Source: http://cisgw3.law.pace.edu/cases/950201g1.html
Timestamp: 2019-04-19 14:56:11+00:00

Document:
The Austrian [seller], a furniture manufacturer, agreed to manufacture a leather seating arrangement for the German [buyer]. The [buyer] sold the furniture to one of its clients, who discovered that the furniture did not conform with the contract. The [buyer] required the [seller] to remedy the lack of conformity by repair. Yet, even after the furniture had been repaired, the [buyer] still found the furniture not to conform with the contract and declared the contract avoided. The [seller] demanded payment including interest amounting to 13%.
The appellate court found the CISG to be applicable to the contract since both parties were located in Contracting States (article1(1)(a) CISG). It was held that the [seller] did not have a payment claim against the [buyer] since the repaired furniture did not conform with the contract and this amounted to a fundamental breach of the contract which gave the [buyer] the right to declare the contract avoided (article 49(1)(a) CISG).
In addition, the appellate court found the [buyer] to have declared the contract avoided within a reasonable time (article 49(2)(b) CISG), even though approximately five weeks had elapsed between the delivery of the repaired furniture and the declaration of avoidance. The [seller] alleged that according to its general terms and conditions of trade the [buyer] was obliged to declare avoidance within five days. However, the appellate court found that the [seller's] general terms and conditions of trade did not apply when a repair had already taken place.
The appellate court also denied a claim for all benefits of possession (profits and advantages of use), which the [buyer] derived from the furniture in accordance with article 84(2) CISG, since such benefits were deemed not to exist in this case.
In accordance with � 543(1) ZPO, [*] the Court of Appeal refrained from presenting the facts of the case.
The [seller's] admissible appeal is not successful in this case. Conversely, the [buyer's] admissible cross-appeal is successful.
1. The District Court of Oldenburg [Court of First Instance] correctly held that, according to Art. 3(2) EGBGB, [*] the provisions of the CISG are applicable to the contract. This overriding UN Convention on Contracts for the International Sale of Goods is applicable in both Austria and Germany since 1 January 1991 (cf. Palandt / Heldrich, 54th ed., EGBGB 28, Annotation 7).
2. With its unsuccessful claim, the [seller] requested the payment of the purchase price in the total amount of 15,050.63 DM [Deutsche Mark] for a furniture seating arrangement manufactured and delivered in accordance with two invoices of 21 February 1992 and 29 May 1992. The [seller's] claim for the payment of the purchase price is unsuccessful because the [buyer] had exercised its right to declare the contract avoided under Art. 49 CISG.
The Court of First Instance correctly held that the failure of the seller to perform its obligations under the contract amounted to a fundamental breach of contract in accordance with Art. 49(1)(a) CISG. The Court of Appeal accepts the appraisal made by the Court of First Instance regarding the testimony of the expert witness. The expert witness has confirmed and supplemented his evidence in this regard before the Court of Appeal. He has stated, particularly, that due to the price level of the item in dispute a high standard of quality is required. The existing objections ascertained are technically preventable. Especially from the frontal view, no defects should be visible. The ascertained color discrepancies also would not improve with time, as the different parts will equally change under the effect of exposure to light. Thus, a color difference will always remain. Also, the seams on the materials used for the seating arrangement are manufactured differently, resulting in an unpleasant optical impression.
The expert's statements do not give reason to the Court to doubt his expertise. The elaborations are plausible; therefore, it is assumed that the defects are still present and that the [seller's] attempted cure has failed. In compliance with the reasoning in the appealed judgment, the Court of Appeal thus assumes that the [buyer] had a right to declare the contract avoided.
3. The [buyer] has declared the avoidance of the contract in a timely manner. The Court of Appeal follows the correct reasoning in the appealed judgment, especially pertaining to the reasonableness of the time period within which [buyer] has given the notification.
a) According to Art. 49(2) CISG, a declaration of avoidance of the contract must be made within a reasonable time. This time regulation does not have a counterpart in German law (cf. von Caemmerer / Schlechtriem, Art. 49, Annotation 14a). A fundamental idea of the CISG is that the seller has a right, worthy of protection, to learn as soon as possible whether or not the buyer is going to declare the contract avoided. A lengthy pending status is irreconcilable with this right (cf. von Caemmerer / Schlechtriem, Art. 49, Annotation 43). The time period starts when the buyer receives the cured delivery, thus, as soon as the buyer knows or ought to have known of the breach of contract. This moment - not disputed between the parties - is assumed to be 1 December 1992.
The Court of Appeal also agrees with the reasoning of the Court of First Instance that the "reasonable" time for the declaration of avoidance was still running in the beginning of January 1993, as possible delays on the occasion of the Christmas and New Year period, as well as the necessary correspondence between the [buyer] and its own customer, must be taken into consideration. Also to be considered is the fact that it took the [seller] several months to attempt to cure, so that the "reasonable" time period to which the [buyer] is entitled cannot be interpreted to mean immediately.
Therefore, it is not materially relevant to the decision that the customer of [buyer], the final customer, stated at the last court hearing that he had already orally notified the [seller's] driver at the time of delivery after the attempted cure that the driver should take back the furniture. The driver refused this rejection.
b) A different result can also not be deduced from the [seller's] assertion that, as a result of the agreed upon "General Business Conditions," a five-day deadline applied, which the [buyer] had let elapse. It may remain undecided whether the [seller's] general terms and conditions have become part of the contract. The contractual terms presented by the [seller] in any case do not include a provision for the event of an effected cure. It remains doubtful whether the five-day deadline foreseen for notice of lack of conformity should also apply when, subsequent to an initial notice of lack of conformity, the [seller] has agreed to cure and the cured goods have been tendered again. As a general principle, any ambiguity in standard terms must be resolved against the party relying on the terms, in this case the [seller]. Thus, the [seller] can not draw any favorable legal consequences from the ambiguous general terms and conditions.
4. Based on the [buyer's] right to declare the contract avoided, restitution of all benefits must be made in accordance with Art. 84 CISG. The Court of Appeal cannot follow the reasoning in the judgment of the Court of First Instance on this point.
According to international sales law, the remedy of price reduction is not available and the [buyer] must return the furniture in order to make restitution of the goods. Under Art. 84(2) CISG, the [buyer] must account to the seller the exchange value of all benefits which the [buyer] has derived from the goods or part of them. The [buyer] has not gained any benefits from the use of the furniture. The literature cited in the appealed judgment does not apply in the present case since the literature cited there refers only to benefits derived from the lease of items, assignment of licenses to third parties for money, etc.
Furthermore, contrary to the assumption made by the Court of First Instance, in the present case the question is still open whether the final customer of the goods will actually declare avoidance of its contract with the [buyer] and to what extent the [buyer] can obtain benefits from this possible, but apparently not yet made, rescission of the contract. The [buyer's] statement that though the final customer has requested the rescission of the contract the latter party would also be agreeable to a considerable price reduction in the range of 50%, has not been contradicted during the proceedings.
The [seller] has the burden of proof regarding the benefits that the [buyer] has received and for which it must make restitution. The [seller] has not rendered the necessary proof. There is evidently no benefits in this case, because the use of defective furniture is not a measurable monetary benefit and would thus have to be considered as an imposed benefit.
Therefore, the [seller's] entire claim must be dismissed.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the first Appellant-Plaintiff of Austria is referred to as [seller]; the Defendant-Respondent of Germany is referred to as [buyer]. Monetary amounts in German currency (Deutsche Mark) are indicated by [DM].
Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code] ; BGH = Bundesgerichtshof [Federal German Supreme Court]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; ZPO = Zivilprozessordnung [German Civil Procedure Code].

References: Art. 3
 Art. 49
 Art. 49
 Art. 49
 Art. 49
 Art. 49
 Art. 84
 Art. 84