Source: http://cisgw3.law.pace.edu/cases/960521g1.html
Timestamp: 2019-04-22 18:06:53+00:00

Document:
The [seller] sold a used car to the [buyer], both parties being car dealers. The documents showed that the car was first licensed in 1992 and the mileage on the odometer was low. The sales contract included the exclusion of any warranty. The [buyer] later sold the car to a customer, who discovered that the car had been first licensed in 1990 and that the actual mileage on the odometer was much higher. The [buyer] paid damages to his customer and demanded the same amount as damages from the [seller].
The appellate court held that the [buyer] could claim damages under articles 35(1), 45 and 74 CISG. The [buyer's] damages caused by its liability to its customer could be claimed under article 74 CISG because such damages are foreseeable if goods are sold to a dealer who intends to resell them.
Even though the [buyer] could have detected the car's lack of conformity with the contract, the [seller] could not avail itself of article 35(3) CISG since the [seller] knew the actual age of the car and thus acted fraudulently. The appellate court held that article 35(3) CISG could not be relied on by a fraudulent seller, referring to the general principles embodied in articles 40 and 7(1) CISG. According to the appellate court, even a very negligent buyer deserves more protection than a fraudulent seller. Although, the exclusion of any warranty was possible under article 6 CISG, it was held to be invalid in this case. The appellate court found that the substantial validity of such a clause was not governed by the CISG. In this case, this question was governed by German law, according to which an exclusion of warranty is invalid if the seller acts fraudulently.
English: Honnold, Uniform Law for International Sales (1999) 67 [Art. 4 (scope of CISG: fraud)]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 4-8 n.105; § 6-15 n.163; René Henschel, Conformity of Goods in International Sales Governed by CISG, pdf access at Nordic Journal of Commercial Law, Issue 2004 #1 <http://www.njcl.utu.fi> p. 14; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.607, 757;  S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 54, 204;  Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 7 para. 30 Art. 35 para. 37 Art. 74 paras. 21, 45, 50 Art. 79 para. 6, 39; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 131, 142, 161, 178 et seq., 291, 295, 298 et seq.
The appeal of the [seller] filed according to form and time and also otherwise permissible is not successful.
The Landgericht [Court of First Instance] has correctly decided that the [buyer] has a claim for damages in the amount of DM [Deutsche Mark] 20,000 according to Arts. 74, 35, 45(1)(b) CISG. Concerning the application of the CISG in the present case, reference is made to the findings of the Court of First Instance in order to avoid repetition.
1. Art. 35 CISG ties the liability of the seller to performance in conformity with the contract. It is without question that in the present case liability is present in the meaning of Art. 35 CISG. The characteristics stipulated in the contract are relevant to the determination of conformity with the contract - quantitative and qualitative data and descriptions. Thereby qualitative data encompass all factual and legal circumstances with regard to the relationship of the goods to the environment; whether they affect the usability or the value of the goods due to their type and duration is not relevant to the determination of conformity with the contract under Art. 35(1) CISG. Taking that into consideration in this case, it is without doubt that the delivered car does not constitute performance by the [seller] in conformity with the contract: the car was neither of the specified licensing year, nor did it show the indicated mileage with the result of a liability in principle of the [seller] under Art. 35(1) CISG.
2. Contrary to [seller's] contention, the liability of the [seller] is not excluded under Art. 35(3) CISG as the [seller] acted fraudulently at the conclusion of the contract.
According to the motion filed by the [seller] in the appeal proceedings drafted by its former lawyer, Attorney [�], from August 1993 in the proceedings for a temporary injunction before the District Court in Stuttgart, it was at least known to Attorney [�] that the car had already been first-time licensed in March 1990. It is against every experience of life that this information had not been given to Attorney [�] by the [seller] itself. If the [seller] knew about the licensing of the car since March 1990, it is, in the opinion of the Court, clear that the [seller] was also aware of the fact that the mileage of the Mercedes was not limited to 15,000 kilometers, even though in the end this is not relevant for the decision, given the concealment of the age of the car. This the more so in view of the fact that the car had been leased by a sales agent, whereby this business group, as is known, does not cover only a small number of kilometers per year. In this context it is legally irrelevant who finally made the changes to the car papers and/or the odometer.
Even if one follows the contention of the [seller] that the [seller] itself did not know anything about the licensing in the year 1990, the [seller] is liable for fraudulent non-disclosure of the non-conformity. At least Attorney [�] knew about the first licensing in the year 1990 and he was the one who had contributed to the conclusion of the contract in his capacity as the [seller]'s representative and who had translated into German the papers for the car with the untrue first licensing in 1992. The conduct of the [seller's] agent has to be attributed to the [seller] and regarded as [seller's] own fraudulent conduct.
It has to be inferred from the basic idea of Art. 40 CISG, whereby a seller is not entitled to rely on the conduct of the buyer if the seller is to blame more, in connection with Art. 7(1) CISG, that in case of a fraudulent conduct of the [seller], the [seller] has to accept responsibility even if the [buyer] could not be unaware of the non-conformity. Therefore, the statements of the [seller] pertaining to the supposed possibilities of perception of the [buyer]'s wife - which, as has to be pointed out supplementary, cannot be equated with the possibilities of perception of the [buyer] himself - are not relevant. Even a grossly negligent unknowing buyer appears to be more protection-worthy than a seller acting fraudulently (von Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, CISG, 2nd edn., Art. 35, Annotation 37 with further evidence). Consequently, when there is fraudulent conduct of the seller, the inapplicability of Art. 35(3) CISG follows from Art. 40 in connection with Art. 7(1) CISG..
3. Also, the exemption from liability agreed upon by the parties at the time of the conclusion of the sales contract does not preclude the liability of the [seller]. On the basis of the draft invoice of the [buyer], presented by the [seller] in the appeal proceedings, which had been translated into Italian and been made the basis of [seller's] invoice, it has to be assumed that the sale was made with an exclusion of any warranty. Such an exclusion of any warranty is permissible at any time under Art. 6 CISG, whereby the content of such a clause of exemption from liability is not ruled by the CISG (cf., von Caemmerer/Schlechtriem, op. cit., Art. 35, Annotation 42). The content control rather must conform to national law. Since a subsidiary choice of law is absent and Art. 27 EGBGB [*] does not apply, Art. 28(1) sentence 2 EGBGB applies. According to this, the relevant law is the national law of the State in which the party to be protected against an improper exemption from liability has its place of business and normally resides (cf., von Caemmerer/Schlechtriem, op. cit., Art. 79, Annotation 64 with further evidence). Therefore, the individual exclusion of any warranty has to be measured under German law, here under � 476 BGB old version [*]. According to � 476 BGB old version [*], an exclusion of any warranty stipulated between the parties to the contract does not apply when the conduct of the seller is fraudulent.
4. The damages claimed by the [buyer] are recoverable within the meaning of Arts. 74 et seq. CISG. The damages of the [buyer] are so-called consequential damages within the meaning of Art. 74 CISG in the form of a liability damage, which arose as the breach of contract by the [seller] has made the [buyer] liable towards third parties. As required by the CISG, the [buyer] has calculated his damages precisely. Under these requisites, the damages would only be unrecoverable if they would have to be classified as unforeseeable. This is to be denied.
The [seller] knew that the [buyer] did not buy the car for his own use, but in his capacity as a car dealer. The [seller] thus had to reckon that the delivery of non-conforming goods would make the [buyer] liable towards his customer. In view of this, the foreseeability of the damages could only be denied if the damages would have to be considered as so exceptionally high that the [seller] did not have to reckon it. Having regard to the higher age of two years of the car and the much higher mileage, it is beyond doubt that the voluntary payment of the [buyer] in the amount of DM 20,000 is not too high at a purchase price of DM 95,000. The [seller] thus had to reckon with damages of this dimension.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Germany is referred to as [buyer]; the Defendant-Appellant of Italy is referred to as [seller]. Amounts in German currency (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 Gesetzbuch [German Code on the Conflict of Laws]. Please note that the BGB has been amended with effect as of 1 January 2002, and that the numbers of numerous provisions have changed. For example � 476 of the old version has been incorporated into � 444 of the new version.
** Peter Feuerstein is an International Legal Consultant. He conducted his post graduate research at Cambridge University, England, where he studied at Clare College in preparation of his Doctoral Dissertation. He received his Dr. jur. from Philipps-University of Marburg, Hessia, Germany, in 1997.

References: § 4
 § 6
 Art. 7
 Art. 35
 Art. 74
 Art. 79
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 40
 Art. 7
 Art. 35
 Art. 35
 Art. 40
 Art. 7
 Art. 6
 Art. 35
 Art. 27
 Art. 28
 Art. 79
 Art. 74