Source: http://cisgw3.law.pace.edu/cases/950622g1.html
Timestamp: 2019-04-22 18:24:12+00:00

Document:
Plaintiff [Seller] claims payment of the purchase price arising out of two deliveries of goods jointly from Mr. Z. [First Defendant] and Company Z. GmbH [Buyer]. The dispute between the parties mainly concerns the capacity of [First Defendant] to act as defendant in the present proceedings and the conformity of the delivered goods.
On 13 September 1991 Mr. Z. -- being the [First Defendant] and CEO of Company Z. GmbH, being the [Buyer], registered in the trade register at the Lower Court (Amtsgericht) Kassel -- ordered the clothes from [Seller] which are referenced by [Seller]'s invoices of 15 February 1992 and 9 March 1992. The invoices were addressed to "Company Z." and provided a time for payment of 10 days after receipt of the invoice. [Seller]'s entire correspondence was conducted in this manner without [First Defendant] having ever complained about the designation of the company. [Seller] is a trading company established under the laws of Italy, with its seat in San Marino. At the time of conclusion of the contract in Kassel, Germany, it was represented by its German representative P.C. GmbH. Its employee and witness F. received the order placed by [First Defendant].
The trousers and t-shirts referenced by the invoices of 15 February 1992 and 9 March 1992 have been delivered from San Marino to Kassel by carrier. The deliveries, however, did not represent the whole of the order of 13 September 1991. Various tops matching the trousers were missing. In relation to these missing clothes, the order was cancelled by fax of [Seller]'s representative dated 13 April 1992. By fax of 23 April 1992, which did not contain the annex "GmbH", [First Defendant] gave notice to [Seller]'s representative that sale of the delivered trousers was basically impossible without the matching tops and demanded a price reduction of 20% on the invoices of 15 February 1992 and 9 March 1992. The other faxes by [First Defendant] of 2 April 1992 and 4 May 1992, however, bear the designation "(...) GmbH" as well as [First Defendant]'s personal signature. The company logo on the upper part of all faxes (letterhead), however, reads "Z.".
By fax dated 7 July 1992, [Seller] agreed to the demanded price reduction and requested immediate payment of the total sum of Deutsche Mark [DM] 10,090 remaining after subtraction of the 20% discount. However, [First Defendant] and [Buyer] failed to make payment. Already on 23 January 1992 [Seller] had sent a letter to "Company Z." which refers to an assignment of [Seller]'s claims for the purchase price arising out of current and future deliveries to a factoring company "D. S.p.A." in Turin, Italy. [First Defendant] and [Buyer] also failed to make payment to that company.
[Seller] asserts to be owner of the two purchase price claims under the invoices of 15 February 1992 and 9 March 1992. It only sent a "notice of assignment" to [First Defendant] and [Buyer] while no actual assignment of these claims had been concluded with the factoring company. At the time of ordering of the clothes on the business premises in Kassel on 13 September 1991, [First Defendant] had not indicated that his company was a GmbH (Gesellschaft mit beschränkter Haftung; limited liability corporation under German law). This was not in dispute between the parties. Only during the further correspondence, and after delivery of the goods, a subsequent amendment made with a typewriter showed that [First Defendant] had added the word "GmbH" above his signature and alongside the company name "Z.". [First Defendant] and [Buyer] had not objected after taking delivery of the goods that the delivered pants were defectively manufactured. They were contained in an accumulative delivery, and neither [First Defendant] nor [Buyer] had ordered ensembles/combinations but only single pieces. By fax dated 23 April 1992, [First Defendant] indicated his willingness to make payment for the delivered goods if a discount of 20% was granted. [First Defendant] once again confirmed in a telephone conversation with witness K. on 7 July 1992 that, given the price reduction, all complaints raised thus far were settled.
[Seller] alleges that it was relying on a bank loan in the amount of the sum claimed. The interest for payment arrears in Italy was 18% at the time.
By statement of claim dated 25 November 1993, [Seller] had first commenced an action against the single-member company [First Defendant], proprietor being C.Z. By letter dated 18 March 1994 [Seller], extended the action against [Buyer]. [Buyer] is the company Z. GmbH, represented by the CEO C. The legal representative of the initial [First Defendant] has not given his consent to the extension of the action to the additional defendant. A change in the court's record of the action in relation to [First Defendant] during the hearing on 1 June 1995. The defendant is now Mr. C.Z.
[Seller] requests the Court to order [First Defendant] and [Buyer] as joint debtors to order to pay [Seller] DM 10,090 plus 18% interest since 20 March 1992.
[First Defendant] and [Buyer] request the Court to dismiss [Seller]'s action.
[First Defendant] and [Buyer] challenge the assertion that [Seller] was owner of the claim for the purchase prices arising out of the invoices of 15 February 1992 and 9 March 1992. [Seller] had assigned these claims to the company "D. S.p.A.". Concerning the order [First Defendant] and [Buyer] allege that they referred to a complete line of sportswear, consisting of blousons, blazers, jeans, shirts, bodysuits and t-shirts. The delivered trousers no. 90115/785 were defectively manufactured and thus unmerchantable. The same applied to art. 91120/757. The trouser legs of art. 90115/754 were much too short because apparently Italian sizes had been delivered instead of German sizes. Instead of the ordered black jeans no. 90115/754 it received the double amount of type no. 90115/785. Due to the designated defects, the goods were not (entirely) merchantable. Complaint about the defects was made to [Seller]'s employee Mr. N. over the telephone. [First Defendant] states that it could not be sued for the purchase price because it was not [Seller]'s contracting partner.
Concerning further details of the dispute reference is made to the correspondence between the parties and the submitted document copies.
[Seller]'s action is admissible and well-founded except for the amount of the interest rate claimed.
[Seller]'s claim for payment of the purchase price of DM 10,090 against [Buyer] is founded on Art. 53 United Nations Convention on Contracts for the International Sale of Goods (CISG) of 11 April 1980 (BGBl [*] 1989 II, pp. 588 et seq.) in conjunction with �� 4, 35, 36 GmbHG [*], Art. 28(5) EGBGB [*]. According to Art. 53 CISG the buyer must pay the price for the goods and take delivery of them as required by the contract and the Convention. The applicability of the CISG on the present contract of sale does not follow from Art. 1(1)(a) CISG, because San Marino has not as yet ratified the Convention (Staudinger/Magnus, Kommentar zum BGB mit Einführungsgesetz und Nebengesetzen; Wiener Kaufrecht (CISG); 13th ed. 1994, Einl. zum CISG para. 21). However, the CISG applies pursuant to Art. 1(1)(b). Under this provision the Convention applies to contracts of sale of goods between parties whose places of business are in different States -- here: San Marino and Germany -- when the rules of private international law lead to the application of the law of a Contracting State. Art. 27(1) EGBGB does not apply in this case. Given the parties' submissions, [Seller], [First Defendant] and [Buyer] have neither expressly nor impliedly made an agreement on the set of laws governing their sales contract. The Court has not obtained any written agreement which would indicate a mutual intention by the parties. Moreover, the parties have not relied upon the applicability of certain legal provisions which any of them considered as governing their contract.
The question concerning the law applicable to the contract of sale must be resolved according to Art. 28 EGBGB in cases as the present where no agreement has been made between the parties. Pursuant to Art. 28(1)(1) EGBGB the contract will be governed by the law of that country with which it objectively bears the closest connection. Art. 28(2)(1) EGBGB makes a presumption that the contract is most closely connected with that country in which the party having to effect the characteristic performance is domiciled at the time of conclusion of contract. This would lead to the application of the law of the seller's country -- here: San Marino. However, this presumption does not apply in the particular case because the objective circumstances of the contract conclusion in Kassel as a whole demonstrate that the contract bears a closer connection with German law. The contract has been negotiated via a representative of [Seller] who is seated in M. Furthermore, the correspondence between [Seller] and [First Defendant] and [Buyer] indicate that negotiations must have been conducted in the German language. Payment of the purchase price should be made in German currency. The individual prices of the various kinds of goods have been invoiced in German currency as well. Striking a balance between the interest of both parties further calls for application of German law since [Seller]'s representative in Germany is familiar with the domestic provisions while [First Defendant] and [Buyer] have difficulty in accessing the legal order of the microstate of San Marino. This holds true even if it is assumed that the laws of San Marino were generally similar to Italian law.
Since German law is applicable pursuant to Art. 28(5) EGBGB and thus a legal order of a country which has become Contracting State to the CISG, the requirements of Art. 1(1)(b) CISG are fulfilled. The CISG is lex specialis, overriding the German provisions on domestic sales contracts under �� 433 et seq. BGB [*], even though the Convention does not apply within [Seller]'s country. The material scope of application of the CISG however only covers the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. However, the law applicable on agency -- relevant in this case to determine whether [First Defendant] or [Buyer] has become contracting partner to [Seller] -- is not covered by the CISG. Matters concerning agency must therefore be assessed under the substantive law otherwise applicable according to private international law (Art. 28(5) in conjunction with Art. 28(1)(1) EGBGB) (Staudinger/Magnus, Art. 4 para. 37).
In this case [Buyer] has become contracting partner to [Seller]. If a company name is being used for the purposes of commercial transactions, the contracting partner will always be the owner of the company (Scholz, GmbHG, 7th ed., � 4 para. 4). This follows from � 36 GmbHG [*].
[Seller] is furthermore entitled to the claim for payment of the purchase price under Art. 53 CISG. [First Defendant] and [Buyer] had first contested [Seller]'s ownership of the claim and had submitted [Seller]'s notice of assignment of 23 January 1992 concerning the assignment of claims for the purchase price arising out of current and future deliveries to factoring company "D. S.p.A." in Turin, Italy. However, [Seller] has subsequently furnished a letter by company "D. S.p.A." in which the latter confirms that no claims have been assigned to it, thus rebutting [First Defendant] and [Buyer]'s joint submissions.
[First Defendant] and [Buyer] have no longer made statements concerning the alleged lack of capacity of [Seller] to claim the purchase price. However, since [First Defendant] and [Buyer]'s allegations could be upheld only if they were further substantiated by factual evidence, [Seller]'s ownership of the claim must be considered as conceded according to � 138(3) ZPO [*] and is thus not no longer in dispute.
[Buyer]'s assertion of non-conformity of the delivered trousers in its memorandum of 14 November 1994 is irrelevant for the finding of existence of a claim for the purchase price. It may remain unresolved whether or not the clothes in fact bear the manufacturing defects because in any case [Buyer] has not sufficiently demonstrated that it made proper notification of the lack of conformity against [Seller] according to Art. 39 CISG. The burden of substantiation must be borne by [Buyer] even more because throughout its entire correspondence with [Seller], which is available to the Court, an issue of defective manufacturing of delivered goods had not even been raised once. [Buyer] merely mentioned that it was unable to sell the trousers in the absence of the corresponding tops and that it thus wanted to cancel the contract. The respective objections have been amicably settled by virtue of the agreement on a 20% discount and cancellation of the order in respect to the non-delivered clothes. [Buyer] motion to (partially) challenge the purchase price claim under Arts. 49, 50 CISG on the grounds of alleged manufacturing defects is not compatible with the agreement on a 20% discount. On the basis of the [First Defendant] and [Buyer]'s fax of 23 April 1992, this agreement must be interpreted in a way that all objections on the part of the buyer should be settled, which includes those in relation to the manufacturing quality of the goods.
[Buyer] has failed to rebut these findings with its submissions. The mere assertion that the quality defects had been notified to a Mr. N. over the telephone are insufficient to retain the right to rely on a lack of conformity pursuant to Art. 39(1) CISG. Under this provision the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. In cases of notifications over the telephone the buyer will have to bear the burden of proof insofar as he must indicate the date of calling the seller, the name of the dialog partner and the content of the notification for a sufficient procedural substantiation (Staudinger/Magnus, Art. 39 para. 71). These requirements are not fulfilled by [First Defendant] and [Buyer]'s submissions in their memorandum dated 14 November 1994.
[Seller]'s interest claim against [Buyer] is not founded in terms of an interest rate of 18% but [Buyer] owes -- pursuant to Art. 78 CISG in conjunction with � 352(1) HGB [*] -- only 5% interest since maturity of the purchase price claim, i.e., since 20 March 1992 because no agreement in deviation between [Seller] and [Buyer] is apparent. The CISG does not govern the amount of the interest rate, so it must be determined according to German law, applicable to this contract of sale by virtue of Art. 28(5) in conjunction with Art. 28(1)(1) EGBGB [*] (cf. OLG [*] Frankfurt NJW [*] 1991, 3102; Staudinger/Magnus, Art. 78 CISG paras. 12, 16). Since both [Seller] and [Buyer] are commercial companies under Italian, respectively, German law, the interest rate will be 5% pursuant to � 352(1) HGB. The deviating opinion expressed by the District Court (Landgericht) Stuttgart (RIW [*] 1989, 984 et seq.), according to which the interest rate applicable at the creditor's seat -- here: [Seller]'s seat -- should be relevant must be rejected because in the present case applicability of the CISG only follows from the reference to German law pursuant to Art. 1(1)(b) CISG in conjunction with Art. 28(5), (1)(1) EGBGB. The Italian interest rate of 18% as claimed by [Seller] for interest on payments in arrears does not apply here.
[Seller] is entitled to a claim for payment of the purchase price of DM 10,090 also against [First Defendant] on the grounds of principles concerning legal appearance (Rechtsscheinsgrundsätze) in conjunction with �� 4(2), 35(3) GmbhG [*].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of San Marino is referred to as [Seller] and the second Defendant Company Z. GmbH of Germany is referred to as [Buyer]. The first Defendant Mr. Z. of Germany is referred to as [First Defendant]. Amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGBl = Bundesgesetzblatt [German Federal Law Gazette]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the conflict of laws]; GmbHG = Gesetz betreffend die Gesellschaften mit beschränkter Haftung [German statute concerning limited liability corporations]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW = Neue Juristische Wochenschrift [a German law journal]; OLG = Oberlandesgericht [German Appellate Court]; RIW = Recht der Internationalen Wirtschaft [journal on international commercial law]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].

References: art. 91120
 art. 90115
 Art. 53
 Art. 28
 Art. 53
 Art. 1
 Art. 1
 Art. 27
 Art. 28
 Art. 28
 Art. 28
 Art. 28
 Art. 1
 Art. 28
 Art. 4
 Art. 53
 Art. 39
 Art. 39
 Art. 39
 Art. 78
 Art. 28
 Art. 28
 Art. 78
 Art. 1
 Art. 28