Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography

Reproduced with permission from the Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 51-94

(. . .)

[Scope of the CISG]
[Article 3]

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].[77] In the second case, the American manufacturer promised to produce a machine for an industrial plant [OLG Düsseldorf 2 July 1993].[78] In the third case, a French manufacturer of computer printers developed software for the special needs of the buyer [OLG Koblenz 17 September 1993].[79]

None of these contracts are sales contracts under German law because German sales law is applicable only if the goods manufactured are generic.[80] If the goods are custom-made, the provisions concerning a Werkvertrag (contract of manufacture) apply.[81]

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.[82] Since these materials were not supplied by the buyer, the CISG properly applied.

(. . .)

Go to entire text of Karollus commentary

FOOTNOTES

* 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.

(. . .)

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).

(. . .)

[Exclusions from the CISG]
[Article 4]

Apart from th[e] exclusions in Article 4, other issues not governed by the CISG include the legal capacity of corporations [LG Hamburg 26 September 1990; OLG Düsseldorf 8 January 1993],[89] assignment of claims [KG Berlin 24 January 1994],[90] assumption of debts [LG Hamburg 26 September 1990],[91] set-off of reciprocal obligations [AG Frankfurt 31 January 1991; OLG Koblenz 17 September 1993],[92] and issues of agency [LG Hamburg 26 September 1990; KG Berlin 24 January 1994].[93]

FOOTNOTES

(. . .)

89. Judgment of Sept. 26, 1990, LG Hamburg, 1991 IPRax 400; Judgment of Jan. 8, 1993, OLG Düsseldorf, 1993 RIW 325.

90. Judgment of Jan. 24, 1994, KG Berlin, 1994 RIW 683.

91. Judgment of Sept. 26, 1990, LG Hamburg, 1991 IPRax at 402.

92. Judgment of Jan. 31, 1991, AG Frankfurt am Main, 1991 IPRax 345; Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 937.

93. Judgment of Sept. 26, 1990, LG Hamburg, 1991 IPRax at 401; Judgment of Jan. 24, 1994, KG Berlin, 1994 RIW 683. But see infra part IV.1.

(. . .)

[Choice of law]
[Article 6]

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,[98] 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].[99] While this favors CISG application, it may not favor parties who did not intend CISG application.[100] However, contracting parties can avoid this ambiguity by expressly excluding the CISG. Go to entire text of Karollus commentary

FOOTNOTES

(. . .)

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.

(. . .)

[Currency of payment]
[Article 62]

The seller's payment claim must be made in the currency provided for in the contract. Therefore, if a sales contract calls for payment in Italian Lira, the seller cannot demand German Marks [KG Berlin 24 January 1994].[208] However, if German law were applicable, the buyer could still choose payment in German Marks [OLG Koblenz 17 September 1993].[209]

FOOTNOTES

(. . .)

208. Judgment of Jan. 24, 1994, KG Berlin, 1994 RIW at 683.

209. See BGB § 244; Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 936. For ULIS requirements, see Judgment of Apr. 14, 1978, OLG Karlsruhe, 1978 RIW 544, 544-45. However, the interpretation of BGB § 244 and its application to sales contracts governed by CISG is very controversial. For a detailed analysis, see Ulrich Magnus, Währungsfragen im Einheitlichen Kaufrecht, 53 Rabels Zeitschrift für ausländisches und internationales Privatrecht [RabelsZ] 119 (1989).

(. . .)

[Damages]
[Article 74]

Article 74 allows only monetary damages for breach of contract; compensation in kind is not permitted.[213] 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].[214] Although this holding is arguably incorrect,[215] 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.[216]

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],[217] or if he has to pay interest for other credit obtained as a necessary consequence of a delayed payment [OLG Koblenz 17 September 1993].[218] 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].[219] In another decision, however, the court tried to moderate these burdens [LG Hamburg 26 September 1990].[220] 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],[221] and in another case that the buyer could foresee that non-payment would force the seller to obtain credit [OLG Koblenz 17 September 1993].[222]

FOOTNOTES

(. . .)

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.

(. . .)

[Interest]
[Article 78]

Article 78 allows for the collection of interest on any monetary arrearage, without prejudice to damages recoverable under Article 74. Unfortunately, Article 78 does not provide for the calculation of an appropriate interest rate. Accordingly, the allowed interest rate must be calculated under national law.[223] The issue is which national law is applicable to determine the interest rate. Most authors [224] and courts [LG Hamburg 26 September 1990; OLG Frankfurt 13 June 1991; OLG Frankfurt 18 January 1994; OLG München 2 March 1994; OLG Koblenz 17 September 1993; OLG Düsseldorf 10 February 1994] [225] have generally agreed that the law applicable to the issue of interest is the Vertragsstatut (the law that governs the contract apart from CISG); in the absence of a choice of law provision in the contract, the applicable law would be the seller's law [OLG Koblenz 17 September 1993; OLG Düsseldorf 10 February 1994].[226] At least one court decided that the creditor's law was applicable [LG Frankfurt 16 September 1991; see also LG Stuttgart 31 August 1989 and KG Berlin 24 January 1994 (Neither decision making clear whether interest was granted according to Article 78 or damages according to Article 74)] [227] and another court did not decide on the question because the results did not differ.[228] In addition, some authors have proposed other solutions, such as application of the law of the debtor's country[229] or of the country which issued the currency specified in the contract.[230] These solutions have not been adopted by the courts. The problem is of considerable importance since interest rates are rather low in some states (four or five percent in Austria and Germany) but much higher in others (ten percent in Italy and more than fifty percent in Bulgaria).[231] The contracting parties should avoid these uncertainties by agreeing on an interest rate or by choosing the applicable law.

FOOTNOTES

(. . .)

223. CISG, supra note 4, art. 7(2). Article 7(2) also -- and primarily -- provides for a gap-filling according to general principles. But, in the present case, that does not seem to be possible because the Vienna Conference failed to agree on any principles.

224. See Gert Reinhart, Fälligheitszinsen und UN-Kaufrecht, 1991 IPRax 376 (1991); Herber & Czerwenka, supra note 16, at 347; Karollus, supra note 20, at 227; Piltz, supra note 21, at 280-82; Hermann Eberstein & Klaus Bacher, Art. 78: Zinsen, in Kommentar zum Einheitlichen UN-Kaufrecht 665, 672-73 (Ernst van Caemmerer & Peter Schlechtriem eds., 2d ed. 1995)

225. See Judgment of Sept. 26, 1990, LG Hamburg, 1990 RIW at 1019; Judgment of June 13, 1991, OLG Frankfurt am Main, 1991 RIW at 591-92; Judgment of Jan. 18, 1994, OLG Frankfurt am Main, 1994 RIW at 241; Judgment of Mar. 2, 1994, OLG München, 1994 RIW at 596-97. See generally Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 938; Judgment of Feb. 10, 1994, OLG Düsseldorf, 1994 RIW at 1051.

226. See Judgment of Sept. 17, 1993, OLG Koblenz, 1993 RIW at 938; Judgment of Feb. 10, 1994, OLG Düsseldorf, 1994 RIW at 1051.

227. Judgment of Sept. 16, 1991, LG Frankfurt am Main, 1991 RIW at 954. See Hans Stall, Inhalt und Grenzen der Schadensersatzpflicht sowie Befreiung con der Haftung im UN-Kaufrecht, im Vergleich zu EKG und BGB, in Einheitlichen UN-Kaufrecht und nationales Obligationenrecht 257, 279-80 (Peter Schlechtriem ed., 1987). See also Judgment of Aug. 31, 1989, LG Stuttgart, 1990 IPRax at 317-18; Judgment of Jan. 24, 1994, KG Berlin, 1994 RIW at 683-84 (neither decision making clear whether interest was granted according to Article 78 or damages according to Article 74).

228. Judgment of June 13, 1991, OLG Frankfurt am Main, 1991 RIW at 591-92.

229. See Hans Stoll, Internationalprivatrechtliche Fragen bei der landesrechtlichen Ergänzung des Einheitlichen Kaufrechts, in Festschrift für Murad Ferid 495, 509-10 (Andreas Heldrich et al. eds., 1988).

230. See Wolfgang Grunsky, Anwendbares Recht und gesetzlicher Zinssatz, in Festschrift für Franz Merz 147, 147-57 (Walter Gerhardt et al. eds., 1992).

231. Perez, supra note 21, at 281-82.

(. . .)

[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].[232]

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.[233] 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].[234] 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,[235] 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].[236] 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.[237] 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.

FOOTNOTES

(. . .)

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.

(. . .)

Go to Case Table of Contents

Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography