Source: http://cisgw3.law.pace.edu/cases/980526g1.html
Timestamp: 2019-04-22 18:46:44+00:00

Document:
A Czech seller, plaintiff, claimed payment for living fish delivered to a German buyer, defendant. The buyer refused payment, arguing that the fish were infected with a virus. The buyer also claimed damages by way of set-off, as its own fish stock had been fatally infected by the transmitted virus.
The court found that the buyer had failed to examine the fish in time (article 38(1) CISG). The buyer argued that, as the virus was a latent defect, late examination did not adversely affect its rights. But the court held that the buyer must examine the goods or cause them to be examined within as short a period of time as is practicable under the circumstances, even in the case of a latent defect. The omission of an examination would be irrelevant only if the defect could only have been determined by an expert, which the buyer had failed to prove. The court found that, in the given circumstances, immediate inspection would have been appropriate and examination of random samples of fish would have been sufficient. Moreover, the court held that the buyer was not entitled to rely on the certificate of inspection that had been issued by a veterinarian in order to permit importation of the fish. It also held that the buyer's notice to the seller, given four weeks after discovery of the virus, was too late; notification within eight days would have been appropriate (article 39(1) CISG). Accordingly, the seller's claim was allowed.
As to the buyer's set-off claim, the court held that lack of sufficient notice within the scope of the CISG also extends to exclude a claim for tortious liability [article 4 CISG].
[Seller] is asking for payment of the purchase price for fish delivered to the [buyer]. The Court of First Instance granted the claim. [Buyer] is appealing against this decision.
[Seller] operates a fish breeding farm in the Czech Republic. [Buyer] operates one in Germany. In December of 1995, [buyer] ordered approximately thirty-three tons of live fish, mainly carp, for resale. One of those orders concerned -- apart from the carp -- two tons of trout. The parties agreed on an overall purchase price of 66,680.- DM [Deutsche Mark]. Included in this amount -- which is the amount the [seller] is asking for -- is the price for the trout in the amount of DM 7,400.-.
[Buyer] picked up the fish during the period 16 December until 27 December 1996 in three installments at [seller]'s farm in the Czech Republic. A further installment was effected through a forwarding agent commissioned by the [seller] but paid for by the [buyer]. Four delivery records exist with respect to these deliveries, dated 16 December, 20 December, 27 December and 28 December 1995. The delivery effected on 20 December 1995 included the trout. [Seller] included an invoice with each delivery. Four such invoices exist, dated 16 December, 20 December, 27 December and 28 December 1995, invoicing the amounts of 16,800 DM, 13,700 DM, 14,400 DM and 21,780 DM. They add up to the 66,680.- DM claimed by the [seller].
[Seller]'s sales manager requested payment of the purchase price from the [buyer] several times -- to no avail. (Cf. [seller]'s letters of 9 August, 2 September, 10 September and 10 October 1996, each time granting an additional period of time for performance). [Buyer] refused to pay the purchase price because the fish in question and almost its entire stock of fish (which had been mixed with the delivered fish) had perished in the year 1996 due to infection with the so-called VHS-epidemic [a viral blood-poisoning which leads to bleeding and putrefaction].
[Seller] submits that even though [buyer] in several conversations throughout the year 1996 promised to pay the purchase price (the latest of these conversations having taken place on 15 December 1996), [buyer] failed to make such a payment.
[Seller] has partly withdrawn his claim for the payment of interest on the purchase price.
[Seller] is asking the Court to order the [buyer] to pay it DM 66,680.- with interest of 5% from 12 August 1996.
[Buyer] is asking the Court to dismiss the claim.
[Seller] -- contrary to all fish breeding rules -- fed the trout before they were shipped, so that the trout vomited due to the vibrations during transport. As a result, the water in the transport containers was polluted, which led to the death of 50% of the trout.
[Buyer] further submits that, even though it had taken precautionary measures by changing the water, it was unable to prevent the death of the trout. Only a provisional, not a complete change of water had been possible while the fish were being transported. At the border, [buyer] obtained a certificate of inspection issued by a veterinarian who held that the fish were safe to be imported into Germany. Later on, a further 400 kg of the trout died. This led to the death of 2.5 tons of trout in [buyer]'s rearing plant and to the death of 5 tons of trout in [buyer]'s feeding plant.
[Buyer]'s trout farm had only just been certified as epidemic-free in the fall of 1995.
[Buyer] submits that after the epidemic had broken out, the river Ilm (which supplies the water for [buyer]'s farm) had been examined for a length of 15 km for the VHS-virus, with a negative result. The further fry and feeding fish that had been bought from the fish farm [...] had been regularly examined there and were healthy. By excluding all other alternatives, it had therefore been established that the disease had been imported through the fish supplied by the [seller]. These had been infected with VHS.
[Buyer] puts forward that the epidemic had broken out due to the rising temperatures in the spring of 1996. At the time the fish were still at the [seller]'s farm, the illness was dormant, because the low temperatures prevented an outbreak. Therefore, [seller] was unable to demand payment of the price because the fish had been infected at the time of the handing over of the goods.
Furthermore, [buyer] submits that the epidemic caused damages in the amount of DM 188,600.-, of which [buyer]'s insurance covered only DM 84,000.-. The details are set out in [buyer]'s briefs of 31 July 1997 and of 5 September 1997. [Buyer] submits that it is setting-off its damages against [seller]'s claim for payment of the price.
[Buyer] puts forward that it immediately notified [seller] of the outbreak of the epidemic and reserved a claim for damages.
[Seller] submits that, due to the low temperatures in December 1995, the trout did not feed at all, therefore it was incomprehensible how the fish would have vomited food while being transported. [Seller] submits that it did not contravene the feeding ban. He denies that the fish had been fed before the transport.
Furthermore, [seller] submits that the [buyer] had insisted on filling 500 kg of fish into each of the transport containers, despite the concerns voiced by the [seller]. This amount had been too high, with the result that the fish easily perished. [Seller] assumes that [buyer] had used soiled water when it changed the water during transport, arguing that this was the probable cause of death. [Seller] contests that a veterinary inspection had taken place at the border. A vet would have discovered the fact that the fish were dying.
[Seller] furthermore submits that the [buyer] never notified [seller] of a non-conformity of the fish. In the last ten years not a single case of VHS had occurred at [seller]'s fish farm. [Seller] contests that its breeding farm had been infected with VHS.
[Buyer] replies that even during low temperatures fish are being fed only with smaller amounts of food. Under no circumstances are they to be fed before being shipped. The temperatures at [seller]'s had been high enough to allow a normal feeding of the fish. Feeding buckets had been placed next to the water channels containing the fish. It could therefore be inferred that the fish had been fed before being transported.
[Buyer] submits that since it had not been present at the time the trout were loaded, it did not give any instructions. The change of water had occurred at a German gas station, where [buyer] had used drinking water. After the epidemic had broken out, [buyer] had notified [the seller] and announced a claim for damages. [Seller] had disputed the outbreak of the epidemic and refused any claims for damages. Further correspondence between the parties had taken place.
[Buyer] submits that the veterinary certificate presented by [seller] and issued on 23 September 1997 had been issued as a favor. This was apparent by comparing it to the certificate that had been presented earlier and was dated 14 August 1997.
[Buyer] submits that it noticed the outbreak of the epidemic at the end of February / beginning of March 1996. At this point in time, it was unable to make out the connection with the trout delivered by the [seller]. When [buyer] picked up the trout on 20 December 1995, [buyer] had also been given a health certificate which entitled it to rely on the fact that the trout were healthy.
[Buyer] submits that the examination as to the causes of the disease had been finalized only in July of 1996. At the end of July / the beginning of August 1996, [buyer] had anonymously bought ten specimens of trout from the [seller] in order to have them examined. All ten specimens contained the VHS virus. In [buyer]'s letter of 12 September 1996, [buyer] informed the [seller] of the cause of the epidemic. [Buyer] therefore notified the [seller] of a lack of conformity of the goods within a reasonable period of time according to the Convention on Contracts for the International Sale of Goods, both the Federal Republic of Germany and the Czech Republic being members of this Convention.
with an interest of 5% from 12 August 1996.
II. [Buyer] is to bear the legal costs (�� 92(2), 269(3) ZPO [*]).
III.	The decision is provisionally enforceable.
The judgment by default was delivered to the [buyer] on 10 July 1997. With its brief of 22 July 1997, delivered on the very day, [buyer] objected.
[Seller] is asking the Court to uphold the judgment by default of 1 July 1997. [Buyer] is asking the Court to reverse the judgment by default and dismiss the claim.
I. The judgment by default of 1 July 1997 is affirmed.
The Court of First Instance held that [seller] was entitled to demand payment of the price for the delivered fish under � 433(2) BGB [*]. The parties agreed as to the existence of a contract for the sale of the fish and the agreed purchase price. [Buyer] was not entitled to reduce the purchase price on the grounds of a non-conformity..
The Court held that because the parties had not agreed on whether German or Czech civil law were to govern the contract, the Convention of Contracts for the International Sale of Goods (which both countries were members of) was to be applied.
The Court held that, according to Art. 39(1) CISG, the buyer is bound to notify the seller of the lack of conformity within a reasonable period of time, otherwise buyer loses the right to rely on such a non-conformity. With respect to the prohibited feeding of the trout before the transport, [buyer] had not given any such notice. As far as its letter of 8 November 1996 could be considered as a notice of non-conformity, it had been given too late. Furthermore, the requirements of Art. 40 CISG had not been met. According to this provision, [seller] would be barred from relying on the provision of Art. 39 CISG in circumstances in which [seller] could not have been unaware of the prohibited feeding of the trout. However, [buyer] had not produced any evidence to this effect. The existence of feeding buckets next to the fish channels was not sufficient proof that the fish had in fact been fed. [Buyer] was also not entitled to rely on Art. 44 CISG because it did not present a reasonable excuse for its failure to give the required notice.
The Court held that a timely notice was also missing with respect to the trout that had died as a result of the epidemic. The reasonable period of time granted under Art. 39(1) CISG had commenced on 22 March 1996 when the disease had been ascertained by the veterinary officer. However, [buyer] had not notified [the seller] of the epidemic until 12 September 1996, a date that had to be considered as too late. As far as [buyer] submitted that it had informed the seller at an earlier point in time, this submission was insubstantial because it did not contain any details as to the time and the person the notice was allegedly given to. [Buyer] had contradicted itself in this respect. First, it had submitted that it informed the [seller] by fax immediately after the epidemic had broken out. Later, [buyer] submitted that it discovered the cause of the disease after an anonymous purchase in August 1996. Furthermore, the Court held that [buyer] had not presented sufficient evidence that the cause of the epidemic had lain in the sphere of the [seller]. The epidemic could just as well have been a result of the change of water by the [buyer] or the other fish the [buyer] had purchased.
The Court held that the later submission of [buyer]'s brief did not give occasion to re-open the oral hearings. [Buyer]'s statement of facts with respect to the trout bought anonymously was belated and there was no reasonable excuse for this delay. As far as these facts had been mentioned in its letter of 8 November 1996 (written before the start of legal proceedings, but added to the file in time), the [buyer] had failed to make this letter a part of its statement of facts when it failed to refer to it in its brief. Furthermore, the [buyer] did not explain how the witness [...] was able to testify as to the existence of the VHS virus. Even such testimony would not prove that the trout delivered in December 1995 had been infected with the virus.
The Court held that [seller]'s demand for interest was justified under �� 284(1) BGB [*], � 352(1) HGB [*]. [Seller] caused the payment to be in arrears with its letter to [buyer] on 9 August 1996.
[Buyer] appealed the decision of the Court of First Instance with a brief of 27 November 1997 and set forth its reasons for the appeal in the brief of 28 January 1998.
[Buyer] submits that the cause for the epidemic had been [seller]'s infected trout. Every other conceivable cause of infection had been ruled out. This was confirmed by the letter of the veterinary office of 29 March 1996.
[Buyer] submits that, even though it was presented with a health certificate by the [seller] with every delivery of fish, those certificates had not been up to date. This was apparent by looking at the dates on the upper right-hand corner. Obviously, one health certificate dated 22 March 1995 had been photocopied several times. The handwritten entry on the top right was the same on each certificate.
[Buyer] submits that the Court of First Instance was correct in applying the Convention on Contracts for the International Sale of Goods, because both the Federal Republic of Germany and the Czech Republic were member States. However, the Court of First Instance had disregarded � 278(3) ZPO [*]. Not until the hearing did the Court draw the parties' attention to the fact that the CISG was to be applied. The Court therefore granted the parties additional time to present their briefs. The Court was incorrect in disregarding the brief submitted later by the [buyer]. Furthermore, the Court failed to notice that the CISG contains its own basis for the claim for the purchase price, Art. 53.
[Buyer] submits that it notified [seller] of [buyer]'s damage in its letter of 24 April 1996 and informed him that the disease in question was the VHS epidemic, which had most likely been transmitted by [seller]'s fish. [Buyer] had notified [seller] even earlier, that is, twice after 22 March 1996.
[Buyer] submits that [seller] referred to [buyer]'s letter of 24 April 1996 in [seller]'s letter of 2 September 1996 and also responded to [buyer]'s accusations.
[Buyer] submits that the VHS epidemic had already been latent in the [seller]'s breeding farm, but had not broken out because of the low temperatures at the time. The farm was supplied with water from the river Otava. [Seller]'s measuring reports indicated that the temperatures had been low. Moreover, those reports had to be read with caution as they had not been signed by the person doing the measurement. The disease had therefore only been able to break out in [buyer]'s farm, fed with water from the warmer river Ilm.
[Buyer] is asking the Court to change the decision of the Court of First Instance of 28 October 1997 in order to reverse the judgment by default by the Court of First Instance of 1 July 1997 and to dismiss the claim.
[Seller] submits that the fish perished through no fault of its. There had not been an outbreak of the VHS-epidemic in its farm for the last ten years. The water exchanged at the gas station had not been checked and might just as well have been the cause for the death of the fish.
[Seller] submits that the health certificates handed over to the [buyer] had been issued separately for each installment. The date "22 March 1995" on each of the certificates was the date of the export license which was valid for one year. The health certificates were always issued by the local veterinary officer. The certificate for the trout had been issued on 20 December 1995.
[Seller] submits that the Court of First Instance was correct in applying the Convention on Contracts for the International Sale of Goods.
[Seller] submits that [buyer] did not give notice of the asserted defect of the goods within reasonable time. The first time such a notice had been given was on 12 September 1996.
[Seller] submits that the water temperatures at its farm had been 12 to 13 degrees Celsius in July, August and September. It was therefore untrue that a latent VHS-epidemic would not have broken out. Had the virus existed, a notion that [the seller] contests, the epidemic would have broken out.
[Buyer]'s appeal is admissible, but unfounded.
The Court of First Instance was correct in granting [seller]'s claim.
I. The German Civil Courts have jurisdiction over the case.
II. [Seller]'s claim is justified.
The Convention on Contracts for the International Sale of Goods is the applicable law. Both the Federal Republic of Germany and the Czech Republic are parties to the Convention (Palandt/Putzo, BGB [*], 57th ed. 1998, ante � 433 n. 21, Palandt/Heldrich, EGBGB [*] Art. 28 n. 7).
Under Art. 28(1) and (2) EGBGB, the Czech Civil Law would have to be applied because the characteristic performance of the contract was the delivery of the fish, which was to be effected in the Czech Republic (Palandt/Heldrich, EGBGB Art. 28 n. 3). While several member States of the CISG, such as France, Italy, Spain and other countries, have decided to be bound by Art. 1(1)(b) CISG -- meaning that in transnational cases the CISG instead of their own sales law would apply -- the Czech Republic has made a declaration under Art. 95 CISG that it would not be bound by Art. 1(1)(b) CISG (Piltz, NJW [*] 1994, 1101, OLG [Oberlandesgericht (Regional Court of Appeals)] Düsseldorf, DB [*] 1994, 2492 [<http://cisgw3.law.pace.edu/cases/940210g1.html>].
However, the parties explicitly agreed during the course of the legal proceedings that the CISG is to be applied. According to Art. 27(2) EGBGB, the parties are free to agree on the application of a certain law at any given time (Palandt/Heldrich, EGBGB Art. 27 n. 3). The agreement is not subject to any requirements as to form (Art. 27(4), Art. 11(1) and (2) EGBGB).
[Seller] is entitled to require the [buyer] to pay the purchase price for the fish under Art. 53 CISG.
[Buyer] is neither entitled to reduce the price according to Art. 50 CISG, nor is it allowed to set-off a claim for damages under Art. 74 CISG. In order to exercise both rights (v. Caemmerer/Schlechtriem/Stumpf, CISG-Commentary, Munich 1990, Art. 39 n. 2), the [buyer] would have had to give notice of the defect of the fish, that is, the prohibited feedings and the disease within a reasonable time after it discovered or ought to have discovered the lack of conformity (Art. 39(1) CISG). The standard for "ought to have discovered" can be equated with gross negligence (v. Caemmerer/Schlechtriem/Stumpf, Art. 39 n. 8 and Art. 35 n. 32).
The Court of First Instance was right when it held that the [buyer] did not submit that it gave notice of the prohibited feeding before transport of the fish to the [seller]. [Buyer] is therefore not entitled to rely on this lack of conformity.
With respect to the disease of the fish, [buyer] submits that it discovered the epidemic on 22 March 1996. [Buyer] puts forward that it sent a written notice of non-conformity to the [seller] on 24 April 1996. Even before that date (but after 22 March 1996), it claims it notified the [seller] of the defect twice.
The time at which the [buyer] ought to have discovered the disease can be inferred from Art. 38 CISG (v. Caemmerer/Schlechtriem/Stumpf, Art. 39 n. 8). According to this provision, [buyer] was held to examine the fish -- or cause it to be examined -- within as short a period as was reasonable in the circumstances. This obligation also applies to hidden non-conformities and exists independently of health certificates already submitted. This is not an application of German commercial standards, but of the United Nations Sales Law. The [buyer] was therefore entitled to only as short a period of time as was reasonable in the circumstances of the specific case and [buyer]'s possibilities (v. Caemmerer/Schlechtriem/Stumpf, Art. 38 n. 5).
When calculating that period of time, a strict standard is to be applied so that the [buyer] was required to examine the fish immediately (v. Caemmerer/Schlechtriem/Stumpf, Art. 38 n. 5). A spot check would have been sufficient.
If the parties have not agreed on a different procedure, the law of the place of the examination determines the fashion of the test (v. Caemmerer/Schlechtriem/Stumpf, Art. 38 n.1). In the present case, [buyer] does not submit that it examined the fish at all after their arrival in Germany. According to German law, this would lead to adverse consequences for the buyer, unless the disease could only have been discovered by an expert (Schlegelberger/Hefermehl, HGB [*], 5th edition 1982, � 377 n. 68; Baumbach/Duden/Hopt, HGB, 28th ed. 1989, � 377 n. 3g; dissenting OLG [*] Hamburg, BB [*] 1953, 99: the buyer was obliged to consult an expert immediately; cf. also Staub/Brüggemann, HGB, 4th ed. 1983, � 377 n. 87). [Buyer] has not put forward anything relating to the symptoms of the disease, so that the Court is unable to decide whether the disease could have been discerned by the [buyer], or whether only an expert could have recognized the infection. It is not enough to assert that the disease had been "latent". This does not take into account that the obligation to examine the goods is an obligation to act on the part of the buyer.
[Buyer] therefore is not entitled to rely on any rights because it failed to examine the fish within time. Furthermore, [buyer] did not submit that it gave notice of the lack of conformity within reasonable time after it discovered the disease on 22 March 1996, as required under Art. 39(1) CISG.
The Court has decided on the length of a reasonable period of time by considering relevant case law and the opinions of scholars. The Court holds in accordance with these that a period of eight days after the examination report of 22 March 1996 would have been reasonable. The OLG [Oberlandesgerich (Regional Court of Appeals)] Düsseldorf [Germany] in the decision reported in DB 1994, 2492 (2494) [<http://cisgw3.law.pace.edu/cases/940210g1.html>] found a period of a few days after delivery to be reasonable in the circumstances. v. Caemmerer/Schlechtriem/Stumpf, Art. 39 n. 8 report that the case law on Art. 39 ULIS [*] is basically applicable to the CISG, since the requirement to notify the seller "promptly" under Art. 39 ULIS also had to take into account the circumstances of the case at hand. According to ULIS case law, a notice "after several days", "after nine days", after ten days", "after eighteen days", "after two months" was no longer reasonable, whereas a notice "after eight days" or "after eleven days" had been considered to be given within time (cf. v. Caemmerer/Schlechtriem/Stumpf, Art. 39 n. 8 with further references).
Piltz, NJW [*] 1994, 1101 at 1104, argues that a period of eight days has to be considered timely, whereas the OLG Düsseldorf, NJW-RR [*] 1993, 999 [<http://cisgw3.law.pace.edu/cases/930108g1.html>], cited by Piltz, held that a period of seven days was too long.
In [buyer]'s brief of 29 April 1998 (which had been submitted later and not been admitted by the Court of First Instance), [buyer] claims that in a decision of 8 March 1995, the BGH [Bundesgerichtshof (Federal Supreme Court of Germany)] considered a period of one month to be timely [<http://cisgw3.law.pace.edu/cases/950308g3.html>]. For the sake of the argument, this Court points out that such an account is not true. In the case the BGH had to decide, the Court found that a period of one month had gone by. The Court solely commented that even if one applied a very generous standard of a one-month period (following the opinion of Schwenzer), such a period had already passed.
This Court follows the opinions cited above because they are the leading opinions and are not too generous. Above all, they take into account the purpose of the obligation to give notice of a defect, that is, to clarify non-conformities quickly.
[Buyer] submitted that it gave notice of the defect with its fax of 24 April 1996, and even earlier, that is, twice after 22 March 1996. However, the notice of 24 April 1996 was given too late in the opinion of the Court, as it was given over four weeks after the examination report of 22 March 1996 has been issued. As the Court of First Instances pointed out, [buyer] has not substantiated its submission with respect to the notices allegedly given before 24 April 1996.
As a result, the Court cannot find that the [buyer] notified [the seller] of the disease within a reasonable time.
With respect to Arts. 40 and 44 CISG, the Court relies on the accurate findings of the Court of First Instance.
[Buyer] cannot rely on the fact that it did not determine the final cause for the disease until July of 1996. [Buyer] submitted that it had already examined all possible causes of infection in March of 1996. Thus the alleged cause for the disease was sufficiently known to [buyer].
Even if -- for the sake of the argument -- July 1996 was the relevant point in time, or, as [buyer] further submits, the beginning of August 1996, the notice of non-conformity given on 12 September 1996 would be too late according to the standards developed above.
The facts do not give any grounds to deny the [seller] the right to rely on the provision of Art. 39 CISG.
Lack of sufficient notice within the scope of the CISG also extends to exclude other concurrent remedies, such as a claim for tortuous liability. German case law following the case BGHZ [*] 67, 359 cannot be applied (v. Caemmerer/Schlechtriem/Huber, Art. 45 n. 88). [Buyer] is therefore unable to claim damages for the infection of its other fish. The Court therefore does not need to take evidence on whether the trout had actually been infected with the VHS virus.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Czech Republic is referred to as [seller]; the Defendant-Appellant of Germany is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].
*** Camilla Baasch Andersen is a Lecturer in International Commercial Law at the Centre for Commercial Law Studies, Queen Mary, University of London, and a Fellow of the Institute of International Commercial Law of the Pace University of Law. She is currently finishing her PhD thesis on the uniformity of the CISG at the University of Copenhagen.

References: Art. 39
 Art. 40
 Art. 39
 Art. 44
 Art. 39
 Art. 53
 Art. 28
 Art. 28
 Art. 28
 Art. 1
 Art. 95
 Art. 1
 Art. 27
 Art. 27
 Art. 11
 Art. 53
 Art. 50
 Art. 74
 Art. 39
 Art. 39
 Art. 35
 Art. 38
 Art. 39
 Art. 38
 Art. 38
 Art. 38
 Art. 39
 v. 
 Art. 39
 Art. 39
 Art. 39
 v. 
 Art. 39
 Art. 39
 Art. 45