Source: http://cisgw3.law.pace.edu/cases/930312g1.html
Timestamp: 2019-04-23 00:05:51+00:00

Document:
An Italian seller, plaintiff, delivered clothes to a German buyer, defendant. The buyer claimed lack of conformity of the goods 25 days after the delivery date. The seller recovered the goods for examination and granted a pro forma credit note to the buyer. After examination, the seller denied the lack of conformity and sued the buyer for the purchase price.
The court held that the rules of private international law of Germany led to the application of Italian law. Since the CISG was in force in Italy as of 1 January 1988, even though Germany was not a Contracting State at that time, the CISG was held to be applicable (article 1(1)(b)).
The court upheld the ruling of the first instance court. It held that the seller's claim was justified under article 53 CISG. The contract was not terminated by agreement of the parties as provided by article 29 CISG. Under the circumstances of the case (article 8(1), (2) CISG), when granting the credit note, the seller had no intention to accept the buyer's proposed termination. The note was issued pro forma, and there was no reason for the buyer to interpret this as the outcome of the examination of the goods by the seller.
The court found that the buyer was not allowed to declare the avoidance of the contract under articles 49(1)(a) CISG, 35 CISG, and 45 CISG. It further found that even if there was a lack of conformity of the goods, the buyer had failed to give notice within a reasonable time, as 25 days could not be considered a short or reasonable period according to article 38 CISG and 39 CISG.
The court held that although the seller recovered the goods for examination, it had not renounced its right to rely on article 39 CISG. In this respect, the court noted that under Section 377 of the German Commercial Code, the seller, by negotiating a settlement with the buyer does not lose its right to rely on the buyer's failure to give notice of lack of conformity within the required deadline. Only when there are clear circumstances, such as the seller's unconditional acceptance of the restitution of the goods by the buyer, the seller's decision not to rely on such failure, can be assumed. The court held that these considerations should be taken into account when applying the CISG in comparable cases, as a settlement between the parties should remain a possibility in national or in international trade, even in case of the buyer's failure to give a timely notice of lack of conformity.
"This judgment also concerned the question of whether the seller had lost his right to rely on Article 39 in responding to an alleged late notice by taking back the goods to inspect them. The Court found that a reasonable person, in accordance with Article 8(2), would not find an examination of the goods to verify a claim of lack of conformity sufficient implication that the seller considered the notice timely, In that respect, a seller is entitled to 'cover his bases' without 'shooting himself in the foot,' without taking out reservations against the timeliness of the notice." Andersen, Pace Review of the Conveniton on Contracts for the International Sale of Goods (1998) 119-120.
The appeal is unfounded. The District Court was correct in rejecting the cross-action and in ordering Defendant [Buyer] to pay Plaintiff [Seller] the remaining price of Deutsche Mark [DM] 7,441.- for the deliveries of cloth from September and October 1989.
1. The [Seller]'s purchase-money claim can be concluded from Art. 53 CISG. The CISG is applicable to the contract between the parties. This cannot be deduced from Art. 1(1)(a) CISG. At the time of the conclusion of the contract in 1989, Germany had not yet become a Contracting State to the CISG. The CISG only came into effect in the Federal Republic of Germany on 1 January 1991. However, the applicability of the CISG results from Art. 1(1)(b) CISG in connection with Art. 28(1), (2) EGBGB [*] (German International Private Law). According to the German International Private Law, Italian law must be applied to the contract. Italy was already a Contracting State to the CISG in 1989. Italy acceded to the CISG and it came into effect for that country on 1 January 1988 (Schlechtriem/Herber, Commentary to the CISG 1990, on Arts. 1-6 CISG, No. 17).
2. The sales contract entered into by the parties was not set aside by mutual agreement in the sense of Art. 29 CISG with regard to the goods that were not yet cut. It is true, however, that [Buyer] by writing of 16 November 1989 offered to [Seller] the goods that were not cut in the value of DM 20,521.20 and thereby made an offer for a partial termination agreement. But [Seller] did not accept this offer. An acceptance cannot be seen in the fax of 15 December 1989 in which [Seller] informed [Buyer] that it will collect the goods from the forwarder and have the goods examined by a public examining agency. An acceptance could only be seen in the credit entry of 29 December 1989 if one regards as irrelevant [Seller]'s contention that such a credit entry was necessary according to Italian foreign exchange law in order to receive the goods from the forwarder. Nor are the other circumstances that must be taken into consideration according to Art. 8(1) and (2) CISG sufficient to enable one to deduce from the credit entry an implicit acceptance of [Buyer]'s partial termination proposal. However, it speaks for a declaration of intention in favor of a partial termination of the contract, that [Seller] had before declared by fax of 14 December 1989 that it was going to - immediately - label the goods that were by examination found out to be deficient and that it informed [Buyer] by fax of 15 December 1989 that it was going to collect the goods from the forwarder, have them examined and report about the results and that it only issued the credit entry of 29 December 1989 fourteen days later without any written commentary. Therefore, there was some basis for [Buyer] to conclude that the examination had already taken place within the fourteen days that had passed and that the credit entry was the announced immediate reaction to the results of the examination. However, the note "pro forma" on the credit entry speaks against this interpretation. This note and the short period of time of fourteen days for the examination by a public examination agency should have given cause to [Buyer] to not yet consider the credit entry as a reaction to the result of the examination. In fact, [Buyer] did not understand the credit entry in that sense. This is shown by [Buyer]'s subsequent behavior. After [Seller] informed [Buyer] by writing of 19 January 1990 that the goods were alright, [Buyer] did not by writing of 31 January 1990 refer to a mutual agreement to terminate the contract, which was already correctly pointed out by the District Court. In its writing, [Buyer] said concerning the behavior of [Seller]: "If you are of the opinion that you are not required to accept the complaints ...". Furthermore, "fees of the public examination agency" are mentioned. This comment must be understood as an announcement to let the goods be examined by an examination agency in Germany in case of the return of the goods. This was then done by [Buyer]. However, there would not have been a cause for that if the parties had previously agreed on the partial termination of the sales contract as put forward by [Buyer].
3. Neither was the sales contract of the parties partially - concerning the goods that were not cut - set aside by unilateral declaration by [Buyer] according to Arts. 49(1)(a), 35, 45 CISG.
a) It is doubtful whether the goods were deficient and whether this constituted a "fundamental" breach of contract in the sense of Art. 25 CISG in connection with Art. 49 CISG. The formation of pilling that is alleged by [Buyer] cannot be taken into account as there is no proof of this defect. In its expert opinion, expert B. did not ascertain a pilling of the goods. Concerning the weaving flaw alleged by [Buyer], according to the 7 June 1990 expert opinion of the technical college [...], a large part of irregularities are only so-called "weaving pleats" and the cloth is only deficient in so far as there is a small, straight seam stripe which is only visible from one side of the cloth and which results from damage to the thread.
b) However, whether that is correct, and whether this constitutes a fundamental breach of contract, need not be decided. In any event, [Buyer] has lost its right to assert such a breach of contract according to Art. 39(1) CISG. Under Arts. 38 and 39 CISG, deficiencies of the goods must be determined by examination within a short period of time after the delivery of the goods to the buyer and must then be notified to the seller within a reasonable period of time. The determination of the period of time must be made according to the circumstances of the individual case, but a strict determination must be applied (Schlechtriem/Stumpf, see above, Art. 38 CISG No. 5; Soergel-Lüderitz, Civil Code, 12th ed. 1991, Art. 39 CISG, No. 2). In the present case, the alleged weaving flaws were notified for the first time by the fax of 31 October 1989 that was mentioned in the writing of [Buyer] of 7 November 1989. That was twenty-five days after the delivery of the goods on 6 October 1989. A period for notification of twenty-five days is neither short nor reasonable in the sense of Arts. 38 and 39 CISG. Special difficulties to ascertain the alleged weaving flaws are not visible. [Buyer] itself declared in its writing of 7 November 1989 that the goods have "serious weaving flaws that can be found throughout the whole bale".
c) [Seller] is not barred from asserting this lapse of notification period. It is true that [Seller] let itself into the examination of the goods. However, this does not constitute an implicit waiver of the legal consequences of Art. 39 CISG. According to the German domestic law of the sale of goods it is acknowledged in context with Section 377 of the Commercial Code that just the readiness to negotiate of the seller does not lead to a waiver of the defense of lapse of notification period, but that such a waiver can only be assumed if there are definite facts in favor of it, for example, the unconditional taking back of the goods or an unconditional remedying of a defect (BHG [*] BB [*] 1987, p. 1489, 1490 et seq.; 1991, p. 1732, 1733; OLG [*] Munich NJW [*] 1986, p. 1111; Baumbach/Hueck, Commercial Code, 28th ed. Section 377, No. 1 E). This jurisprudence is to be transferred to comparable questions within the application of the CISG. It is based on the principle of national and international commerce that also in case of delayed notifications of deficiencies the attempt of a conciliatory solution between the parties is desireable and that the seller must therefore be allowed a certain discretion to act without fearing a loss of its objection of lapse of notification period. According to these principles, in the present case a waiver of the legal consequences of Art. 39 CISG by [Seller] cannot be assumed. [Seller] did not unconditionally take back the goods. On the contrary, Seller always declared that it only takes back the goods for examination. The only possible hint for a waiver could be seen in the credit entry of 29 December 1989. However, it has already been determined above that this credit entry was not sufficient for a setting aside of the contract due to the note "pro forma". Consequently, it cannot be seen as a waiver of the consequences of Art. 39 CISG either.
4. Based on the balance of the price that [Buyer] consequently owes [Seller], the interest ordered by the District Court is due. Concerning the interest, the judgment of the District Court was not challenged.
5. At the same time, it results from these considerations that [Buyer]'s cross-action which aimed at the refund of the paid price in the amount of DM 10,950.20 is unfounded.
* All translations should be verified by cross-checking against the original text. purposes of this translation, Plaintiff-Appellee of Italy is referred to as [Seller] and Defendant-Appellant of Germany is referred to as [Buyer]. Amounts in the currency of Germany (Deutsche Mark) are indicated as [DM].
Translator's note on other abbreviations: BB = Der Betriebsberater [German law journal]; BGH = Bundesgerichtshof [Federal Supreme Court of Germany]; EGBGB = Einführungsgesetzbuch zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; NJW = Neue Juristische Wochenschrift [German law journal]; OLG = Oberlandesgericht [Regional Court of Appeal].
** Kirsten Stadtländer is a trainee lawyer at the Higher Regional Court of Düsseldorf. She obtained her law degree at Humboldt University Berlin and was a member of the team of Humboldt University at the 9th Willem C. Vis International Commercial Arbitration Moot 2001/02 and a coach of the team at the 10th Willem C. Vis International Commercial Arbitration Moot 2002/03.

References: Art. 53
 Art. 1
 Art. 1
 Art. 28
 Art. 29
 Art. 8
 Art. 25
 Art. 49
 Art. 39
 Art. 38
 Art. 39
 Art. 39
 Art. 39
 Art. 39