Source: http://cisgw3.law.pace.edu/cases/940915g1.html
Timestamp: 2019-04-19 14:28:42+00:00

Document:
By letter dated 19 September 1992, the Defendant [buyer], owner of a shoe retail business, ordered from the Plaintiff [seller], a shoe manufacturing firm in Italy, 143 pairs of various types of shoes. The shoes were delivered to the buyer on 16 February 1993. Upon conclusion of the contract, the parties had agreed that payment of the net amount of the invoice was to be made either within ten days from the date of invoice yielding a 3% cash discount, or within sixty days after the date of invoice.
By letter of 5 February 1993, the seller invoiced the buyer for the total price of his delivery, i.e., IT� [Italian Lira] 8,411,000. The buyer did not pay and subsequently was sent a first reminder by seller's letter of 7 April 1993. The reminder did not lead to payment. Accordingly, the seller sent a second notice, this time also setting a time limit for payment until 13 May 1993. Subsequent to this notice the buyer forwarded a check dated 29 April 1993 to the seller deducting IT� 2,886,000 for shoes [buyer] noticed as being defective. The shoes for which the buyer gave notice of defect are item nos. (...). The check the buyer sent to the seller was only received on 18 May 1993.
The seller maintains that the shoes for which the buyer refuses to pay were neither defective nor had the buyer validly avoided the sales contract. Further, the buyer owed him interest for the period of sixty days after the date of invoice since 6 April 1993, as well as interest for the residual price since 19 May 1993. Seller also contends that it is entitled to reimbursement of expenses resulting from the use of legal services for pre-trial enforcement of the payment.
The seller demands that the buyer to be ordered to pay him IT�. 2,886,000 plus 16.5% interest out of IT� 8,411,000 for the period of 6 April 1993 until 19 May 1993 and 16.5% interest out of IT� 2,886,000 since 20 May 1993 as well as DM [Deutsche Mark] 312,- plus 16.5% interest since 14 May 1993.
The buyer requests that the claim be denied.
Buyer maintains that the shoes under item nos. (...) were defective and non-sellable. As far as items (...) are concerned, the jewelry ornamentation elements on the front part of the shoes were not straight and the straps of items (...) were too long on the inside as well as on the outside so the shoes were going baggy easily. Further, the sole was not fixed properly and the straps on the heals were backstitched too narrowly. Buyer further contends that its attempt to also sell items (...) was no waiver of the right to avoid the contract, but rather proof that it was impossibe to sell those shoes.
The seller takes the position that the buyer can only validly defend the claim for the sales price in respect of item no. (...) if it rightfully claimed and declared the partial avoidance of the contract under Article 49 CISG. As regards item no. (...), seller maintains that it had not breached the contract fundamentally in the sense of Article 25 CISG, so that the contract was not validly avoided and the payment deduction could not be justified.
The seller's claim is denied.
The seller does not have a right to the residual price and therefore also lacks a valid claim to either the interest sought or any additional damages.
The fact that the buyer gave notice of defect (Article 39(1) CISG) in the correct manner and within the prescribed time limit remains unchallenged. Pursuant to Articles 49(1)(a), 25 et seq., 35(1) and (2) CISG, buyer then validly declared avoidance of the contract in respect of shoes under item nos. (...) because the lack of conformity of these goods is a fundamental breach of contract under those provisions.
The defects of the shoes as described in detail by the buyer in its pre-trial memorandum of 22 February 1993 have not been challenged by the seller in an appropriately substantiated way. The simple allegation that the goods had not been defective does not suffice for effectively contesting the alleged facts. Although the buyer bore the onus of presentation and the burden of proof for the existence of the alleged defects, this does not excuse the seller from his obligation to respond more specifically to the detailed allegations of defects. The precise description of the various defects of each item leads to the [seller's] obligation to respond to them in an appropriate way. It is therefore unnecessary to take evidence.
The buyer's pre-trial statement that it was attempting to sell items (...) does not change the result as it does not constitute the acceptance of the goods as conforming to the contract. The offer to return the shoes (item nos. ...) in the buyer's letter of 8 March 1993 constitute a valid avoidance of the contract under Article 26 CISG. The buyer would have lost this right only if she had already sold shoes under item nos. (...) at this time and before it discovered the lack of conformity (Art. 82(1), 82(2)(c) CISG). The buyer's attempt to sell these shoes, of which she gave prior notice in its letter of 26 April 1993, can only be interpreted as an attempt to mitigate the negative effects for both sides, the more so as it would have had to account to the seller for any profit under Art. 84(2) CISG. The buyer affirms that it still is able and willing to return the disputed shoes. The parties may attempt an agreement as to the way of returning the shoes and the costs for returning the shoes.
According to the above reasoning, the seller does not have a right to interest in respect of the sales price of the shoes under item nos. (...). Neither does it have a right to interest out of the full residual price since 19 May 1993. Pursuant to Art. 79(1) CISG, the buyer is not liable for the delayed payment as it could not reasonably be expected to pay immediately for defective goods the seller did not want to take back without either an agreement in this respect or without having tested the possibility of selling the goods despite their described defects. The buyer has also communicated to the seller the reason for its late payment (Art. 79(4) CISG). [Seller's] claim for pre-trial damages based on Art. 74 CISG also fails in lack of a breach of contract.
The appeal has been brought in the right form and within the prescribed time limit but fails on the substance.
The Amtsgericht outlined correctly that the seller does not have a right to payment of the claimed additional part of the purchase price. The Court adopts the sound elaboration of the Amtsgericht (in analogy to � 543 ZPO [Civil Procedure Code]).
The buyer had the right to avoid the contract in accordance with Arts. 51 and 49(1)(a) CISG as regards both the shoes under item no. (...) as well as those under item nos. (...). Those goods did not conform with the contract in the sense of Art. 35 CISG. To fulfil the requirement of this Article, the goods must be fit for the purposes for which goods of the same description would ordinarily be used or for any particular purpose made known to the seller. The goods must be of average quality, and it does not suffice that they can only just be traded. The buyer, however, outlined in detail the various defects of the shoes under the said numbering. Where the buyer provides a specific complaint about the goods, the seller principally bears the onus of presentation as regards the conformity of the goods under the contract at the time the risk passes over to the buyer. As the buyer gave notice of the lack of conformity of the goods from the very beginning, it did not accept them as performance of the seller's obligation. The seller therefore could not just limit his position to the mere denial of the lack of conformity. Insofar as the seller maintains that the delivered shoes were in accordance with the sample on the basis of which the shoes were ordered, this argument is irrelevant. A sample only has binding effect where the parties actually agreed so (Herber/Czerwenka, Commentary to the CISG, 1, edition 1991, Art. 35 No. 6). The seller never alleged such an agreement. Additionally, seller then would have had to show specifically that the sample also had the same defects as alleged by the buyer.
A right to remedy the defects or to substitute delivery does not exist. The buyer can demand avoidance of the contract as there is no right to repeated performance in case of a fundamental breach of contract. The fundamental breach of contract can - as is the case its e - also be seen in the fact that the existence of a lack of conformity is completely denied and the remedying of defects as well as substitute delivery are generally rejected.
By its letter of 8 March 1993, the buyer also sent the necessary notice of avoidance as required under Art. 26 CISG. The letter of 26 April 1993 by which the buyer informed the seller of its intention nevertheless to attempt to sell items (...) does not affect the avoidance of the contract that had already been communicated. The intended action is rather a measure to mitigate any loss to which the buyer is obliged under Art. 77 CISG. As the items are still with the buyer, their return is also possible.
Neither does the seller have a right to interest under Art. 78 CISG in respect of the partial payment due for the faultless goods. A seller may claim interest under Art. 78 CISG where the buyer fails to pay the price or any sum in arrears. However, here the buyer had the right to suspend the performance of the contract under Art. 71(1)(b) CISG according to which one party to the contract may suspend the performance of his obligations where, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations - this may be based on a certain conduct in the preparation of or during the performance itself. A fundamental breach of contract in the sense of Art. 25 CISG is not necessary (Herber/Czerwenka, Commentary to the CISG, Art. 71 No. 5). As the seller refused performance in respect of items (...), the buyer could conclude from this conduct that the seller was not going to perform a substantial part of his contractual obligations. The notice of suspension required under Art. 71 CISG can be seen in the buyer's letter of 8 March 1993, in which it refused acceptance of the defective items and offered their return.
Due to the reasons outlined above, the seller does not have a right to recover any pre-trial legal expenses regarding the faultless part of the goods. In this respect the buyer also had the right to suspend its performance under Art. 71 CISG.
* All translations should be verified by cross-checking against the original text. For purposes of these translations, Plaintifff-Appellant of Italy is referred to as [seller] and Defendant-Respondent of Germany is referred to as [buyer]. Monetary amounts in Italian Lira are indicated by [IT�] and monetary amounts in German currency (Deutsche Mark) as [DM].
** Martin Eimer, Associate of the Institute of International Commercial Law of the Pace University School of Law, received his LL.M. from Edinburgh University. He is currently a Research Assistant to Prof. Martin Hunter, Essex-Court Chambers, London.

References: Art. 84
 Art. 79
 Art. 74
 Art. 35
 Art. 35
 Art. 26
 Art. 77
 Art. 78
 Art. 78
 Art. 71
 Art. 25
 Art. 71
 Art. 71
 Art. 71