377, 378 HGB [*] -- cannot be considered as a starting point without further ado (comp. Schlechtriem-Schwenzer, Art. 38 No. 2 with further references). Art. 38(1) CISG, however, does not show any substantial differences compared to the previous provision of Art. 38(1) ULIS. According to Art. 38(1) ULIS, the goods were to be examined "within a short period of time", whereas Art. 38(1) CISG requires this to take place "within as short a period of time as practicable". Since according to Art. 11 ULIS, however, also the circumstances of the case had to be considered for the calculation of the final date, the provision of Art. 38(1) CISG does not show any differences in substance to the provision of ULIS that would require an alteration to the previous adjudication regarding ULIS. Above all, the requirement to examine and to give notice of defects is supposed to enable the seller to possibly remedy the breach of contract by way of substitute delivery or replacement or to mitigate the buyer's damage. In addition, the seller should get the chance to prepare himself for negotiations or litigation about the breach of contract of the goods, for instance by securing necessary evidence. Finally, the seller should become certain at a certain time about the invoice items he can record in the books (comp. Schlechtriem-Schwenzer, Art. 38 No. 4; as regards [ULIS] comp. also BGH, judgment of 2 June 1982 VIII ZR 43/81, NJW [*] 1982, pp. 2730-1).
In the present case, the [buyer] did not fulfill his obligation to examine. The tiller was delivered to the [buyer] on 21 April 1999. According to his own submissions, the [buyer] did not even in the following time carry out an examination of the machine. Therefore, the [buyer] noticed the alleged defects only on the occasion of the first use of the machine in June 1999, thus about seven weeks after delivery. Contrary to his opinion, the [buyer] was not entitled, even under the circumstances, to wait with the examination for the first use of the tiller, taking into account his [buyer]īs internal level of incoming orders. According to Art. 38(1) CISG, the [buyer] was obliged to examine the goods properly and as soon as possible. The examination must be appropriate to reveal discernible defects, which, where machines or other technically complicated devices are concerned, includes the examination as to the capability of functioning (comp. Schlechtriem-Schwenzer, Art. 38 No. 13 and following pages, with further references). Had the [buyer], as submitted, only been able to test the functioning of the tiller on the occasion of an actual use, and a corresponding use was out of question in the foreseeable future, he [buyer] must have carried out a so called test- or trial run, namely within an adequate short period of time.
In accordance with the District Court (Landgericht), the Court stipulates two weeks at the most as this time limit. The [buyer] failed to set forth substantively that such an examination was not possible and could not have been expected of him [buyer]. On no account, was [buyer] allowed to wait for the first actual use of the machine in June 1999. As far as the [buyer] submits only generally that the lawn required for a trial run had not been available to him, he cannot convince [the Court]. It is not apparent, why a trial run of the tiller should not have been possible on a suitable lawn, particularly as the [buyer]īs field (of activity), as pointed out correctly by the [seller], is not limited to the construction of sports grounds but includes also horticulture. In so far it is not apparent that the [buyer] was forced to rent a corresponding lawn respectively a sports ground. Moreover, the [buyer] fails to submit any clear indications that this would actually have involved costs amounting to DM 50,000.
At the due examination of the tiller by way of a trial run within the first two weeks after delivery, the [buyer] could have noticed the alleged defects. From that point on, the [buyer] was obliged to notify the [seller] of the alleged breach of contract of the delivered machine within a (further) reasonable period of time according to Art. 39(1) CISG. It is controversial, however, which time limit is to be regarded as adequate for the notification of defects according to Art. 39(1) CISG (comp. Herber/Czerwenka, Art. 39 No. 9; Schlechtriem-Schwenzer, Art. 39 No. 15 and following pages, with further references). In some cases it is being maintained that the buyer had to react within the time customary in trade, which was almost equivalent to the term "prompt" within the meaning of § 121(1) BGB [*]. Therefore, a rebuke after four weeks time could regularly not be regarded as within the set period, whereas a rebuke after eight days could still be considered as within time (comp. Herber/Czerwenka, Art. 39 No. 9). According to a different understanding following the US-American jurisprudence, for durables normally the time limit of one month as a rough average is regarded as adequate (comp. BGH [*], judgment of 3 November 1999, VIII ZR 287/298, NJW-RR 2000, pp. 1361-2; Schlechtriem-Schwenzer, Art. 39 No. 17; alike also LG Oldenburg, NJW-RR 1995, p. 438). In the present case, it is not necessary to decide this conflict of opinion. In accordance with the predominant opinion of the case law and legal literature, the Court does not consider the given period of more than one month between the expiration of time (early in May 1999) and the notification of defects on 17 / 18 June 1999 as reasonable anymore. Therefore, in default of a rebuke in time, the [buyer] is barred from pleading breach of contract of the tiller (Art. 39(1) CISG).
Contrary to the [buyer]īs opinion, the [seller] has not waived the plea of delay. As regards the buyer's duty to examine and to give notice of defects according to § 377 HGB [*], it is recognized by the adjudication and legal literature that the seller can at any time - even tacitly - waive the legal consequences of § 377(1) and (2) HBG. Such a waiver, which is also available under CISG (comp. BGH, judgment of 25 June 1997, VIII ZR 300/96, NJW 1997, pp. 3311-2), can possibly also be assumed where the seller took back the goods without reservation, promised subsequent improvement unreservedly or did not plead the objection of delayed notification of defects (comp. BGH, judgement of 19 June 1991, VIII ZR 149/90 NJW 1991, pp. 2633-2634; Baumbach/Hopt, HGB 29TH edition, § 377 No. 14 with further references). The mere entering into negotiations about the defects reprimanded by the buyer, contrary to the [buyer]īs opinion, cannot be regarded as such a waiver since it also might only indicate the seller's wish to initially try an out-of-court settlement regarding the defects (comp. BGH, judgment of 19 June 1991, NJW 1991, p. 2633). Neither does that conflict with the fact that the objection of delay was first pleaded in the course of the legal proceeding (comp. BGH, judgment of 19 June 1991, NJW 1991, p. 2633). The fact that the Plaintiff [seller] continually denied the existence of defects before the procedure and also in the procedure at issue does particularly point against a waiver of the plea of delay. Eventually, the Plaintiff [seller] is not prevented from pleading the delayed notification of defects according to the requirements of good faith (§ 242 BGB). That would require the [seller]īs behaviour allegedly contrary to good faith to be causal for the delayed rebuke (comp. BGH, judgment of 19 June 1991, NJW 1991, 2633), which is obviously not the case here.
II. The costs order is based on §§ 97(1), 344 ZPO; the decision on the provisional enforceability is based on §§ 708 No. 10, 713 s 1 ZPO. The litigation does not give rise to grant leave to appeal (§ 564(1) ZPO).
* Translator's note on abbreviations: BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [a well-known German law journal]; ULIS = Uniform Law on the International Sale of Goods [antecedent to the CISG, done at The Hague on 1 July 1964]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].
All translations should be verified by cross-checking against the original text.
** Julian Waiblinger, Humboldt University, Berlin, Faculty of Law since 1999; King's College, London, Diploma in Legal Studies 2001/2002.
*** Camilla Baasch Andersen, Fellow of the Institute of International Commercial Law of the Pace University School of Law, is a Lecturer at Queen Mary, University of London.Go to Case Table of Contents