Source: http://cisgw3.law.pace.edu/cases/030321g1.html
Timestamp: 2019-04-25 08:15:28+00:00

Document:
The case focuses on the notice of nonconformity under article 39(1) CISG and on the requirements related to its timeliness.
An Italian public company entered into a contract with a German buyer for the sale of fabrics. Almost seven weeks after the goods were delivered to the buyer, the latter gave notice of nonconformity to the seller, announcing at the same time his intention of having the purchase price reduced because of the nonconformity of the goods.
The seller denied any nonconformity and claimed that the notice of nonconformity was not timely. The buyer, however, alleged a latent defect, stating that the nature of the nonconformity was such as to become obvious only once the fabric was dyed.
The court held that the seller had a claim for the purchase price pursuant to article 53 CISG. The court stated that the buyer had lost the right to rely on the lack of conformity pursuant to article 39 CISG, since he had failed to give timely notice of nonconformity to the seller. Examining the time limit within which the buyer has to give notice of nonconformity, the court emphasized that both the period within which the buyer has to examine the goods pursuant to article 38(1) CISG and the period in which the buyer has to notify the seller of any defects or nonconformity pursuant to article 39(1) CISG must be taken into account. The court pointed out that even if the buyer reports the defects to the seller immediately after having detected them, he can lose his right to rely on the lack of conformity if he did not comply with the short period of examination of article 38(1) CISG.
According to the court, even assuming that the nonconformity only came to light once the fabrics had been processed, the buyer should have randomly dyed samples of the fabrics in order to comply with his obligation to examine the goods. Moreover, since the buyer had requested immediate delivery of the goods, he should have examined the goods within as short a period as practicable in the circumstances and within the seller's reasonable expectation. Thus, a notice given almost seven weeks after delivery could not be considered timely.
The court noted that under article 59 CISG, a formal request for payment is not required on the part of the seller to demonstrate that the buyer is in arrears. Pursuant to articles 61 and 74 CISG, the seller was awarded reimbursement of attorney's fees incurred in connection with a reminder to the buyer. The court awarded default interest pursuant to article 78 CISG. With regard to the interest rate, the court pointed out that there were divergent opinions on this question, since article 78 CISG expressly permits the award of interest without, however, stating the rate. In the end, the court decided to apply German law as the law of the State in which the debtor, i.e., the buyer, had his place of permanent residence, domicile or establishment.
(ii)	An additional EUR 417.75 plus interest of 8% above the Base Interest Rate [*] since 28 November 2002.
2.	The claim is dismissed in all other respects.
3.	The costs of this legal proceedings shall be borne by the [buyer].
4.	Claims under this judgment are preliminarily enforceable against the deposit of an amount equalling the amount to be enforced.
Following the [buyer]'s order of 27 February 2002, the [seller], an Italian public company, delivered approximately 60,000 meters of fabrics at a purchase price of EUR 64,670.86 on 5 March 2002. In a letter of 22 April 2002, the [buyer] gave notice to the [seller] of lack of conformity of 8,867 meters of the fabrics. Further, [buyer] proclaimed to reduce the purchase price as invoiced on 15 March 2002 in an amount of EUR 13,921.19. On 24 April 2002, the [seller] denied the existence of any non-conformity or defect in the goods that were delivered, because the [buyer] had already dyed the goods.
Through his attorney, on 5 June 2002 the [seller] asked the [buyer] to pay the amount of EUR 50,749.67 immediately. This is the portion of the invoice price that was not in dispute. Concurrently, [seller] offered to settle the remaining amount in dispute. By letter of 19 July 2002, the [seller] made a further offer to settle the dispute. The [buyer] replied to the latter overture with her own note of 5 August 2002.
On 13 June 2002, the [buyer] paid the EUR 50,749.67 amount that was not in dispute.
[Buyer]'s notice of lack of conformity of the goods was too late. The defects to which [buyer] referred were quite obvious; they ought to have been detected immediately on receipt of the goods.
The [buyer] should pay for [seller]'s attorney's fees associated with the letter of 5 June 2002, to the extent that these fees cannot be set off against the legal fees occurring in this legal proceeding pursuant to Sec. 118 Par. 2 BRAGO [*]. These attorney's fees should be assessed at EUR 842.25, as calculated on EUR 50,749.67 being the decisive value.
[Seller] asks the Court to require the [buyer] to pay to the [seller] (i) an amount of EUR 13,921.19 and (ii) attorney's fees incurred in the amount of EUR 842.25 plus default interest of 8 % above the Base Interest Rate [*] calculated on EUR 13,921.19 since 14 June 2002 and on EUR 842.25 since 12 June 2002.
[Buyer] asks the Court to dismiss [seller]'s legal action.
All of the goods delivered were randomly examined immediately after their receipt. Nevertheless, the [buyer] could not become aware of any lack of compliance or defects, since they only became known while the fabrics were being processed. The [buyer] gave notice of lack of compliance immediately after converting the fabrics and processing them, i.e., on the same day or on the day thereafter.
The [seller] is not entitled to a further claim for attorney's fees brought before the Court in his legal action, since the parties had already entered into an extra judicial settlement pursuant to their notes of 19 July 2002 and 5 August 2002.
With regard to the particularities of the parties' submissions and statements, the Court refers to their statements plus any schedules thereto submitted to the Court.
The [seller]'s claim is well founded as to the extent held in the aforementioned tenor of this judgment. Beyond that, the [seller]'s legal action is partly unfounded and has to be dismissed in other respects.
The [seller]'s claim is not unfounded by virtue of the fact that the parties already settled another dispute out of court. The [buyer] had neither in terms of timeliness nor in fact accepted the [seller]'s settlement offer of 19 July 2002. The only means of accepting that offer might have been to pay the amount requested by the [seller] on or before 25 July 2002. The [seller] made it crystal clear vis-à-vis the [buyer], that he was only willing to keep his offer open until 25 July 2002. The [seller] notified the [buyer] of his intention to commence legal action in which he would request the remainder of the purchase price if the [buyer] did not pay the requested amount by 25 July 2002. The [buyer] has neither paid the amount nor accepted in her letter dated 5 August 2002 every core point set forth in [seller]'s offer of an out-of-court settlement of the dispute.
According to Art. 53 CISG, the [seller] has a claim for the remainder of the purchase price in an amount of EUR 13,921.19 concerning the goods delivered on 5 March 2002. The [buyer] lost her right to rely on and reprimand any lack of conformity and to notify any defects of the goods pursuant to Art. 39 CISG, because the [buyer] did not give timely notice of non-conformity.
To determine whether a notification of lack of conformity took place within a reasonable time, two different periods must be considered: first, the period to examine the goods pursuant to Art. 38(1) CISG; second, the period to notify the [seller] of any defects or non-conformity under Art. 39(1) CISG.
The period to give notice of any lack of conformity lapses, even if a buyer gives notice of the defect immediately after the defect was detected but does not meet her obligations with respect to the examination period, where a buyer ought to have become aware of any lack of conformity at an earlier stage.
The Court assumes, to the advantage of the [buyer], that [buyer] gave notice of the defects and lack of conformity immediately after [buyer] detected them. This means that the [buyer] became aware of the defects of the goods and their lack of conformity on 21 or 22 April 2002. However, the goods that were delivered on 5 March 2002 were on stock with the [buyer] until 21 April 2002. Moreover, the [buyer] only examined the goods at the outset for obvious defects (at sight); [buyer] did not carry out any further examinations going beyond this. Even if the defects that [buyer] later noticed were of such a nature that one could only become aware of them after dying the fabrics, the [buyer] should have randomly dyed the fabrics as well. The [buyer] has not asserted that it was impossible for her to do that. The [buyer] has not submitted any statement explaining why she waited so long to dye the fabrics. Considering the fact that the [buyer] ordered the fabrics urgently, an explanation for not dying any of the fabrics sooner, in fact, seems even more necessary.
[Buyer] had requested a delivery of the goods "immediately on 1 March 2002" as set out in her letter of 27 February 2002 to the sales agent [Handelsvertreter] ____. The sales agent declared that the goods should be delivered as fast as possible after their assortment. In view of this urgency, a [seller] could expect that the [buyer] should give notice of any lack of conformity after the lapse of one month at the latest. It might also be possible to argue that the [buyer] was obliged to give such a notice even at an earlier stage. In any event, the notice given -- seven weeks after the actual delivery of the goods -- was not timely. The [buyer] did not examine the goods within as short a period as practicable in the circumstances and within the [seller]'s reasonable expectations. [Buyer]'s notice of lack of conformity was not given within a reasonable time after the [buyer] ought to have become aware of any defects of the goods.
The [seller]'s claim for reimbursement of attorney's fees incurred in connection with the reminder on 5 June 2002 stems from Arts. 61, 74 CISG. The [buyer] was in default in respect of her duty to pay the purchase price. The purchase price was due and payable 45 days after receipt and delivery of the goods as agreed between the parties. Consequently, the [buyer] was obliged to pay this amount on 19 April 2002. According to Art. 59 CISG, there is no need for a reminder in order to demonstrate that the [buyer] was in arrears. For this reason, the [buyer] was in default when the [seller]'s attorney contacted her to pay the purchase price.
According to Sec. 118 Par. 2 BRAGO [*], attorneys' fees for any activity rendered extra judicially are to be set-off against legal fees incurred during subsequent court proceedings. However, this principle merely applies to activities that are congruent with and identical to the subsequent legal action. In this case, the pre-litigation activity rendered by the [seller]'s attorney referred to the entire claim for the purchase price under the sales contract, whereas the primary cause of action in this legal proceeding only has to do with part of the purchase price. Insofar as the attorneys' fee for any extra judicial activity goes beyond the amount of his fee for rendering services during this legal proceeding [Verfahrensgebühr], there should be no set-off between those two types of attorneys' fees.
A 7.5/10 attorneys' fee amounts to EUR 842.25 calculated on an amount in dispute of EUR 64,670.86. If the [buyer] had paid in a timely manner the EUR 50,749.67 amount which was not in dispute, only a 7.5/10 attorneys' fee of EUR 424.50 calculated on EUR 13,921.19 would have been arisen. The difference between the former and the latter fee, i.e., EUR 417.75, is the damage, incurred by the [seller] due to the [buyer]'s default.
The [buyer] owes accrued interest on the purchase price since 14 June 2002, because [buyer] has been in arrears since 20 April 2002. However, the [buyer] only owes accrued interest on the attorneys' fees since commencement of this legal action, because the [seller]'s letter of 5 June 2002 did not comprise a request to pay these legal costs within a certain period of time. In fact, these legal costs were only considered within the [seller]'s offer for an extra judicial settlement of the dispute.
The ancillary decisions held by the Court ensue from Secs. 92 Par. 1 and 709 ZPO [*].
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Italy is referred to as [seller]; the Defendant of Germany as [buyer]. Amounts in the currency of the Eurocurrency Area (Euro) are indicated as [EUR].
Base Interest Rate = Basiszinssatz [Base Interest Rate as set forth in Sec. 1 of the German Act on the Transmission of the Discount Rate (Federal Law Gazette I, p. 1242) as from time to time amended]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; v. Caemmerer/Schlechtriem = Kommentar zum einheitlichen UN-Kaufrecht, München 1990 [German Commentary on the CISG, Munich 1990]; BRAGO = Bundesgebührenordnung der Rechtsanwälte [Federal Regulations on Fees for Attorneys]; ZPO = Zivilprozessordnung [German Civil Procedure Act].
** Stefan Kuhm is a Member of the Bar Association, Frankfurt a.M., and a Ph.D. candidate at Eberhard-Karls-Universität, Tübingen.

References: Art. 53
 Art. 39
 Art. 38
 Art. 39
 Art. 59
 v.