Source: http://cisgw3.law.pace.edu/cases/990225s1.html
Timestamp: 2019-04-22 18:08:47+00:00

Document:
The German seller, plaintiff, supplied to the Swiss buyer, defendant, roofing materials and in addition performed the roofing on the construction site. The seller sued the buyer for the outstanding purchase price, the price for its services, default interest and reimbursement of debt collection costs.
In its default judgement, the court applied the CISG, since the labour costs were not substantially higher than the costs of the supplies (article 3(2) CISG). Thus, the contract was not classified as a service contract and accordingly, payment was due under article 53 CISG.
The court held that the seller was entitled to default interest according to article 78 CISG, the amount of which had to be determined by German domestic law as applicable under private international law provisions. In addition, the court found that the buyer had to indemnify the seller also for the debt collection costs (article 74 CISG).
1. The [Seller] has its place of business in Germany. The [Buyer] has its place of business in Switzerland. This is therefore an international case in the sense of Art. 1(1) IPRG [*]. According to Art. 1(2) IPRG, international conventions take precedence concerning the competence of Swiss courts and the applicable law. We examine below whether the District Court of the Canton Zug is competent to judge the present case and which law is applicable.
In the present case, local competence is governed by the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 16 September 1988. This convention went into force in Switzerland on 1 January 1992 and in Germany on 1 March 1995. According to Art. 1 of the Lugano Convention; this convention applies to civil and commercial matters. The [Seller] requests payment for the delivery of materials for construction sites and for roofing work. Consequently, the claim is based on the laws concerning contractual obligations and is covered by the Lugano Convention (cf. Botschaft des Bundesrates of 21 February 1990 concerning the Lugano Convention, p. 18; Kropholler, Europäisches Zivilprozessrecht, 4th ed. Heidelberg 1993, Art. 1 Lugano Convention, para. 10 et seq.). The District Court of the Canton Zug therefore has local competence according to Art. 2(1) in connection with Art. 53 Lugano Convention. Functional competence results from � 9 GOG [*] in connection with � 10 No. 2 GOG. The claim therefore has to be judged by this court.
With respect to the applicable law, the court first has to determine whether the CISG is applicable to the present case.
1.2.1 The CISG went in force in Germany on 1 January 1991 and in Switzerland on 1 March 1991. According to Art. 1(1) CISG, the Convention applies to contracts for the sale of goods between parties which have their place of business in different States if (a) the states are parties to the Convention or (b) international private law leads to the application of the law of a State which is a party to the Convention. Art. 3(2) CISG provides that the Convention does not apply to contracts in which the predominant part of the [Seller]'s obligations consists of performing works or services. Therefore, contracts for the delivery of (at first still) moveable objects (goods) can be covered by the CISG, e.g., a contract which is a combination of a sales and a contract for work or a contract for the delivery of goods still to be produced. A decisive criterion for the applicability if the CISG is the relation of the goods to be delivered and the work to be done under a contract. If the work has a clear dominance because its value clearly exceeds the value of the goods to be delivered the CISG cannot be applied (Gauch, der Werkvertrag, 4th ed. Zurich 1996, para. 371 et seq.).
1.2.2 The invoices included in the record ([Seller]'s exhibits no. 3-10) show that the [Seller], besides delivering construction materials also performed roofing works. However, the value of the work did not clearly exceed the value of the goods delivered. The CISG is therefore applicable to the present case.
According to the lex fori principle, the proceeding in international cases is generally governed by the law of the forum (Keller/Siehr, Allgemeine Lehren des internationalen Privatrechts, Zurich 1986, p. 592 et seq.).
3.1. According to � 96 ZPO [*] a party that has been correctly summoned to appear before a court for a main or final proceeding and remains absent with no excuse or does not make any declarations concerning the main issue for no reason has to bear the costs and has to be summoned to a hearing which can end in a judgment in contumacy (� 96(1) ZPO). If the party has already been absent without excuse before the justice of the peace, the party has to be summoned to the first hearing which then is a hearing in which a judgment in contempt can be made (� 96(2) ZPO). In these cases, the summons has to contain a warning that if the party does not appear, the acceptance of the claim's factual basis and the waiving of any objections to the claim will be assumed (� 96(3) ZPO).
3.2 The [Buyer] did not appear at the hearing before the justice of the peace on 9 November 1998 with no excuse. The [Buyer] was therefore summoned to appear at the main proceeding before the Cantonal Court on 25 February 1999 with the warning mentioned above. It therefore has to be assumed that the [Buyer] accepts the claim's factual basis and waives any objections. The [Seller]'s statement of the case is therefore the basis of the decision.
The [Seller] further demands 10% interest for the amount of 28,543.61 DM since 4 September 1997. It has mainly argued that this interest rate was usual for the construction industry in Germany (exhibit no. 4, p. 4).
5.1 According to Art. 78 CISG, the party which does not pay the purchase price or other amount due owes interest since the due date. The CISG does not contain any provisions on the rate of interest. According to the accepted opinion, the interest rate is defined by the domestic law to which international private law leads (Magnus, in: Honsell, Kommentar zum UN-Kaufrecht, Berlin 1997, Art. 78 para. 12. According to Art. 117(1) IPRG in case there is no choice of law, the contract is subject to the law of the State to which it has the closest connection. According to Art. 117(2) and Art. 117(3) IPRG that State is Germany in the present case. Therefore, German law is applicable to determine the interest rate. As both parties are undisputedly traders in the sense of � 1 et seq. of the German Commercial Code (HGB), the interest rate is governed by this law. According to � 352(1) HGB, the legal rate of interest, including interest for delay is 5%. The [Seller] has not argued that the parties had agreed upon a higher interest rate.
5.2 The [Seller]'s claim for 227.18 DM became due on 18 April 1997 (exhibit No. 3), the claim for 6,945.90 DM on 27 May 1997 (exhibit no. 4), the claims for 2,013.83 DM and 1,150.39 DM on 19 June 1997 (exhibits no. 5 and 6), the claim for 14,839.29 on 16 July 1997 (exhibit no. 7), the claims for 1,427.93 DM and 1,877.17 DM on 17 July 1997 (exhibits 8 and 9) and the claim for 61.92 DM on 6 August 1997 (exhibit no. 10). As already mentioned, the obligation to pay interest under Art. 78 CISG arises as soon as the amount is due. The [Seller] has, however, only requested the court to order the payment of interest from 4 September 1997 (Annex 1 of the claim, p. 1). The court is bound by this request (� 54 ZPO). Accordingly, the [Buyer] owes 5% interest for delay on the amount of 28,543.61 DM since 4 September 1997.
The [Seller] has further requested the court to order the [Buyer] to pay the cost of a payment summons, 100 Sfr. These costs are proven by the payment summons No. 980264 of the office for enforcement in Risch (exhibit no.13). As the debtor bears the costs of enforcement according to � 68(2) SchKG [*], the [Buyer] has to pay these cost.
The [Seller] finally demands dunning and collection expenses of 989.20 Sfr. (Annex 1 of the claim, p. 5).
7.1 Obligations to pay interest and obligations to pay damages exist independently from each other and are each subject to individual prerequisites. The creditor of a payment can therefore demand further compensation of damages caused by the delay as well as interest (Magnus in: Honsell, Kommentar zum UN-Kaufrecht, Berlin 1997, Art. 78 para. 10). Art. 74 defines damages as compensation of the other party's loss caused by the breach of contract, including damages.
7.2 According to the [Seller]'s uncontested argument it has suffered costs for dunning in the amount of 24.20 Sfr. and costs for a collection agency's service in the amount of 965 Sfr. The [Buyer] is obliged to compensate these costs as further damage caused by the delay in the sense of Art. 74 CISG. The [Buyer] is therefore obliged to pay the amount.
1. The [Buyer] is ordered to pay 28,543.61 DM (23,548.50 Sfr.) plus 5% interest since 4 September 1997 plus dunning and collection expenses of 989.20 Sfr. and costs of a payment summons, 100 Sfr.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Germany is referred to as [Seller]; Defendant of Switzerland is referred to as [Buyer]. Amounts in the former German currency (Deutsche Mark) are indicated as [DM]. Amounts in the currency of Switzerland (Swiss francs) are indicated as [Sfr.].
Translator's note on other abbreviations: GOG = Gerichtsorganisationsgestz [Law on the Organization of the Courts]; IPRG = Bundesgesetz über das internationale Privatrecht [Swiss International Private Law]; ZPO = Zivilprozessordnung [Law on Civil Procedure].

References: Art. 1
 Art. 1
 Art. 1
 Art. 1
 Art. 2
 Art. 53
 Art. 1
 Art. 3
 Art. 78
 Art. 78
 Art. 117
 Art. 117
 Art. 117
 Art. 78
 Art. 78
 Art. 74
 Art. 74