Reproduced with permission from the Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 51-94
Martin Karollus [*]
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[Applicability of the CISG: effect of an Article 95 reservation]
The CISG entered into force in the FRG on January 1, 1991. For this reason, Part II of the CISG is applicable only to an offer made on or after January 1,1991, and Part III of the CISG is applicable only to a contract concluded on or after January 1, 1991. Consequently, there were few CISG applications under Article 1(1)(a) in 1991 and 1992, but this has changed since 1993.
Nevertheless, in many decisions the CISG was applied to older sales contracts based on Article 1(1)(b). In the absence of a choice of law provision in the contract, the German rules on conflict of laws generally lead to the application of the seller's law. If the seller was from a country which adopted the CISG before 1991 (especially Italy and France), the German courts applied the CISG as part of the seller's law.
However, in one case the court was wrong [OLG Düsseldorf 2 July 1993]. The seller came from Indiana, and the law applicable to the contract was therefore the law of Indiana. The OLG Düsseldorf decided the CISG was applicable, because the United States had been a CISG member since 1988. Unfortunately, the OLG Düsseldorf ignored the fact that the United States had opted out of Article 1(1)(b) by declaration under Article 95.
Generally, the CISG is not dispositive as to whether the courts of a state which has not made a declaration under Article 95 should apply the CISG under Article 1(1)(b) as the domestic law of a nation which has opted out of Article 1(1)(b) by declaration under Article 95. In the FRG, this problem has been solved by national statute. According to Vertragsgesetz Article 2, a German court may not apply Article 1(1)(b) if the conflict of laws analysis requires application of the law of a state which has opted out of Article 1(1)(b) by declaration under Article 95. Therefore, the OLG Düsseldorf incorrectly applied the CISG instead of the domestic law of Indiana (presumably the Uniform Commercial Code). It is perhaps not surprising, however, that the court favored application of the more familiar CISG.
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* Professor of Law at the University of Bonn, Germany, from 1992 to February 1995. Currently, Professor of Law at the University of Linz, Austria. Address: Institut für Handels-und Wertpapierrecht, Universität Linz, A-4040 Linz-Auhof, Austria, Europe.
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60. Id. art. 100(1).
61. Id. art. 100(2).
62. For decisions applying the CISG under Article 1(1)(a), see Judgment of May 14, 1993, LG Aachen, 1993 RIW 760; Judgment of Jan. 18, 1994, OLG Frankfurt am Main, 1994 RIW 240; Judgment of Apr. 20, 1994, OLG Frankfurt am Main, 1994 RIW 593; Judgment of July 13, 1994, LG Frankfurt am Main, 1994 NJW-RR 1264; Judgment of Mar. 2, 1994, OLG München, 1994 RIW 595. See also Judgment of Feb. 10, 1994, OLG Düsseldorf, 1994 RIW 1050 (the CISG may be applicable under either Article 1(1)(a) or (b)).
63. For decisions applying the CISG under Article 1(1)(b) (seller's country in parentheses), see Judgment of July 3, 1989, LG Münich I, 1990 IPRax 316 (Italy); Judgment of Aug. 31, 1989, LG Stuttgart, 1990 IPRax 317(Italy); Judgment of Apr. 3, 1990, LG Aachen, 1990 RIW 491 (Italy); Judgment of Apr. 24, 1990, AG Oldenburg in Holstein, 1991 IPRax 336 (Italy); Judgment of Sept. 26, 1990, LG Hamburg, 1991 IPRax 400 (Italy); Judgment of Jan. 31, 1991, AG Frankfurt am Main, 1991 IPRax 345 (Italy); Judgment of June 13, 1991, OLG Frankfurt am Main, 1991 RIW 591 (France); Judgment of Aug. 14, 1991, LG Baden-Baden, 1992 RIW 62 (Italy) (implicit application of CISG Article 1(1)(b)); Judgment of Sept. 16, 1991, LG Frankfurt am Main, 1991 RIW 952 (Italy); Judgment of Sept. 17, 1991, OLG Frankfurt am Main, 1991 RIW 950 (Italy); Judgment of Nov. 20, 1992, OLG Karlsruhe, 1993 NJW-RR 1316 (France); Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW 845 (Indiana, USA); Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW 934 (France); Judgment of Jan. 24, 1994, KG Berlin, 1994 RIW 683 (Italy) (same result as application of CISG Article 1(1)(b) using conflict of laws analysis); Judgment of Feb. 10, 1994, OLG Düsseldorf, 1995 RIW 53 (France).
64. See Einführungsgesetz zum Bürgerlichen Gesetzbuch [EGBGB] arts. 27-28.
65. EGBGB art. 28.
66. Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW 845.
67. 52 Fed. Reg. 6262 (1987).
68. See Malcolm Evans, Article 95, in Commentary on the International Sales Law 654, 656-57 (C.M. Bianca & M.J. Bonell eds., 1987); Honnold, supra note 1, §§ 47-47.5; Karollus, supra note 20, at 31.
69. See supra note 6 and accompanying text.
70. See Peter Schlechtriem, Kurzkommentar, 1993 EWiR 1075.
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[Contracts for the manufacture of goods]
German courts have applied the CISG via Article 3(1) in three cases involving contracts for the manufacture of goods. In the first case, an Italian manufacturer contracted to produce shoes according to the detailed instructions of the German buyer [OLG Frankfurt 17 September 1991]. In the second case, the American manufacturer promised to produce a machine for an industrial plant [OLG Düsseldorf 2 July 1993]. In the third case, a French manufacturer of computer printers developed software for the special needs of the buyer [OLG Koblenz 17 September 1993].
None of these contracts are sales contracts under German law because German sales law is applicable only if the goods manufactured are generic. If the goods are custom-made, the provisions concerning a Werkvertrag (contract of manufacture) apply.
Nevertheless, the contracts are sales contracts under the CISG; the only distinction made by the CISG concerns the origin of the raw or component materials. Since these materials were not supplied by the buyer, the CISG properly applied.Go to entire text of Karollus commentary
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77. Judgment of Sept. 17, 1991, OLG Frankfurt am Main, 1991 RIW 950.
78. Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW 845.
79. Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW 934.
80. Bürgerliches Gesetzbuch [BGB] § 651.
81. BGB §§ 633-50.
82. CISG Article 3(1) states: "Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials. . . ." CISG, supra note 4, art. 3(1). No court has yet considered the meaning of "substantial part." For discussion of the interpretation of "substantial part," see Honnold, supra note 1, § 59; Herber & Czerwenka, supra note 16, at 28; Karollus, supra note 20, at 22-23; Rolf Herber, Art. 3: Verträge über herzustellende Waren oder Dienstleistungen, in Kommentar zum Einheitlichen UN-Kaufrecht 68 (Ernst van Caemmerer & Peter Schlechtriem eds., 2d ed. 1995).
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[Personal injury, liability of seller; indemnification for]
According to CISG Article 5, the CISG does not apply to the seller's liability for death or personal injury caused by the goods. This provision should have been discussed by the OLG Düsseldorf in a case where an American seller delivered a machine to a German buyer [OLG Düsseldorf 2 July 1993]. The buyer resold the machine to Russia where it was used in an industrial plant. Unfortunately, defects in the machine caused an accident that killed one workman and injured another. The German buyer, liable to his Russian customer, sued the American seller for compensation, in effect demanding discharge from his liability. The OLG Düsseldorf held that the CISG applied to this claim. This seems wrong, since such a claim for indemnification should also be precluded by CISG Article 5.Go to entire text of Karollus commentary
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94. Judgment of July 2, 1993, 1993 RIW 845.
95. See infra part VI.13.
96. In addition, the OLG Düsseldorf should not have applied the CISG because the United States opted out of Article 1(1)(b). See supra note 67 and accompanying text.
97. See W. Khoo, Article 5, in Commentary on the International Sales Law 49 (C.M. Bianca & M.J. Bonell eds., 1987); Schlechtriem, supra note 22, at 20; Rolf Herber, Art. 5: Ausschluß der Haftung für Tod oder Körperverletzung, in Kommentar zum Einheitlichen UN-Kaufrecht 79 (Ernst von Caemmerer & Peter Schlechtriem eds., 2d ed. 1995); Reinhart, supra note 19, at 25.
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[Choice of law]
If a contract contains a choice of law clause referring to the law of a CISG Member State, it is not clear whether the CISG is applicable. On one hand, the parties may have intended application of the CISG as part of the chosen national law. On the other hand, they may have intended to apply only the designated national law, excluding the CISG. While the parties' intent should prevail, in most cases such intent cannot be proven. Courts, therefore, are bound to develop general rules for the interpretation of choice of law provisions. The German courts, in accord with most authors, favor CISG application. In their view, the mere choice of a national law does not indicate an intent to exclude the CISG [OLG Koblenz 17 September 1993; OLG Düsseldorf 2 July 1993; OLG Köln 22 February 1994]. While this favors CISG application, it may not favor parties who did not intend CISG application. However, contracting parties can avoid this ambiguity by expressly excluding the CISG.
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98. See Rolf Herber, Art. 6: Ausschluß, Abweichung oder Änderung durch Parteiabrede, in Kommentar zum Einheitlichen UN-Kaufrecht 13 (Ernst von Caemmerer & Peter Schlechtriem eds., 2d ed. 1995).
99. Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 934-36 (the parties chose "French law," and the court applied the CISG as part of French law); Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW at 845 (the parties did not indicate a choice of law, but the court noted that if they had chosen German law, the CISG would not apply because it was not in force in Germany when the contract was formed); Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW at 972. The leading decision of the Bundesgerichtshof as to ULIS and choice of law provisions is Judgment of Dec. 4, 1985, BGH, 96 Entscheidungen des Bundesgerichtshofs in Zivilsachen [BGHZ] 313 (1986).
100. See Karollus, supra note 20, at 38-39.
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Article 74 allows only monetary damages for breach of contract; compensation in kind is not permitted. Nevertheless, the OLG Düsseldorf held that a buyer of defective goods who became liable to a second buyer could demand discharge from his liability as a seller of defective goods to the second buyer from the original seller [OLG Düsseldorf 2 July 1993]. Although this holding is arguably incorrect, I agree. As soon as the first buyer paid damages to the second buyer, he could recover the sum paid from the original seller. There is no reason why the original seller should not pay directly the second buyer.
The recovery of interest under CISG Article 78 is only a minimum, allowed "without prejudice to any claim for damages." For example, the seller can recover damages if his sales are prefinanced and he has to pay interest for any delay in payment [LG Aachen 3 April 1990], or if he has to pay interest for other credit obtained as a necessary consequence of a delayed payment [OLG Koblenz 17 September 1993]. However, the courts do not agree on the showing required for such consequential damages. Two decisions have held that the seller has to specify and prove his loss exactly, and that it is not sufficient for the seller to declare generally that he is working on credit as a consequence of delayed payment [LG Frankfurt 16 September 1991; OLG Frankfurt 18 January 1994]. In another decision, however, the court tried to moderate these burdens [LG Hamburg 26 September 1990]. Although the seller did not prove that he had to obtain credit because of payment delay, the court granted damages based on the discount rate in the seller's country.
According to the second sentence of Article 74, damages suffered as a consequence of a breach of contract are recoverable only if such damages were foreseeable to the party in breach at the time the contract was concluded. No German court has yet barred a claim for damages because of this provision. A court has held that the buyer's liability to third parties was foreseeable when the goods were not timely delivered [LG Aachen 14 May 1993], and in another case that the buyer could foresee that non-payment would force the seller to obtain credit [OLG Koblenz 17 September 1993].Go to entire text of Karollus commentary
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213. See Victor Knapp, Article 74, in Commentary on the International Sales Law 538, 540 (C.M. Bianca & M.J. Bonell eds., 1987); Hans Stoll, Art. 74: Umfang des Schadenersatzes, in Kommentar zum Einheitlichen UN-Kaufrecht 623, 635-36 (Ernst von Caemmerer & Peter Schlechtriem eds., 2d ed. 1995); Enderlein et al., supra note 14, at 235; Karollus, supra note 20, at 213.
214. Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW at 845-46.
215. See Peter Schlechtriem, Kurzkommentar, 1993 EWiR 1075 (1993).
216. See also Stoll, supra note 213, at 635-36 (arguing that a party who has suffered damages from the other party's breach should be discharged from liability under the contract when the extent of damages is not calculable).
217. Judgment of Apr. 3, 1990, LG Aachen, 1990 RIW at 492.
218. Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 936-37.
219. Judgment of Sept. 16, 1991, LG Frankfurt am Main, 1991 RIW at 954; Judgment of Jan. 18, 1994, OLG Frankfurt am Main, 1994 RIW at 241.
220. Judgment of Sept. 26, 1990, LG Hamburg, 1991 IPRax at 403 (referring to Herbert Asam & Peter Kindler, Ersatz des Zins-und Geldentwertungsschadens nach dem Wiener Kaufrechtsübereinkommen vom 11.4.1980 bei deutsch-italienischen Kaufverträgen, 1989 RIW 841, 844-45 (1989)).
221. Judgment of May 14, 1993, LG Aachen, 1993 RIW at 761.
222. Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 937.
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[Jurisdiction and venue for an action]
The CISG does not deal with procedural issues and therefore contains no rules concerning jurisdiction and venue for an action. For German courts, jurisdiction and venue issues are governed and determined by the relevant provisions of the Zivilprozeßordnung (ZPO) and the European Community's Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters (EC Convention) [OLG Koblenz 17 September 1993].
However, jurisdiction and venue can depend on the applicable non-procedural law, and then the CISG is relevant indirectly. For example, under ZPO Section 29 and Article 5(1) of the EC Convention, a claim can be filed at the Erfüllungsort (place where performance did or should have occurred). In this respect, it is important that under the CISG contract payments are frequently due at the seller's place of business. Therefore, the seller can file a claim for payment in the jurisdiction where his place of business is located.
The Court of the European Community has recently confirmed jurisdiction in the locale of the seller's place of business under the EC Convention [Custom Made Commercial Ltd. v. Stawa Metallbau GmbH 29 June 1994]. Although this decision concerned ULIS, the same rationale applies to the CISG. This result, however, is not very convincing, since it seems unfair that the buyer can be sued in the seller's country. While this unfair result is a consequence of the CISG drafters' unwillingness to interfere with national procedural statutes, the CISG is not the source of the problem. Procedural provisions like ZPO Section 29 and Article 5(1) of the EC Convention are the problematic sources.
Unfortunately, the courts have even tried to extend the application of CISG Article 57. According to the OLG Düsseldorf, Article 57 applies not only to contractual payments, but to all other demands for the payment of money, such as damages claims [OLG Düsseldorf 2 July 1993]. This allows the creditor to file the claim for payment in the jurisdiction encompassing his place of business. It is doubtful that this application of Article 57 is correct since one could argue that there is no separate place of performance for damages. In general, the place where the duty should have been performed ought to govern. For example, if the seller has not delivered the goods, the place of performance (and the venue) should be the same for a claim demanding specific performance and for a damages claim.
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232. European Communities Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, Sept. 27, 1968, 8 I.L.M. 229 [hereinafter EC Convention]. For a contractual agreement on jurisdiction under Article 17 of the EC Convention and a cross-action and waiver of lack of jurisdiction under Article 18 of the EC Convention, see Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 935.
233. CISG, supra note 4, art. 57(1)(a).
234. Case C-228/92, Custom Made Commercial Ltd. v. Stawa Metallbau GmbH, 1994 RIW 676 (1994).
235. See Honnold, supra note 151, at 589-90.
236. Judgment of July 2, 1993, OLG Düsseldorf, 1993 RIW at 845-46. See Piltz, supra note 52, at 1106.
237. See Huber, supra note 86, at 425-26.
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