Source: http://cisgw3.law.pace.edu/cases/940210g2.html
Timestamp: 2019-04-18 10:33:46+00:00

Document:
The defendant, a German buyer, refused to pay the purchase price asserting that parts of the fabrics delivered by the plaintiff, an Italian seller of textiles, were of a colour different from that specified in the contract. The first instance court held in favour of the plaintiff.
The appellate court held that the fact that some of the textiles delivered were of a different colour did not amount to non-conformity with contract specifications, since the textiles were not unfit for the purpose for which they were bought (article 35(2)(b) CISG). The court held that such a delivery constituted partial non-performance, as a result of which the [buyer] was entitled to exercise the rights prescribed in articles 46 to 50 of the CISG (article 51 CISG). However, it was found that the [buyer] failed to fix an additional period of time of reasonable length for performance by the [seller], and consequently, it was held that the [buyer] could not exercise those rights (articles 39, 47(2) and 49(1)(b) CISG). The only right that the [buyer] had not lost as a result of its failure to fix an additional period of time for performance by the [seller] was the right to demand payment of damages for breach of contract by the [seller] (article 45 CISG).
However, the court found that the [buyer] had not demanded such damages. In addition, it was held that the [buyer] had lost the right to declare the contract avoided on another ground, namely that the [buyer] had sold further the goods bought, thus having made restitution of the goods impossible (article 82(1) CISG).
In a German-Italian sale of tissues at a price of 6,749.21 German Marks, CISG was applicable (probably by virtue of Article 1(1)(a)). The German buyer lost his right to avoid the contract under Article 82 CISG, and the Italian seller claimed the price plus interest. Landgericht, the court of first instance, had awarded 5% interest.
The [buyer]'s appeal is unsuccessful. The District Court correctly granted the [seller]'s claim for payment of the purchase price in the amount of 6,120.13 DM [Deutsche Mark] (under correct calculations the claim is for 6,120.12 DM).
The relationship between the parties is governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG), which entered into force in Italy on 1 January 1988 and in Germany on 1 January 1991 (cf. MüKo/Martiny, attachment II to Art. 28 EGBGB [*] n. 2). Under Art. 53 CISG, the [buyer] is obligated to pay the purchase price for the unreturned fabric at a price of 13.45 DM per meter (undisputedly, this is the price the parties agreed upon), minus the 629.09 DM already paid. Taking into account the amount of fabric that was returned by the [buyer] (153.3 m), [buyer] was left with (655.1 m - 153.3 m =) 501.8 m of textiles worth (501.8 m x 13.45 DM =) 6,749.21 DM. After subtraction of the 629.09 DM paid, this leads to a remaining claim for payment of the purchase price in the amount of 6,120.12 DM.
The [buyer] raises "the objection of the possibility of rescission", meaning that [buyer] wants to rely on a right to refuse performance similar to that available under � 478 BGB [*], because [buyer] allegedly gave notice of the lack of conformity before it claim for a remedy became time-barred. In truth, however, [buyer] argues that the [seller]'s delivery was incomplete and therefore altogether unfit for the purpose envisaged by the contract. [Buyer] fails to conclusively argue for its purported right to refuse performance under the provisions of the CISG.
Under Art. 35(2)(b) CISG, the goods do not conform with the contract unless they are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract. The [buyer] does not substantiate its claim that the goods were altogether unfit for the purpose envisaged by the contract for the reason that a part of the 153.3 m of plain-colored fabric had been returned due to the wrong color and that a substitute delivery of the respective amount in the right color ordered by the [buyer] had not been effected. The [buyer] insofar breaches its duty of truth during the legal proceedings: According to [buyer]'s earlier submissions, it was forced to sell only a remaining amount of 331.1 m considerably under price. After [buyer] had returned the 153.3 m, it was evidently able to make proper use of a part of the remaining 501.8 m in the amount of (501.8 - 331.1 =) 170.7 m at a price of (170.7 x 13.45 =) 2.295.92 DM. An overall breach of contract is therefore not proven.
Furthermore, such a breach does not exist with regard to the remaining fabric in the amount of 331.1 m, which was sold below price according to the [buyer]'s initial pleading. Not even the [buyer] itself has claimed that it explicitly told the [seller] or [seller]'s agent G. at the time of the conclusion of the contract that the checked fabrics and the plain fabrics could only be used in the combination ordered. The sole fact that the [buyer] ordered the fabrics so that it could combine them is not sufficient. This does not exclude the possibility that the fabrics could or should have been combined with the fabrics of other manufacturers.
Insofar as the [seller] delivered textiles in a color not ordered by the [buyer], [seller] effected the delivery of an aliud, which led to a partial non-performance. According to Art. 51 CISG, Articles 45 to 50 apply in respect of the part of the goods which is missing or which does not conform. Under Art. 47(2) CISG, the buyer may not resort to any remedy for breach of contract before the expiry of an additional period of time of reasonable length for performance by the seller of its obligations, unless the buyer has received notice from the seller that it will not perform within the period so fixed. Following the corresponding provision of Art. 49(1)(b) CISG, the buyer is only entitled to declare the contract avoided if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of Art. 47 or if seller refuses delivery. The [buyer] failed to fixed an additional period of time for performance by the [seller] when [buyer] returned the goods that had been delivered in the wrong color.
The fixing of an additional period of time was not dispensable because [seller] informed [buyer] by fax of 8 July 1992 that it was unable to deliver the ordered goods at the time being and only offered a partial delivery -- one piece in a different color. [Seller]'s behavior did not constitute a serious and definite refusal of performance, which would have made the fixing of an additional period of time dispensable. Strict standards need to be applied for the conclusion of a serious and definite refusal of performance. These requirements are not met if the debtor solely declares to be unable to deliver for the time being, as is the case here. The [buyer]'s behavior in the following period shows that it was not interested in a substitute delivery. As is revealed by its letter of 12 October 1992, [buyer] was experiencing financial difficulties and therefore requested to be allowed to return the remaining textiles in the amount of 331.1 m.
[Buyer] furthermore lost the right to declare avoidance of contract under Art. 82(1) CISG, because it is unable to make restitution of the goods following its reselling of the textiles. None of the exceptions of paragraph (2) of Art. 82 are met. Insofar as [buyer]'s attorney declared in the course of the oral hearing that the goods still existed -- as it had found out during the preparation of that hearing -- this is insignificant. Before the start of the legal proceedings, [buyer] told the [seller] by fax of 19 October 1992 that it sold the remaining 331.1 m textiles for DM 629.09. Soon after, [buyer] sent the [seller] a crossed check over this amount. The [seller] took over [buyer]'s account of events in [seller]'s statement of claim, without the [buyer] ever objecting to this presentation during the course of the proceedings. [Buyer] thus upheld its explanation made before the start of the legal proceedings that it sold the remaining fabrics for 629.09 DM.
Whether [buyer]'s behavior constitutes an anticipatory confession with the effects of �� 288, 290 ZPO [*] does not need to be decided. In any event, [buyer] was acting contrary to good faith -- a principle that also applies to procedural law -- if [buyer] untruthfully asserted before the initiation of legal proceedings that it sold the remainder of the fabric, then did not correct that matter during the proceedings and let [seller] treat this fact as undisputed, only to declare at the end of the second instance that the goods were still in [buyer]'s possession after all. �� 290, 532 ZPO apply to such a case at least by analogy. According to these provisions, a confession that does not correspond to the truth can only be revoked in the appellate proceeding if it was caused by a mistake, not if it was based on a conscious misrepresentation of the facts. The [buyer] has not made any submissions that it was under a mistake in the above-mentioned manner, even though the Court during the hearing urgently drew [buyer]'s attention to the contradiction and to [buyer]'s dishonest conduct before the start of the legal proceedings.
In any event, [buyer] has not lost its entitlement to damages under Art. 45(1) and (2) CISG in connection with Art. 74 et seq. CISG as a result of its failure to fix an additional period of time for a substitute delivery -- supposing [buyer] gave a timely notice of non-conformity in accordance with Art. 39 CISG. [Buyer] would possibly have been able to raise such claims, i.e. for loss of profit, by way of set-off. This is a path [buyer] did not choose to follow.
The interest granted by the District Court at a rate of 5% from 27 November 1992 (date of service of the claim), the amount of which is not disputed by the [buyer], is founded under Art. 78 CISG in connection with � 352 HGB [*] and � 291 BGB [*]. Under Art. 78 CISG, if the buyer fails to pay the purchase price, the seller is entitled to interest on it. The interest rate is not provided for in the Convention, but is to be settled in conformity with the law applicable by virtue of the rules of private international law (cf. v.Caemmerer/Schlechtriem, CISG-Kommentar, Munich 1990, Art. 78 n. 3). As both parties rely on German law for the legal dispute, they have formed an implicit agreement on the applicability of German law (Art. 27(1) sent. 2 EGBGB [*]). The [buyer] is therefore obliged to render the commercial interest rate of 5% from the time of the service of the claim (� 352 HGB, � 291 BGB).
The result would not be any different if -- due to a lack of choice of law -- Italian law was to apply to the sales contract following Art. 28(1) and (2) EGBGB [*]. According to Art. 1282, 1284(1) Cc [*] the legal interest rate for sums in arrears is also 5%.
[Buyer]'s appeal is therefore unsuccessful with [buyer] bearing the cost of the legal proceedings under � 97(1) ZPO [*].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Italy is referred to as [seller], and the Defendant-Appellant of Germany is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; Cc = Codice civile [Italian Civil Code]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; HGB = Handelsgesetzbuch [German Commercial Code]; ZPO = Zivilprozessordnung [German Civil Procedural Code].
** Ruth M. Janal, LL.M. (UNSW) is a PhD candidate at Albert-Ludwigs-Universität Freiburg. She has been an active participant in the CISG-online website of the University of Freiburg.

References: Art. 28
 Art. 53
 Art. 35
 Art. 51
 Art. 47
 Art. 49
 Art. 47
 Art. 82
 Art. 82
 Art. 45
 Art. 74
 Art. 39
 Art. 78
 Art. 78
 Art. 78
 Art. 28
 Art. 1282