Source: http://cisgw3.law.pace.edu/cases/980123s1.html
Timestamp: 2019-04-19 14:27:20+00:00

Document:
A German producer of machinery, plaintiff, sold a commercial laundry machine to a Swiss buyer, defendant, and delivered the machine to the final customer in Hong Kong. The buyer refused to pay the price, declaring a set-off with claims arising out of a related consulting agreement with the seller. While the payment obligation under the sales contract, which was governed by the CISG, was not in dispute, the existence and the amount of the set-off were under controversy.
The first issue was whether a standard set of General Terms and Conditions, pursuant to which the setoff claim would have been excluded, formed part of the sales contract. The court held that this issue was not governed by the CISG, and under German domestic law the General Terms and Conditions did not form part of the contract (article 4 CISG).
While stating that the CISG does not deal with set-off (article 4 CISG), the court nevertheless referred to article 8 of the CISG in construing the consulting agreement. This uniform rule, the court noted, coincides with corresponding principles under German and Swiss domestic law. The court concluded that if the interpretation of a statement made by a contracting party coincides with the interpretation of statements made by the other party, a corresponding intent of the parties will be assumed. If, however, interpretation of statements made by both parties does not lead to a congruent result, the intent of the parties has to be elicited in accordance with the principles of Swiss domestic law.
A. The [Buyer] ordered a commercial washing machine worth 528,000 Deutsche Mark [DM] from the [Seller] in the end of 1993. [Seller] agreed to deliver the washing machine to TL and C Co located in Z (hereinafter referred to as T Co) upon, receipt of the documentary credit (Akkreditivbetrag), the sum falls due on T Co. The invoice issued by the [Seller] was dispatched on 30 March 1994 to (Translator's Note: invoice addressee is omitted in the German version; very much likely it is the [Buyer]), the machine was shipped to Hong Kong on 31 March 1994. The [Buyer] received the documentary credit, but has not made any payment on the sum due to the [Seller]. [Buyer] acknowledged that the sum due as such is not contested, but alleged that it is, however, settled by the setting off of the sum due on a counterclaim. The [Buyer]'s counterclaim was based on a consulting agreement ... The [Buyer] filed an objection against the [Seller]'s payment summons, served on 3 October 1994 for 443,089.15 Swiss francs [Sf] plus interest at 5 per cent from 5 May 1994.
The [Seller] filed a claim against the [Buyer] on 2 November 1994 at the Civil Court, seeking to order the [Buyer] to pay the 443,084.15 Sf plus interest at 4 per cent from 5 May 1994 and to impose costs and damages on the [Buyer]. On 13 February 1995, the [Buyer] applied to have the action dismissed, alleging that the sum due is settled by a set-off. The [Seller] modified its claim on 19 September 1995; now it claims 520,662.95 Sf plus interest at 6.5 per cent from 5 May 1994 and demanded to open the case (Translater's Note: "um Rechtsöffnung in der eingeleiteten Betreibung ersucht" translated as: to demand to open the case). [Seller] alleged that the right to set-off a counterclaims is excluded by the general terms and conditions of business applying to this sales transaction. At the first oral hearing, the [Buyer] filed a counterclaim, seeking to order the [Seller] to pay an amount of 379,862.93 plus interest from 21 November 1995. The [Seller] objected to the local jurisdiction of the court for the counterclaim and also argued that the counterclaim was filed late and therefore has to be dismissed. Thereupon, the [Buyer] withdrew the counterclaim.
The Civil Court dismissed the [Seller]'s action, reasoning that the accrued commission arising from the consulting agreement was higher than the [Seller]�s claim and that both claims are ready for set-off.
B. The [Seller] appealed against this judgment, seeking to order the [Buyer] to pay an amount of 520,662.92 Sf plus interest at 6.5 per cent from 5 May 1994 or, in the alternative, 443,084.15 Sf plus interest at 5 per cent from 5 May 1994. [Seller] also applied to implement execution order No. 517,591 issued by the Office of Collection (Beitreibungsamt des Sensebezirks) in the amount of 443,084.15 Sf plus interest at 5 per cent from 5 May 1994 and the amount of 198.00 Sf for execution costs and reserves the right to claim exchange loss.
On 10 September 1997, [Buyer] applied for dismissal of the [Seller]'s appeal. The parties waived the right to an oral hearing.
1. The ruling of the Court of First Instance is a final award in a civil court matter. The value of the matter, which equals the request of the parties being subject of the court's ruling, decides whether the appeal is admissible; this value was 520,662.95 DM, which equals 440,881 Sf based on an exchange rate of 84.60 Sf on 22 April 1997, and exceeds 8,000 Sf. Therefore, the matter is capable of appeal (Art. 291 ss. 1 ZPO [*], Art. 143 ss. 2 GoG [*]).
The ruling the appeal is aimed at was served on the appellant on 24 April 1997. The 30 days period for delivering the appeal was adhered to with the appeal dispatched on 26 May 1997, since the last day of the period fell on an Saturday and the term then ends on the next working day, which was 26 May 1997 (Art. 40 ss. 1 ZPO in connection with Art. 1(a) des Gesetzes betreffend den Ablauf von Fristen). The writ of appeal meets the formal requirements (see Art. 294 ZPO; FZR [*] 1995 No. 12 Page 73 et seq.). Hence, the appeal can be dealt with.
On appeal level, the value of the matter is 520,662.95 DM, on the basis of an exchange rate of 82.80 on the day issuing the court ruling, 431,108.95 Sf, respectively.
2. On 1 January 1998 the law "Gesetz vom 20. Februar 1997 zur Änderung der Zivilprozessordnung und anderer kantonaler Gesetze im Bereich der Zilvilprozessordnung"[*] became effective. This law applies to appeal proceedings in which the ruling underlying the appeal was made after its enactment (Art. 17 of this law). This appeal proceeding is consequently governed by the previous law, except for the terms stipulated in Art. 17 ss. 2 of this law.
3. The parties' writs need to show precisely for what matter of fact an item of evidence shall be cited as evidence (Art. 158(e) ZPO [*]). Both parties have offered items of evidence without declaring precisely on what matter of fact they shall serve as evidence. Neither [Seller] nor [Buyer] has applied for reopening the hearing of evidence. Therefore, additional evidence will not be permitted.
4. The [Seller]'s sales claim of 520,662.95 DM itself is not objected by the [Buyer]; the dispute in this proceeding is about whether the [Buyer] had a counterclaim and a right to set-off this counterclaim.
5. The lower court ruled that the [Seller] failed to show that the [Seller] [Seller]'s general terms and conditions (Sale- Payment- and Delivery terms 10/93 of October 1993) apply to the sales contract between the parties. The Court therefore applied � 387 BGB [*], a provision which allows a set-off in general. In these appellate proceedings, the [Seller] again argues that its general terms and conditions are applicable and that these terms exclude the right to set-off (Art. C.5).
a. [Seller] and [Buyer] have their places of business in Germany and Switzerland, respectively. For lack of individual choice of law, the sales contract concluded by the parties is governed by the United Nations Convention on the International Sale of Goods (CISG), SR [*] 0.221.211.1, applicable in Switzerland since 1 March 1991 and in Germany since 1 January 1991). This body of law does not provide rules concerning set-off (Art. 4 CISG; Honsell, Commentary on the CISG, Zürich 1996, N 20 zu Art. 4 CISG). Pursuant to national conflict of law rules, the law governing the claim which shall be settled by set-off has to apply (Art. 148 ss. 2 IPRG [*], SR 291). For lack of an individual agreement between the parties, the claim for payment of the sales price is governed by the law of the State in which the seller has its place of business at the time it received the order (Art. 118 IPRG; Art. 3 des Übereinkommens betreffend das auf internationale Kaufverträge über bewegliche körperliche Sachen anzuwende Recht, SR [*] O.221.211.4), in the present case, as already stated by the Court of First Instance, this is German law.
According to � 2 of the German AGBG [*], general terms and conditions only apply, if the parties agree upon them in each particular contract or if they agree in advance to apply them to a certain range of contracts. This rule, however, does not apply when contracting with tradesmen (Art. 24 ss. 1 No. 1 AGBG); the tradesman status of a non-German tradesman is governed by German law (� 1 et seq. HGB [*], Handelsgesetzbuch vom 10 Mai 1897[*]) also (Staudinger/Schlosser, Commentary on BGB, 12 ed. Berlin, 1980, note 2 zu � 24 AGBG). In the relationship between a user of general terms and conditions and a tradesman, general terms and conditions also can become part of the contract if in the past they have frequently based their contractual relationship on these terms and the kind of the pertinent business transaction shows that both parties have assumed to apply these terms. In this case, an implicit frame agreement was concluded. An incorporation of general terms and conditions by implied behavior also may happen, when on earlier occasions these terms always have became part of the contract after its conclusion. However, this requires that a frame agreement indeed was established. A similar business transaction on a single occasion in the past does not suffice to incorporate the general terms and conditions into a newly concluded contract. Even if the parties on several occasions of business transactions repeatedly referred to specific terms, this does not make these terms part of similar future contract in any case, especially not, if from time to time contracts are concluded that are subject to negotiations on their fundamental issues. The mere existence of a current business connection and the fact, that the customer anyhow has received knowledge that the user is used to contract on its general terms and conditions, also does not suffice. Most notably, a repeated notice on the delivery note or the invoice is not sufficient.
b. When concluding the contract orally in the end of 1993, the incorporation of the [Seller]'s general terms and conditions was not expressly agreed upon; furthermore, the parties have not stipulated any explicit frame agreement which states that the [Seller]'s general terms and conditions shall apply to the whole range of contracts to be concluded between the parties or parts thereof.
c. The scope of the [Buyer]'s business ranges from producing and trading with machines, devices, industrial textiles and chemicals, the installation and provision of services on machines and devices, to acting as sales agent for technical products (Translator� Note: "Übernahme von Vertretungen technischer Produkte"has been translated as: "acting as sales agent for technical products"). The [Buyer], therefore, is a so-called statutory trader, i.e., a trading company operating a trading business, namely, the procurement and resale of movables, unchanged or after processing them (� 1 ss. 1 and ss. 2 No. 1 and � 6 HGB [*]). Hence, the [Buyer] has the status of a statutory trader which requires examination as to whether the application of the [Seller]'s general terms and conditions was agreed implicitly.
- The [Seller]'s general terms and conditions were printed on the backside of two invoices dated 27 and 29 October 1993 addressed to the [Buyer] and the [Buyer] has not objected to the invoices neither upon receipt nor later.
- P Z, Chief Operating Officer of the [Buyer] and within the consultancy agreement acting as Consultant and Sales Director for the [Seller], had to know by the time the invoice of 30 March 1994 was furnished that the [Seller] in each case uses the [Seller]'s general terms and conditions in its business transactions.
From these facts, the [Seller] alleges that the [Seller]'s general terms and conditions, which according to their Art. A.1, once accepted in a permanent business relation, apply on every later occasion without explicit reference, shall apply to all transactions between the [Seller] and [Buyer], especially to the sale of the commercial washing machine (Appeal No. 9, p. 5-8).
The [Seller] and the [Buyer] were in a permanent business relationship, namely, based on the consulting agreement concluded 15 September 1993. It is not certain how many sales contracts the [Seller] concluded with the [Buyer]. In this respect, the [Seller] neither has made any assertion in any of the four writs delivered prior to the institution of proceedings by the lower court, nor later. From the invoices of 27 and 29 October 1993, of 19 and 29 September 1993, 8 April 1994, 29 April 1994 and 28 June 1994 that were presented it is shown that there were several contracts..
- A permanent practice, which only could suggest a self-evident agreement between the parties, has not been established. Furthermore the sales contracts were, as the dates of the invoices show, concluded singularly and irregularly, namely when the [Buyer] had a customer.
It is obvious that the major issues of the respective contracts, concerning customer-made machines adapted to customer were subject to negotiation in every single case. The fact alone that the [Seller]'s general terms and conditions were printed on two invoices from October 1993 and that the [Buyer] failed to object to these invoices, cannot suffice to conclude that the [Seller]'s general terms and conditions applied to all future sales contracts between [Seller] and [Buyer], especially not for the sales contract at stake.
Whether the [Seller] in general is used to contracting only with reference to its general terms and conditions and the Chief Operating Officer of the [Buyer] was aware of this fact from its consulting practice with the [Seller] -- contested by the [Buyer] -- is not evidenced according to the view of the Court of First Instance. The [Seller] did nothing to show that this view of the facts is wrong, it was content to note that there is a common view suggesting a preponderant probability. This does not prove evidence. By the way, the Chief Operating Officer`s understanding of the facts was not decisive here, for it cannot suffice to give reason to the application of the [Seller]'s general terms and conditions in the present sales contract.
d. The application of the [Seller]'s general terms and conditions was correctly denied by the Court of First Instance; consequently, it remains undecided whether the contractual exclusion of the set-off right would be invalid in the case of asserted insolvency of the [Seller]. To set-off the sales claim with the claim arising from the consulting agreement was generally valid according to � 387 BGB [*].
6. According to s. 7 of the consulting agreement, the [Buyer] can claim a provision of 12 per cent of the generated worldwide turnovers of the [Seller]. The parties disagree about the fact, whether this claim is unconditional or with reference to s. 1 of the consulting agreement only was existent when the [Seller]`s net proceeds on quarter year average reduced by certain extra costs does not fall below the minimum production costs and further costs increased by a profit margin of 5 per cent. The Court of First Instance suggested affirming these restrictions, yet has not decided upon this issue, for it has noted that the [Seller], despite several notices from the [Buyer], has not edited the papers which could document the reduction of the sales price by the extra costs, manufacturing cost and administration expenditures to reasonably control the commission statements; the statements therefore only represent a unsubstantiated assertion. Furthermore, there was no evidence furnished that the [Buyer] has accepted the statements unconditionally. The [Seller] has to bear the consequences of not providing evidence for the claimed costs. The Court of First Instance consequently has calculated the commission claim with 12 per cent of the sales volume and since this sales volume exceeds 5,800,000.00 DM stated, and has concluded that the claim of the [Buyer] exists, which obviously exceeds the sales price. This court therefore concluded that the [Seller]'s claim was settled by set-off.
On appeal level, the [Seller] disputes that a commission claim ever came into existence, because a profit margin of 5 per cent was not reached. Moreover, the [Seller] disputes its duty to furnish documents enabling the [Buyer] to examine the deducted costs and furthermore notes that it has offered to edit these documents in a writ, the lower court, however, never gave a court order to do so and thereby prevented the [Seller] from offering evidence.
a. In advance, the court has to examine, as applied for by [Buyer], whether the commission claim was dependent on the [Seller] sourcing a 5 per cent profit margin.
aa. Declarations of one party to the contract need to be construed in accordance with its will, if the other party knew or could not be unaware of this will. If a corresponding will cannot be determined, declarations and further behavior have to be construed in the manner in which a reasonable third person in the same position under the same circumstances would have interpreted them; to determine this, all relevant circumstances need to be considered, especially the negotiations between the parties, customs, trade usages and the later behavior of the parties (Art. 8 CISG). These basis rules conform to German law (� 133 and � 157 BGB [*], von Caemmerer/Schlechtriem, Commentary on the CISG, Munich, 1990, Note 3 Art. 8), namely, meaning that a party bears the burden of proof, insofar as it wants to deviate from the meaning of a clear wording (Staudinger /Dilcher, Commentary on BGB, 12th ed. Berlin, note 18 to � 133 BGB [*]). Art. 8 CISG corresponds to the principle of trust in Swiss law (Honsell, Commentary on the CISG, Munich, 1990, Note 2 Art. 8), which says that declarations need to be construed as to how the addressee in good faith, i.e., in accordance to its particular wording and context as well as with the entire circumstances, had to understand it. If a contract interpretation brings about a declaration which corresponds to the declaration of another party, a corresponding declaration is supposed and a contract with this corresponding content is concluded. If, however, it is disputed whether the parties have reached agreement, the principle of trust applies as long as not superseded by the established actual will of the parties (BGB 121 III 118 E. 4b/aa, 119 II 368 E. 4b, 118 II 365; Gauch Peter/Schluepp Walter, Schweizerisches Obligationenrecht, Allgemeiner Teil, Vol. 1, 6th ed., Zürich 1995, No. 308 et seq., p. 52 et seq.).
"When providing advice, especially when initiating, preparing and executing business transactions, the [Buyer] shall strictly adhere to the quarterly average net proceeds after deductions of all special costs not to fall below the minimum manufacturing and further expenditures. Reflecting this, the sales price and rebates are to be jointly determined."
The wording of the contract is clear and obvious. S. 1 contains the [Seller]'s profit margin and arranges for the company institution of the [Buyer] to cooperate with those of the [Seller] to provide that the aim can be achieved; s. 1 does not contain any term concerning the remuneration owed by the [Seller]. s. 7, the place where remuneration issues are reflected, provides for a commission related to the turnover, without any limitation or condition and without any link to s. 1. In the following, s. 7 stipulates for a monthly charging of the commission, whereas s. 1, is based on the business transactions within a quarter. S. 7, furthermore, arranges for the [Buyer] to furnish proceeds documents on a monthly base, a procedure that allows an adequate determination and examination of the commission claim if only the proceeds are decisive.
The [Seller] could show that the parties to the contract jointly intended something deviating and the wording has to be accrued accordingly. The institutions of the parties have presented contradictory views on that. This, however, is not decisive. Decisive is the fact, that the contract was drafted by W AG [*], the mother company of B GmbH, in which the [Seller] has a controlling interest. Should the commission be profit-dependent, it is not realistic that the parties have not introduced this fundamental clause into the contract, which, apart from that, governs the issue of commission altogether. The lawyer J P C, heard as witness, was present for the shareholder when the consulting agreement was concluded. He told the court that the commission claim was definitely not profit-dependent. A detailed calculation of the commission claim would have -- in accordance with the [Seller]`s own view -- required a huge and unreasonable effort if it were to be dependent on profit in the sense of s. 1 of the consulting agreement; such agreement is not comprised by the unanimous will of the parties.
The [Seller] has relied on its own, its shareholder's and the [Buyer]`s declaration of intent on 24/25 August 1993, on the one hand, and the one of B GmbH, on the other hand, given in the context of the take-over of 80 per cent of the shares of the [Seller] by B GmbH. Therein, a commission of 10 per cent of the proceeds is guaranteed to compensate the sales price to P Z, who is husband of shareholder G Z, or another person determined by P Z, calculated on the basis of the net invoice volume considering all deductions. Furthermore, therein is stipulated that the net proceeds deducted by any special costs shall not fall below the minimum manufacture costs and further costs added by a profit margin of 5 per cent, considering this the commission shall be determined. From this wording, one cannot deduce the real will of the parties. In any event, it does not show definitely that the commission calculated from the turnover shall depend on a certain accrued profit. Comparing the declaration of intent and the consulting agreement signed three weeks later reveals that both widely use the same wording but the issues of commission and minimum profit remain separate, which leads to the more likely conclusion that that both issues shall be independent.
Hence, the [Seller] failed to show that both parties unanimously desired a deviating agreement concerning the commission claim than that arising from the clear wording of the text of the consulting agreement. That is why it is not decisive whether the [Seller] has gained a profit in the sense of s. 1 of the consulting agreement.
b. In its reply on the set-off plea of the [Buyer], the [Seller] brought forward that the commission is dependent on the profit. The [Seller] reserved to introduce further items of evidence, namely, its balance sheet from 31 December 1993. Contrary to the [Seller]'s exposure provided with the appeal, this cannot be interpreted as an offer to furnish 80 files, which shall be necessary to calculate the profit-dependent commission. Apart from that, the parties need to provide relevant documents, which are in their possession, but they are not allowed to merely reserve to produce these documents later (comp. Art. 158 subsection 2 and Art. 161 subsection 2 ZPO [*]; in general, it is not permitted to deliver such documents after the hearing of evidence (Art, 130 ZPO). The [Seller]'s allegation that the Court of First Instance failed to order the edition of these files misses the point.
Concerning the consequence of the failed provision of these files, the court refers to the reasoning of the Court of First Instance. Even if the commission claim was profit-dependent, the [Seller] would not have any advantage.
7. On appeal level, it was not disputed that the [Seller] has not accepted the furnished charging, the turnover based calculation of the commission of 12 per cent exceeds the claimed sales price or the legal requirements of set-off are met. It follows that the sales claim is settled by set-off. The appeal is dismissed and the ruling of the lower court is affirmed.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff is referred to as [Seller] and Defendant is referred to as [Buyer].
Translator's note on other abbreviations: AG = Aktiengesellschaft [public limited company under German law] AGBG = Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen vom 9. Dezember 1976 [German Code on General Terms and Conditions, meanwhile incorporated into the German BGB]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; FZR = Freiburger Zeitschrift für Rechtsprechung [Swiss Law Journal]; Gesetz vom 20. Februar 1997 zur Änderung der Zivilprozessordnung und anderer kantonaler Gesetze im Bereich der Zilvilprozessordnung [Swiss Amendment Act to the Swiss ZPO and other laws]; GmbH = Gesellschaft mit beschränkter Haftung [limited company under German law]; GoG = Gerichtsorganisationsgesetz [Swiss Code of Court Organization]; HGB = Handelsgesetzbuch [German Commmercial Code]; IPRG = Bundesgesetz über das internationale Privatrecht [Swiss Code of International Private Law]; SR = Systematische Sammlung des Bundesrechts [Swiss corpus juris]; ZivKT = Zivilkostentarif [Swiss table of fees for Civil Procedure] ZPO = Zivilprozessordnung [Swiss Code of Civil Procedure].
** Daniel Fritz is a graduate of the University of Potsdam and has received his LLM degree (International Trade Law) at the University of Stellenbosch.

References: Art. 143
 Art. 1
 Art. 294
 Art. 17
 Art. 4
 Art. 3
 Art. 8
 Art. 8
 Art. 8
 Art. 158
 Art. 161