Germany 24 October 2008 Appellate Court Schleswig (Shop furnishings case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/081024g1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 14 U 4/08
CASE HISTORY: 1st instance LG Lübeck (12 O 192/06) 7 December 2007
SELLER'S COUNTRY: France (plaintiff)
BUYER'S COUNTRY: Germany (defendant)
GOODS INVOLVED: Shop furnishings
Reproduced from Internationales Handelsrecht (6/2009) 243
"1. For those questions of agency not set out in the CISG, the law applicable according to the national conflict of law rules is decisive. This law (here: German) also is decisive for the question of personal liability if a foreign limited liability company did not use the designation of such limited liability.
"2. As a company's designation corresponding to German law is mandatory under directly applicable European law, the principles of ostensible existence of a legal situation to an agent of the (here: French) company limited by shares may be applied if the agent caused the reliance on the liability of at least one natural person by using the company's name without such designation.
"3. In applying the principles of ostensible existence of a legal situation, communication by digital e-mail may not be completely equalized to normal written communication as it cannot be ruled out that a contracting party might only use easy to remember parts of the company's name as catchwords in e-mail communication."
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): agency issues]; 8A ; 8B ; 8C [Interpretation of party's statements or other conduct: intent of party making statement
or engaging in conduct; Interpretation based on objective standards; Interpretation in light of
4B [Scope of Convention (issues excluded): agency issues];
8A ; 8B ; 8C [Interpretation of party's statements or other conduct: intent of party making statement or engaging in conduct; Interpretation based on objective standards; Interpretation in light of surrounding circumstances]
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): Internationales Handelsrecht (6/2009) 243; CISG-online.ch database <http://globalsaleslaw.com/content/api/cisg/urteile/2020.pdf>; Internationales Handelsrecht (6/2009) 243-246
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Queen Mary Case Translation Programme
24 October 2008 [14 U 4/08]
Translation [*] by Andrea Vincze [**]
Edited by Institut für ausländisches und internationales
Privat- und Wirtschaftsrecht der Universität Heidelberg
Daniel Nagel [***]
Upon appeal by [Defendant], the judgment of the sole judge at the 12th Civil Chamber of the Lbeck District Court, dated 7 December 2007, is modified.
|1.||The [Plaintiff-Seller]'s claim is dismissed.|
|2.||[Plaintiff-Seller] shall bear the costs of the proceedings.|
|3.||The judgment is provisionally enforceable. The [Plaintiff-Seller] may prevent enforcement against payment of a security deposit of 110% of the amount to be enforced as long as the Defendant does not provide security in the same amount.|
I. [Plaintiff-Seller] has sought to require [Defendant] to pay four invoices dated 17 August 2005 and 31 October 2005, representing a total sum of EUR 40,688.42.
Based on the orders sent by e-mail between 26 January 2005 and 19 October 2005, [Plaintiff-Seller] delivered to Company P. shop furnishings for various places in France. [Defendant], who is sued by [Plaintiff-Seller] as owner of Company P and alleged purchaser of the shop furnishings, did not respond to the [Plaintiff-Seller]'s demand notes of 25 November 2005 and 28 February 2006. [Defendant] submitted a timely objection to the payment order delivered to him on 24 May 2006.
In July 2006, [Defendant] sold Company P. and resigned from his post as President of that company. A default judgment handed down in the written procedure could not be served on [Defendant].
[Plaintiff-Seller] argued that [Defendant] operated ten stores by the name of Company P. in France. [Plaintiff-Seller] argued that, in any case, [Defendant] is personally liable because [Plaintiff-Seller] had had no knowledge of the legal form of Company P.
[Plaintiff-Seller] requested the court to confirm the default judgment of 13 November 2006, alternatively, to order [Defendant] to pay to [Plaintiff-Seller] EUR 40,688.42 plus interest at the base rate plus 8 percent from 3 December 2005, as well as EUR 653.10 representing out-of-court attorneys' fees.
[Defendant] requested the court to dismiss the [Plaintiff-Seller]'s claim, alternatively, to rule that the default judgment of 13 November 2006 is ineffective.
With reference to the legal form of Company P., [Defendant] contested [Plaintiff-Seller]'s claim that [Defendant] was personally liable. [Defendant] argued that the [Plaintiff-Seller]'s persons in charge had been aware that the purchaser is a corporation.
The District Court admitted the [Plaintiff-Seller]'s alternative claim and, regarding the rest, it ruled that the default judgment of 13 November 2006 is ineffective because it had not been served on [Defendant]. Reference is made to the further details as well as the findings of the judgment of the District Court.
That judgment is appealed by [Defendant] who filed his appeal in a timely manner and according to the formal requirements.
[POSITION OF THE PARTIES]
[Defendant] argues that:
German courts had no international jurisdiction because [Plaintiff-Seller]'s general conditions of sale had not been in French. In addition, it was not correct that regarding private international law, the connection with German law had to be considered because the legal appearance [Rechtsschein] was created in France. The liability for a legal appearance created also had to be determined under French law. German law was not applicable because of the absence of the correct legal form. [Translator's note: In referring to Defendant's "Company P", Plaintiff-Seller forgot to add the "Ltd." to the name of his company.] And, in any event, [Defendant] did not establish the legal appearance [Rechtsschein] alleged by [Plaintiff-Seller]. The invoices and the order confirmations had not been assigned to the corresponding orders. The request for production of written documents, would show that [Plaintiff-Seller] had been aware of the existence of the [Defendant]'s corporation. This would also be evident from the tax number. The first orders had been placed in August 2004. These had been paid for by check, on which the legal form was also indicated.
[Defendant] requests the court to modify the appealed judgment and to dismiss the [Plaintiff-Seller]'s claim in its entirety.
[Plaintiff-Seller] requests the court to dismiss the [Defendant]'s appeal.
[Plaintiff-Seller] argues that:
The District Court correctly applied German substantive law. If it had known the real situation, [Plaintiff-Seller] would not have delivered to the French store chain. It made the transactions in reliance on the legal appearance that had been created. [Defendant] had been introduced to [Plaintiff-Seller] as a so-called franchise partner by one of its long-term clients. The orders had been performed based on the previous communications with [Defendant], which would be sufficient to establish liability for the legal appearance created. The request to produce the written communications and the checks is actually an inadmissible investigation effort. Such examination was not necessary because of the existence of the tax number, yet the legal form was not clear from that. [Plaintiff-Seller] had never received checks from Company P.
[Plaintiff-Seller] also requests the court to determine whether the [Defendant]s appeal was admissible, despite the fact that [Defendant]'s address for service was no longer available.
RULING OF THE COURT
Regarding the details of the presentations of the parties on appeal, reference is made to their written submissions, including the [Plaintiff-Seller]'s written submission dated 1 October 2008, and its attachments.
II. The [Defendant]'s appeal is admissible. The indication of appeal by the [Defendant] is the only necessary requirement for admissibility. Therefore, the existence of the [Defendant]'s summonable address is not a condition of admissibility (BGHZ 102, p. 332 et seq.).
The appeal by [Defendant] is justified on the merits.
However, the objection regarding international jurisdiction of the District Court of Lbeck is unsuccessful.
International jurisdiction of a German court is present in this case. Yet, an objection regarding lack of international jurisdiction can be made on appeal despite the provision included in Art. 513(2) ZPO. Under the scope of application of Council Regulation (EC) No. 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters [Brussels I Regulation] that is applicable in Germany and France, Art. 25 of the Brussels I Regulation is relevant. According thereto, the [court] must examine whether it has jurisdiction ex officio in all instances (Zöller/Gummer/Hessler, ZPO, 26th ed., No. 8 on Art. 513).
National law is subsidiary in this regard. Hence it is irrelevant whether a failure to raise a preliminary objection is present. Rather, an examination is necessary in each stage of the proceedings. [Translator's note: This is a reference to Art. 39 ZPO whereby "Jurisdiction of the Court of First Instance is also supported by the fact that the Defendant presented its oral argument on the merits without pleading lack of jurisdiction."]
The fact that the [Defendant]'s objections to the jurisdiction of the Court are not admissible in the substantive stage depends as little on French law as it does on German law. Regarding its scope of application, Art. 23 of the Brussels I Regulation excludes entirely the application of national law. The Brussels I Regulation provides a self-contained regulation regarding the law applicable to agreements on jurisdiction, and it cannot be amended by domestic legal provisions on jurisdiction (Zöller / Geimer / Hessler, op. cit., Annex I, no. 32 on Art. 23 of the Brussels I Regulation).
Under the Brussels I Regulation, agreements on jurisdiction contained in general terms of sale, as is the case here, are generally allowed. Yet, it is not sufficient to send the general terms of sale in connection with the invoices. This is not the case as regards order confirmations though, which Company P. did not object to in the present case. The fact that the [Plaintiff-Seller]'s general terms of sale were written in the German language is irrelevant because the language of communication between the parties was German in the present case. This is different from the case decided by the Court of Appeal of Hamm where the language of the contract was French (OLG Report 2006, p. 327 et seq.).
First of all, the [Plaintiff-Seller]'s contractual partner was Company P. rather than [Defendant].
[Defendant] acted merely within the framework of the transaction relating to the business relationship, therefore, orders should generally bind Company P. rather than [Defendant]. [Plaintiff-Seller] was not able to support its contention that [Defendant] had originally been the owner of a single-member company that failed to indicate its legal form. There is no evidence either regarding this contention. Instead, [Defendant] acted as the representative of a limited liability company.
Under these circumstances, the [Defendant]'s liability for the orders as an agent could be derived from the doctrine of legal appearance [Rechtsschein] as Company P. did not use an indication of its legal form. This doctrine does not establish a liability based on the fact that the company as the actual contractual partner is unable to perform, but a joint and several liability of the representative of a party to the contract. However, such a liability cannot be placed on [Defendant] in the present case.
[Governing law and resolution of issues]
Regarding the important substantive law issues, the District Court correctly applied German law.
It is true that the starting point is that the present sale of goods is governed by the CISG that precludes the application of provisions of private international law (MüKo / Westermann, BGB, 5th ed., o. 1 on Art. 1 CISG. Requests for payment of the purchase price are governed by Art. 53 CISG.
However, to the extent that the present case involves issues regarding agency, the CISG is not applicable because it does not govern agency. Agency is governed by the national law referred to by the provisions of private international law (MüKo / Westermann, op. cit., no. 17 on Art. 1 CISG). The applicable German law answers the question which law governs personal liability if a foreign limited liability company did not indicate its legal form that would clarify the nature of the limitation of liability.
Regarding possible claims arising out of the agent's presumed liability, the Supreme Court rejected any connection with the articles of incorporation (NJW 2007, p. 1529 et seq.) because the inclusion of legal form is not a specific duty of a company organ. Instead, the principles of the law of torts must be applied, and the law applicable to the liability for a legal appearance created is the law of the place where the legal appearance was created and took effect, i.e., Germany in this case. In contrast to [Defendant]'s argument on appeal, the Supreme Court, loc. cit., also referred to the fact that the freedom of establishment is not infringed if the liability for a legal appearance due to an omission of the legal form, might indirectly compel compliance with German law. The inclusion of a legal form is -- similar to German law -- mandatory by virtue of directly applicable EU law, in accordance with the provisions in Art. 4 of the First Council Directive 68/151/EEC of 9 March 1968 [on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community] (ABl. L 65 dated 14 March 1968, p. 8-12, finally modified by Directive 2006/99/EC, ABl. L 363 dated 20 December 2006, p. 137-140) . At the time of the accession of the new EU Member States, i.e., Romania and Bulgaria, all EU Member States, including Germany and France had to implement the Directive at the latest. Yet, the determining factor is that the Directive is equally based on EU law in all Member States (cf. Rauscher, GPR 2007, p. 244-254, "Entwicklungen im europäischen und völkerverträglichen Kollisionsrecht 2005-2007").
Under Art. 4 of the Directive, within the application of the Directive, it is mandatory to include the legal form of the company and the location of its seat on letters and order forms. [Defendant] agrees with this, as stated in his written submission of 4 July 2007. [Defendant] himself referred to the fact that the letterhead of his company, next to the reference to the legal form, had also contained the capital stock which is a requirement in France.
In his e-mail communications with [Plaintiff-Seller], [Defendant] did not comply with these requirements because he did not include the legal form in the e-mails.
According to preceding jurisprudence of the Supreme Court, a person acting on behalf of a corporation -- irrespective of whether he is the manager or another representative -- is liable for violations of the identification requirements, subject to a liability for a legal appearance, analogously to Art. 179 BGB, if his signature on behalf of the corporation does not indicate the legal form and causes the other party to legitimately expect that at least one natural person is liable (BGH NJW 1981, 2569; BGH NJW 1996, 2645; NJW 2007, 1529, 1530).
In the opinion of the court, these requirements have not been entirely met in the present case. No additional taking of evidence is necessary. Regardless of whether the opinion of [Plaintiff-Seller]'s Witness R on whether the transactions in dispute had become effective in the respective form, it is irrelevant to the parties -- based on objective considerations regarding this type of business transaction û that the [Defendant] did not indicate the form of his company, because the [Plaintiff-Seller]'s reliance on [Defendant]'s personal liability would not have been justified. It is true that the agent's conduct creates the appearance of being a person with unlimited liability; however, it must be taken into consideration that whether the agent incurs liability for the legal appearance created also depends on the legitimate reliance by the contractual partner. Oral statements are not suitable for establishing such reliance. It is rather necessary that the contractual partner was not only unaware of the real situation but -- as is important in the present case -- ought not to have realized it either, and that, consequently, [the contractual partner] delivered the goods in reliance on the agent's unlimited liability and did not assert any claims (cf. BGH NJW 1981, 2569, 2570).
These requirements have not been met in the present case, contrary to [Plaintiff-Seller]'s arguments. First, if through his e-mails, [Defendant] had given [Plaintiff-Seller] the impression that he is a person with unlimited liability, e.g., that he is the owner himself, and thus, would be personally liable for this sole reason if [Plaintiff-Seller] was unaware of the real situation, ought not to have known it and its conduct arose from the legitimate expectation of the [Plaintiff-Seller] that [Defendant] had unlimited liability. Yet, considering all circumstances, this was not the case here despite [Plaintiff-Seller]'s statements to the contrary.
Regarding the e-mail communications being the sole basis of the alleged legal appearance, there was no actual positive act ("signature") regarding the omission of the legal form. Under Art. 35(3) GmbHG [German Act on GmbHs (limited liability companies)], such evidence must be provided in the way that there is a handwritten signature next to the company name. That is not possible in electronic commerce. Therefore, practices in modern commerce must be considered here, that [gained] legal effect among others under Art. 126(3) BGB providing that now written form includes electronic [communications] as well. The "signature", being a condition for the liability for the legal appearance created, in analogy with Art. 179 BGB, does not depend only on whether the parties' respective declaration of intent was physically signed by the agent as well.
Nevertheless, digital e-mail communication is not completely equal to written communication either. Concerning the oral communications, in case of orders by phone in particular, it cannot be excluded that [Defendant] used as key words only the specifically memorable [Translator's note: i.e., significant] parts of the company name. As the recipient of the e-mails could not exclude that [possibility], the reliance on [Defendant]'s unlimited liability cannot be compared to the situation where [the person] has received a written statement or where a reply has been given to a question regarding personal liability.
In addition, in a regular commercial transaction, such as this one, where no consumer was involved, [Plaintiff-Seller] could not have readily relied on the fact that [Defendant] himself is the owner when it [actually] delivered to a French store chain without indicating the legal form. In transactions like the one in dispute, it is not very likely in the first place that [Plaintiff-Seller] would face a customer with unlimited liability which [Plaintiff-Seller] could rely on. The same applies even if [Defendant] had been introduced to [Plaintiff-Seller] by a customer as a franchise partner.
The fact that [Defendant] ended his e-mails and the attachments thereto with his name and the phrase "c/o P" could only have meant that he could be reached under that company name. The fact that he ended [certain] e-mails only with the name of the company does not mean that [Defendant] was the owner of the company because ultimately only the e-mail address was referred to in this respect. When, under these circumstances and despite the specification of the goods by the customer, [Plaintiff-Seller] nevertheless attached great importance to the knowledge of whether it had been dealing with a personally liable natural person or a corporation, it could have and should have asked [Defendant], in particular, as in addition to e-mails, phone contact had also been available to the parties.
This follows from the fact that the orders are not equivalent to the order confirmations. As [Defendant] did not argue that further orders subject to the order confirmations had been placed, it can be assumed that a phone contact must have been available for ordering purposes, as reflected in the order confirmations, and consequently, the details of the respective orders were different.
The court assumes that, in light of the specifics argued, a violation of the First Council Directive is not sufficient by itself to establish [Defendant]'s liability for the legal appearance created. Instead, since it was so important to [Plaintiff-Seller], it would have been [Plaintiff-Seller]'s and its colleagues' duty to clarify whether the respective customer was a limited liability company, prior to relying on the personal liability of a natural person. As [Plaintiff-Seller] failed to do so, [Plaintiff-Seller]'s alleged reliance was unfounded.
Therefore, the [Plaintiff-Seller]'s claim was not justified and it had to be dismissed upon [Defendant]'s appeal, subject to the provision on costs in § 91 ZPO.
The decsion on enforceability is based on §§ 708, 711 ZPO.
There is no reason to permit any further appeal (Revision § 543 ZPO) as the issue lacks fundamental significance.
* All translations should be cross-checked against the original text.
** Andrea Vincze is a Fellow of the Institute of International Commercial Law of Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, and her LL.M. at Pace Law School. She is working on her Ph.D. on ICSID arbitration, and is researching international commercial law and ADR.
*** Ph.D candidate Daniel Nagel has studied law at the University of Heidelberg and at the University of Leeds.Go to Case Table of Contents