Source: http://cisgw3.law.pace.edu/cases/960215g1.html
Timestamp: 2019-04-18 10:43:46+00:00

Document:
A German buyer, the defendant, ordered marble coverings through X, a self-employed merchant and broker. X forwarded the order to an Italian seller, the plaintiff, who handed the undamaged coverings over to the first carrier. After reception the buyer found some of the coverings to be defective and informed X about a lack of conformity. X omitted to forward the notice to the seller. The buyer refused to pay the full purchase price and alleged that it was authorized to undertake a deduction of cash discount for payment within 30 days. The seller sued the buyer for the outstanding purchase price.
The Court allowed the claim under article 53 CISG, applying CISG as being part of the applicable German law. The court held that the contract in the case at hand related to the supply of goods to be manufactured or produced and consequently had to be considered sale pursuant to article 3(1) CISG.
As to the deduction of cash discount the court found that this matter concerned the determination of the purchase price. Therefore the seller had to rebut the buyer's allegation but failed to do so. Consequently the buyer's deduction of cash discount was admissible.
The Court stated that the buyer had to prove the seller's reception of the notice about the lack of conformity (article 39(1) CISG). X acted as a self-employed broker and not as a commercial agent of the seller. Therefore he was no appropriate addressee for the notice. Also giving notice to a self-employed broker was not appropriate in the circumstances by virtue to article 27 CISG. For giving notice by means appropriate in the circumstances the buyer had to assure itself about the reliability of X. Thus, the buyer had to indicate to X his function as a messenger and the importance of the notice and had to control the performance of the commission. When failing to do so the buyer took over the risk of non-compliance with the commission.
The Court granted interest under article 78 CISG. It held that under article 74 CISG the buyer was liable for all damages resulting out of the delay of payment including the costs of a bank credit. In the case at hand the seller failed to prove the existence of such costs.
"[T]he Court stated that the purpose of the Article 39(1) notice provision was not only the general interests of the industry to have a quick settlement of legal issues, but also first and foremost the seller's opportunity to undertake measures (which will become more difficult in time) to defend himself from claims such as damages." Andersen, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 79 n.41. "The fact that the notice must be specifically directed to the seller was also stated". (Es genügt keineswegs die Mängelanzeige an irgendeine mit der Vertragsabwicklung befaßte Person zu richten."). Id. at 105 and n.140.
Plaintiff [Seller] deals in the fabrication of natural stones. Defendant [Buyer] needed a large quantity of prefabricated marble coverings for the Nierendorffplatz Office Centre building project in Berlin-Charlottenburg. On 9 November 1994, I __, an employee of [Buyer], called on A __, a self-employed merchant and broker and ordered from [Seller] by telefax several items of material of this type and advised that there would be further orders. The stones ordered were for step treads, worked in with a rubber profile in accordance with the [Buyer]'s instructions.
In the last invoice, [Seller] offered a 3 % discount for payment between eight days after date of invoice.
By check dated 20 December 1994, [Buyer] paid invoices No. 335/345 in the partial amount of Deutsche Mark [DM] 38,991.09 and DM 20,058.44. [Buyer] held back or set-off the remainder of DM 34,332.88 [Buyer]. [Buyer] provides its own explanation for the set-off; [Seller] disagrees with the set-off.
[Seller] stated that, although it does not dispute the lack of conformity, since the contract was a mail order purchase and the goods were delivered undamaged to the carrier, a later damage of the goods would be in the sphere of risk assumed by the [Buyer]. The same applies to the color variation of the stones which has to be accepted, since these variations belong to the margin of error of the stones. Finally, the step treads, which are now criticized, were manufactured according to the specifications provided by the [Buyer]. For this purpose, [Buyer] got detailed information from A __ (evidence: hearing of Witness A __). Moreover, [Buyer] did not provide a timely notice of lack of conformity before the proceedings. Furthermore, [Buyer] is not entitled to a cash discount deduction, since there was no consent to this.
For the additional details of the claim, reference is directed to [Seller]'s written statement of 28 September 1995 including supplements dated 14 December 1995 and 2 January 1996.
[Seller] seeks to have [Buyer] directed to pay DM 24,332.88 plus 10 % interest (which arises from DM 4,761.82 since 29 December 1994, and from DM 62.36 since 7 January 1995, and from DM 16,252.20 since 17 January 1995, and also from DM 2,698.50 since 9 March 1995).
[Buyer] applies to dismiss the [Seller]'s claim.
[Buyer] asserts that during the first conversation with A __, [Buyer]'s employee I __ pointed out, that all materials were designated for one building project. Therefore, it was agreed that all elements of the delivery should to be attuned to one another with contrasting color. Furthermore, the finished goods should be fabricated in interchangeable types of material, that a 3 % discount will be granted if payment is made be within thirty days after date of invoice and it was agreed that German law is applicable to the contract. Furthermore, [Seller] committed to deliver the goods to the building site. Therefore, A __ ordered a carrier upon consultation with [Buyer]'s employee I __. This was paid for by A __. Upon the arrival at the building site, it was seen that a part of the goods that were dispatched on 29 November 1994 were damaged. The damaged part of the goods were type "Rosso Balmoral CM 2" 50.3 * 50.3 and 70.3 * 70.3 to the value of DM 3,555.80 (DM 1,821.60 + DM 1,734.20). A __ was notified immediately of this lack of conformity. [Seller] was to provide a replacement delivery. Therefore, [Seller] is only entitled to payment in the amount of DM 38,991.09 from invoice No. 335, and the other invoice in the amount of DM 20,058.44 is balanced in consideration of the discount.
[Buyer] further asserts that the materials referred to in invoice No. 355 were also partially damaged. The panels of the type "Verde Maritaca" in the amount of DM 3,022.20 cannot be used because they have a coloring and structure different from the pallets delivered before. [Buyer]'s employee I __ notified A __ of this lack of conformity by telephone call to A __ on 22 December 1994. Therefore, invoice No. 355 has a remaining amount of DM 13,230.00 and invoice No. 26 contains only the confirmed consideration material of the sort "Rosso Balmoral CM 2". The materials which were sent on 9 February 1995 also differed from the other partial delivery in color and structure. [Buyer]'s employee I __ notified A __ of this lack of conformity on 1 February 1995.
[Seller] is not entitled to the remaining amount of DM 13,230.00 since the step treads delivered by [Seller] were defective, since [Seller] did not insert a rubber profile to guard the edges. The rubber profiles that were inserted were not sufficiently interlocked, so that the rubber profiles disengaged. [Buyer] was able to determined these facts after the installation of 320 steps and was notified of the problem on 20 December 1994. Thereupon, the building owner disallowed the inspection because of this, so that it was necessary that the entire stair had to be rebuilt, which cost DM 60,000.00.
The [Seller]'s claim is essentially substantiated.
According to Art. 53 of the United Nations Convention on Contracts of the International Sale of Goods (CISG) of 11 April 1980, [Seller] could claim payment from [Buyer] at once in the amount of DM 22,506.60.
The contract is governed by German law according to Art. 27(1)(a) EGBGB [*]. This was alleged by [Buyer] and [Seller] accepted that. To that law belongs also the CISG (cf. v. Caemmerer/Schlechtriem, CISG, 2nd ed., Art. 1, para. 40) according to the United Nations Convention of 11 April 1980 (BGBl. [*] II, S. 586).
According to Art. 53 CISG, the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. Contracts for the supply of goods to be manufactured or produced are to be considered sales, according to Art. 3(1) CISG.
If the parties dispute the amount of the contractual payment, the [Seller] must prove the payment. But the [Seller] did not do this with respect to the cash discount deduction, which [Seller] denied, since an offer of proof is not sufficient. If [Seller] does not want to accept this price calculation, it must rebut the assertion of [Buyer] (BGH WM [*] 1983, 1008 (1009)).
Since [Seller] waived its opportunity to rebut this price calculation, it applies.
[Buyer], however, has a duty to pay the remaining amount and must also notify of defects, since a buyer loses the right to rely on a lack of conformity, if the buyer does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after buyer has discovered it or ought to have discovered it, according to Art. 39(1) CISG. The buyer's obligation to provide notice of lack of conformity is not only for the interest of the public in the traffic to a fast and final clearing of acts, but also in the interests of the seller, which should be put in a position in which it could come to a decision with respect to damages, and not be exposed to further requirements (BGH NJW [*] 1982, 2730 (2731) [*] to Art. 39 II EKG [*]; BGH NJW 1976 1352; BGH NJW 1984, 1964; BGH NJW 1990, 1290 (1292) to � 377(1) HGB [*]). This intention, the notice of lack of conformity could only comply, if the seller received the notice of lack of conformity provided by the buyer (BGH BGHR HGB [*] � 377 notice of defect 1; cf. LG Frankfurt NJW-RR [*] 1994, 1264 (1265); OLG Frankfurt NJW-RR 1995, 1216) or if the notice of lack of conformity was sent by means appropriate in the circumstances, according to Art. 27 CISG.
It is not enough, to send the notice of defect to anyone who is concerned with the contract settlement, this was also so under ULIS, the 1964 Hague Sales Convention antecedent to the CISG (BGH BGHR EKG Art. 39 time limit to notice of lack of conformity 1). Furthermore, it is important that the seller is informed by the buyer about defects quickly, completely and unmistakably, in regard to the protection of the obligation of the notice of lack of conformity which protects the interests of the seller in cross-border movement of goods. An oral notice of lack of conformity to a third person who is not in the sphere of the seller is not acceptable, since the notice of lack of conformity has fatal effects about the warranty in the contractual relationship.
A proper notice of lack of conformity could only be accepted, if the third person transferred it in a reasonable time to a staff-member of the [Seller] who is authorized to receive it or if the third person was exceptionally allowed to accept the notice of lack of conformity. [Buyer] had alleged that A __ was an authorized account executive of the [Seller], but [Seller] explained, without any contradiction by [Buyer], that A __ was only a broker between the parties. This explanation is in accord with the information by [Buyer], who explained that the A __ is not a member of [Seller]'s staff, but a self-employed merchant.
In the oral proceedings, the [Buyer]'s attorney at law by [Buyer] explained that the A __ is not the [Seller]'s trade representative by [Seller]; apart from that, the attorney could not explain the term "authorized account executive". Therefore, we conclude that in this case A __ was only a broker and not more, even if A __ was allowed to complete the business. A self-employed broker is not an addressee authorized to receive a notice of lack of conformity on behalf of the [Seller]; the one authorized to receive such a notice must be a person who is in sphere of the [Seller] (cf. Baumbach/Hopt, HGB, 29th ed., para. 28; Staub, HGB, 4th ed. � 377, para. 141).
According to Art. 27 CISG, a telephone notice to A __ of lack of conformity is not sufficient. The person who relies on the notice of lack of conformity, must do all that is appropriate to have the notice of lack of conformity arrive. In this case the notice of lack of conformity could have been sent by telefax, since the address and the telefax-number by [Seller] were on the invoice. If [Buyer] takes an aberrant way of conveyance, to overcome speech impairments [Buyer] must know the reliability of this way. For that, [Buyer] had to point out to A __ his messenger function and the meaning of the message and [Buyer] had to control the execution of the order (cf. v. Caemmerer/Schlechtriem Art. 27 para. 7). If [Buyer] does not do that, [Buyer] acts at its own peril (cf. v. Caemmerer/Schlechtriem Art. 39 para. 14 at the end).
[Buyer] has lost the right to rely on the lack of conformity of the delivered goods, since A __ did not provide a proper notice of lack of conformity to [Seller] in a timely manner. The lack of conformity objections presented in [Buyer]'s statement of defense of 29 August 1995 are raised too late (cf. v. Caemmerer/Schlechtriem Art. 39 para.17). This loss of [Buyer]'s right applies also to the set-off claiming interest due to the disadvantageous consequences of the defective step treads. The admissibility of a set-off is determined by the national law which is authoritative (EuGH NJW [*] 1996, 42(43)) according to the European Convention on Jurisdiction and Enforcement of 27 September 1968 (EuGVÜ). But in this case, the international jurisdiction is applicable because of the legal effect, according to � 322(2) ZPO [*] (BGH NJW 1993, 2753). Art. 6(3) EuGVÜ allows the inclusion of set-offs, which apply to the same contract or facts as the claim (BGH as seen above 2755; EuGH NJW 1979, 1100). This connection is present, since the delivery of the supposedly defective step treads was only a part of the contract for which [Seller] claims payment.
[Buyer] owes payment, which was argued and [Buyer] is also obligated to compensate delay disadvantages, according to Arts. 78, 74 CISG. To these disadvantages belongs also the costs of a continuous use of a bank credit (cf. v. Caemmerer/Schlechtriem Art. 74, para. 39). But the accrual of the interest costs is argued between the parties and has not been explained sufficiently by the [Seller]. Therefore, [Seller] is only entitled to interest in the amount of 5 % (cf. v. Caemmerer/Schlechtriem Art. 78, para. 6), and the [Seller]'s remaining interest claim is dismissed.
The attached other decisions follow from �� 92(1), 709, 108 ZPO.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Italy is referred to as [Seller]; Defendant of Germany is referred to as [Buyer]. Amounts in THE former German currency (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BGBl II = Bundesgesetzblatt II [German Federal Law Gazette No. II]; BGH = Bundesgerichtshof [German Supreme Court]; BGH NJW = Entscheidungen des Bundesgerichtshofes veröffentlicht in der Neuen Juristischen Wochenschrift [Decisions of the German Supreme Court published in a German weekly law journal]; BGHR = Sammlung der Entscheidungen des Bundesgerichtshofes [Collection of decisions of the German Supreme Court]; BGH WM = Entscheidungen des Bundesgerichtshofes veröffentlicht in der Zeitschrift Wertpapier-Mitteilungen [Decisions of the German Supreme Court published in the journal bond-memoranda]; EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; EKG = Einheitliches Kaufgesetz [Uniform International Sales Law (ULIS), 1964 Hague Sales Convention]; EuGH = Europäischer Gerichtshof [Court of the European Commission]; HGB = Handelsgesetzbuch [German Commercial Code]; NJW-RR = Rechtsprechungsreport der Neuen Juristischen Wochenschrift [Report of decisons in a German weekly law journal]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

References: Art. 53
 Art. 27
 v. 
 Art. 1
 Art. 53
 Art. 3
 Art. 39
 Art. 39
 Art. 27
 Art. 39
 Art. 27
 v. 
 Art. 27
 v. 
 Art. 39
 v. 
 Art. 39
 Art. 6
 v. 
 Art. 74
 v. 
 Art. 78