Source: http://cisgw3.law.pace.edu/cases/980902g1.html
Timestamp: 2019-04-18 10:32:35+00:00

Document:
As to the set-off, the court held that the buyer was not entitled to a claim loss of profit, in view of the fact that it had omitted to assess its damages on the basis of a specific calculation as required by article 74 CISG. The court noted that, if it had been provided with the vacuum cleaners' current market price, an abstract calculation would have been admissible under article 76 CISG. In such case, the damages would have been calculated on the basis of the difference between the price fixed by the contract and the current market price at the time of the avoidance of the contract. However, as the current market price of the "no-name" vacuum cleaners was missing, damages could only be established on the basis of a specific calculation under article 74 CISG, which had not been provided by the buyer.
Excerpt from Proving the Quantum of Damages, 25 Journal of Law and Commerce (2005-06) 375-383.
In this case, the seller sold a batch of "no-name" vacuum cleaners to the buyer along with batches of branded vacuum cleaners. The buyer alleged that the vacuum cleaners did not perform up to standard, declared the contract avoided and asserted that as a result it had suffered damages.
The buyer failed to return the defective vacuum cleaners and was ordered to pay the purchase price. Its counterclaim for damages was dismissed because it had failed to properly prove its damages. The court held that under Article 74 the plaintiff must exactly calculate its damages. Under the circumstances, the loss of profit relied on was not properly substantiated.
The [buyer]'s appeal is admissible, but largely unsuccessful. The Court of First Instance correctly ordered the [buyer] to pay the purchase price. The [buyer]'s set-off with its claims for damages is justified only with respect to the costs of return, that is, with respect to 1,000 DM [Deutsche Mark].
I. The Court of First Instance correctly held that the [seller] possesses a claim for payment of the purchase price under Arts. 53, 14, 15 and 18 CISG in the amount of DM 18,310.- for 131 unreturned vacuum cleaners (DM 6,550), 4,800 watches (9,600 DM) and 480 Power Twisters (2,160 DM). The Court accurately pointed out that the [buyer] is obliged to pay for the 131 sold vacuum cleaners since it was unable to return them.
1.	Set-off with claims for loss of profit.
Under � 7(b) of its standard terms, the [seller], at its own choice, is only obliged to either cancel the entire contract or part of the contract, grant the [buyer] a corresponding credit, deliver substitute goods, or grant the [buyer] an adequate reduction in the purchase price -- as [seller] did in the present dispute. The [seller] would thus not be obliged to reimburse the [buyer] for any damages, unless required by law. However, the [seller] does not submit the corresponding stipulations of Dutch law; [seller] especially does not address the question whether the parties may derogate from such rules.
The matter is of no importance as the [seller]'s standard terms were not validly incorporated into the contract, with the result that the application of the CISG was not validly excluded by � 10(c) of the standard terms. Both the [seller]'s order forms and its invoices contain a reference to its standard terms in small print and in the Dutch language. Contrary to the [seller]'s submission, the [buyer]'s failure to object to the standard terms does not lead to their implicit incorporation -- even if Dutch law was applicable. It is accurate that an acceptance of the incorporation of standard terms by the other party suffices under Dutch law (cf. Ulmer/Brandtner, AGBGB, 8th ed., Att. 1 n. 95), while it is not necessary for that party to gain knowledge of the specific conditions. As a measure of appropriateness it is, however, of relevance whether the party using the standard terms handed them over to the other party (which was not the case in the present dispute) or in any other way presented [buyer] with a reasonable possibility to read the terms (also not the case, as the standard terms were only deposited at a law firm in Utrecht [The Netherlands]). In any event, the question whether the standard terms were incorporated in the contract is governed by German law. The Court of First Instance correctly pointed out that the contract negotiations took place in Germany, were conducted by the [seller]'s employees in German, and that the invoices were also issued in the German language. At the least, the incorporation of the standard terms is therefore to be determined under German law (Art. 27(1) EGBGB [*]). The incorporation requirement of � 24 no. 1 AGBG [*] is not applicable between traders (� 2 AGBG); an implicit agreement on standard terms is possible in commercial transactions (cf. BGHZ [*] 102, 293 (304)). It is also sufficient if one party in the course of a business relationship repeatedly refers to its standard terms on the invoices and the other does not object (cf. BGH [*] NJW [*] 1978, 2243), even if the standard terms are in a foreign language (cf. OLG [*] Köln, VersR [*] 1994, 1496 (1497)). The fact that the reference was in Dutch does furthermore not hinder an implicit agreement of the [buyer] with the standard terms (cf. BGH NJW [*] 1995, 190). However, in this decision the BGH [*] correctly points out that -- before signing the contract -- the other party must be presented with a reasonable opportunity to inform itself both of the kind and the content of the presented document. As has been explained above, this was not the case in the present dispute. The BGH further explained that standard terms in the German language may apply to a foreigner if German is the language of both the contract and the negotiations. For the present dispute, this means that Dutch would have to have been the language of the contract and the negotiations -- as expounded above, this language was not Dutch, but German. The standard terms are therefore not incorporated under German law.
b) As the application of the CISG was not validly excluded, a reimbursement of damages in the form of loss of profit would be possible. However, the corresponding prerequisites are not met.
aa) Under Art. 74 CISG, damages for breach of contract consist of a sum equal to the loss, including loss of profit.
(1) It is, however, doubtful whether the [buyer] fulfilled its obligation to examine the goods and give notice of any lack of conformity as required under Arts. 38 and 39 CISG. The vacuum cleaners were delivered on 1 and 20 February 1996, but were not queried until 29 March 1996. The [buyer] submits that it put one vacuum cleaner into operation which was not defective. [Buyer] then delivered the machines to its branches and discovered the lack of conformity only when the vacuum cleaners were returned. [Buyer] complains that they lack vacuuming power, which is not a hidden defect and should have been the same in all the machines, as they possess the same amount of wattage. The same goes for the smell ("stinks"), unless some of the wires had burned. However, for the reasons set out below, this question is not decisive.
(2) A further prerequisite for a claim for damages is a breach of contract, which could consist in the lack of conformity of the vacuum cleaners. Whether these goods were in fact defective is disputed between parties, but also irrelevant.
(3) In its fax of 29 March 1996, the [seller] declared the contract avoided. Contrary to the [buyer]'s submission, [seller] did not accept its claims in this fax, but rejected them. Following the undisputed submission of the [seller], the returned vacuum cleaners were sold and its subsequent customer did not ascertain a rejection rate above normal. The [buyer]'s documents on customer complaints are not sufficient to prove the alleged defects, especially since most complaints concerned vacuum cleaners of brand [�], which the [seller] had not even delivered.
(4) Under Art. 74 CISG, the [buyer] would have to exactly calculate its damage (cf. Staudinger/Magnus, UN-Kaufrecht, 13th ed., Art. 74 n. 61), which is something it failed to do -- that is, at least in its fax of 29 March 1996.
bb) Art. 76 CISG provides for an abstract calculation of loss if (as is the case) the contract was avoided and there is a current price for the goods. The calculation is based on the difference between the price fixed by the contract (in the present dispute: DM 50.00) and the current price at the time of the avoidance (the [buyer] alleges a price of at least DM 99.99). The current price is the price that is generally charged for goods of the same kind in the respective industry under comparable circumstances (cf. Staudinger/Magnus, Art. 76 n. 13). If a current price does not exist, the damage is to be calculated under Art. 74 CISG. The Court can neither find that there is a current price for the "no-name vacuum cleaners", nor has the [buyer] made a comprehensible submission to that effect. Thus, the loss of profit has not been sufficiently substantiated.
c) The Court of First Instance furthermore correctly denied a claim for damages based on Art. 77 CISG -- failure to mitigate losses on the part of the [buyer] by failing to enter a substitute transaction. The [buyer]'s submission regarding its efforts for a substitute purchase is insufficient. [Buyer] refers only to the vacuum cleaners of brand [�], which -- following an agreement to that effect -- the [seller] in the end did not deliver. The assertion that a substitute transaction was not possible in the relevant period of time in Göttingen, Lower Saxony and North Hesse [Germany] (supported by expert opinion) is not enough. The [buyer] purchased from a Dutch seller in the present case, therefore offers from foreign countries, at least from all of Germany, should have been considered. It is decisive that the [buyer] does not offer any explanation regarding its efforts to instigate a substitute purchase. It is true that the burden of proof for a failure to mitigate damages is on the creditor, that is, the [seller] in the present dispute (cf. Staudinger/Magnus, Art. 77 n. 22). But the onus of proof is irrelevant because the [buyer] was at least obliged to submit which offers for a substitute transaction it obtained and from which companies. The legal consequence of Art. 77 CISG is solely a reduction in the amount by which the loss should have been mitigated. However, as the [buyer]'s submissions are overall incomplete, the Court cannot determine the extent of the damages, so that a set-off with a claim for loss of profit is also unjustified for these reasons.
2. [Buyer]'s set-off with a claim for reimbursement of advertising costs in the amount of 700.00 DM is not legitimate. The [buyer] submits that it constantly advertises its goods with large announcements in the papers. [Buyer] presents one example which advertises vacuum cleaners for DM 99.99, if only as one of fourteen offers. But a substantiated documentation of the proportionate costs is missing, making the proof insufficient.
3. However, the return costs in the amount of DM 1,000.00 are justified, leading to a reduction of the claim by that sum as a result of [buyer]'s set-off. The [buyer] claims costs for the unloading of the goods, loading of trucks, unwrapping, handling of complaints, etc. Following � 287 ZPO,[*] the Court estimates these costs at around DM 1,000.00, as the delivery to eleven branches and the transport back of 1,330 returned vacuum cleaners caused otherwise unnecessary costs.
III. The [buyer]'s appeal was thus justified in the extent of DM 1,000.00, leading to a change in the decision of the Court of First Instance. The appeal was rejected in all other regards.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant of Netherlands is referred to as [seller]; the Defendant-Appellee of Germany is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: AGBG = Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen [German Code on Unfair Contract Terms]; BGH = Bundesgerichtshof [Federal Court of Justice, the highest German Court in civil and criminal matters]; BGHZ = Entscheidungen des Bundesgerichtshof in Zivilsachen [Case Reporter on decisions of the Federal Court of Justice in civil matters]; EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on the Conflict of Laws]; NJW = Neue Juristische Wochenschrift [pre-eminent German law journal]; OLG = Oberlandesgericht [Court of Appeals]; VersR = Versicherungsrecht [German law journal]; ZPO = Zivilprozeßordnung [German Code on Civil Procedure].

References: Art. 74
 Art. 74
 Art. 74
 Art. 76
 Art. 76
 Art. 74
 Art. 77
 Art. 77
 Art. 77