Source: http://www.cisg.law.pace.edu/cisg/wais/db/cases2/000413a3.html
Timestamp: 2019-04-19 05:04:20+00:00

Document:
The German plaintiff (seller) sold four used machines to the Austrian defendant (buyer), who had long-standing business connections with the seller. In past dealings, machines delivered to the buyer had not carried the European Community "CE" mark, indicating that the product conformed to applicable European Community directives. This time, the buyer refused to pay the rest of the purchase price on the ground that the four machines, of which one presumably had been imported from the Czech Republic or Slovakia, lacked this certification.
The court of first instance found that all four machines should have been certified. Pursuant to EC Directive 89/392 in conjunction with the German law on machinery, the CE-marking was compulsory not only for machines imported from outside the European Economic Area (EEA), but also for machines which had been significantly changed (based on the court's finding, the handling systems had been removed from the machines concerned). The buyer had been assured of being able to sell the machines on the market within the EEA. The court found that since this condition had not been fulfilled by the seller and the buyer gave notice regarding the lack of conformity with the contract without delay, the buyer was entitled to retain the price.
In remanding the case to the court of first instance, the Court of Appeal stated that the court of first instance should consider the legal issues arising under the CISG, and the security and certification standards on the basis of Austrian law, and make the relevant findings.
The Supreme Court affirmed the decision of the Court of Appeal regarding the application of the CISG. The Court noted, that under article 35 CISG, the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. Where the contract does not specify these conditions the standards of article 35(2) CISG become relevant. Whether the goods are fit for the purposes for which the goods of the same description would ordinarily be used is to be decided on the basis of the standards in the country of the seller; the goods need not meet the security, certification and production standards of the importing country. Consequently, the seller was not obliged to follow these legal standards, even though the seller was aware of the place of delivery. It was up to the buyer to consider these requirements and to incorporate them into the contract on the ground of article 35(1) or 35(2)(b) CISG. The Court stated that requirements which apply in the Contracting State of the buyer were to be taken into consideration only if they also exist in the Contracting State of the seller, or have been agreed upon by the parties or made known to the seller according to article 35(2)(b) CISG. Therefore, the Supreme Court directed the court of first instance to determine which security provisions and standards had to be applied and whether the machines complied with such provisions.
* "Austrian Cases on the UN Convention on Contracts for the International Sale of Goods", 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 1-24, at 15-16.
Conformity of goods. "[This] decision of the Austrian Supreme Court � concerned the sale of a second hand placement machine by a German seller to an Austrian buyer. Section 8 of the Austrian Federal Regulation on the Security of Machines (MSV) requires the 'CE-label', but this compulsory mark was missing. The buyer asserted to have notified the seller of the lack of conformity in due time and claimed reduction of price. The Court rejected the claimant's argument that the Austrian Federal Regulation on the Security of Machines ought to be considered when assessing the conformity of the contracted goods. In the absence of a party agreement on this point, the 'objective minimum standard' as provided by Article 35(2) CISG should instead be relevant. This means that goods are in conformity with the contract if they are fit for the purposes for which goods of the same description would ordinarily be used. In the Court's opinion, it may be taken as a rule that the words 'purposes for which goods of the same description would ordinarily be used' have to be determined in compliance with the standards of the seller's country. Consequently, the goods need not be in conformity with the regulations on security, labeling and composition in the country of importation, nor is the seller bound to know this country's relevant standards. Moreover, it is the obligation of the buyer to make himself or herself familiar with the requirements of public law in the country of utilization. In any event, he or she may incorporate these requirements into the contract as provided by Article 35(1) and (2)(b) CISG.81 "
81. This decision is interesting from a European Community Law point of view. It obviously complies with the rules on the free movement of goods.
Editor: Dr. Elke Napokoj, Esq.
The Supreme Court has through the President of the Senate of the Supreme Court, Dr. Niederreiter as presiding judge and through the Hofraete of the Supreme Court, Dr. Schinko, Dr. Tittel, Dr. Baumann and Hon. Prof. Dr. Danzl as further judges in the case of the plaintiff I***** GmbH, *****, represented by Rechtsanw�lte M�ller & Partners, attorneys at law in Salzburg, versus the defendant A***** GmbH, *****, represented by Dr. Robert Oberdanner, attorney at law in Salzburg, because of sA [Austrian shillings] 497,000 plus interest and costs, due to the plaintiff's appeal against the decision of the High Regional Court [Oberlandesgericht] Innsbruck as the initial Appellate Court, dated 12 January 2000, Index No. 1 R 211/99a-22, by which the decision of the Regional Court as Commercial Court [Landesgericht] Salzburg, dated 24 August 1999, Index No. 9 Cg 134/98a-17, has been remanded due to the plaintiff's appeal.
The costs of the appeal proceedings are further costs of the proceedings.
Plaintiff [a German firm, hereinafter "seller"] demands payment of the outstanding balance of sA [Austrian schillings] 497,000 (= DM [Deutsche Mark] 70,000) plus interest and costs incurred for the delivery of machines. In 1985 a machine, which was rejected by the defendant [an Austrian firm, hereinafter "buyer"], was put into operation in N�rnberg. Prior to the sale, it was not technically converted. The Maschinenrichtlinie [Richtlinie 89/392/EWG vom 14. Juni 1989 zur Angleichung der Rechtsvorschriften der Mitgliedsstaten f�r Maschinen (Council Directive 89/392/EEC on the approximation of the Laws of the Member States relating to Machines)] and thereby the requirement of CE labelling is not applicable to used machines except when they are imported to the EWR [Europ�ischer Wirtschaftsraum (European Economic Area)]. At the time of the formation of the sales contract, it was clear to the contracting parties that the [buyer] intended to reconstruct and resell the machine. According to the Geraetesicherungsgesetz [German Act on Safety of Equipment], the resale of an essential modified machine is regarded as a renewed putting into circulation. Therefore, it is in any case necessary to label the modified machine with CE again. The now-required labelling by the [buyer] is, in any case, worthless. The maximum value of the machine is DM 20,000. Furthermore, the [buyer] has not filed a notice of the defect in time. Prior to the delivery at issue, the [seller] has already delivered machines to the [buyer] without CE labelling. [Buyer] never complained about that.
[Buyer] denied and raised objection that the involved machine was imported from the Czech Republic to the EWR [Europ�ischer Wirtschaftsraum (European Economic Area)]. The [seller] therefore brought the machine into circulation in the EWR and sold it to the [buyer]. Because of the missing statutory-required CE labelling, the [buyer] did not pay the outstanding balance of DM 70,000. The machine is worthless because [buyer's] primary business is resale. Furthermore, the required technical documentation is missing as well. Contrary to the opinion of the [seller], Austrian law and therefore the Austrian Maschinen-Sicherheitsverordung [Act on Safety of Equipment] is applicable. According to � 8 of this Act, CE labelling is a mandatory requirement for every machine. Before putting it into circulation in Austria, a producer or the person who puts the machine into circulation has to label the machine. The [seller] has said to the [buyer] that the machines can be sold throughout the EU [European Union] without labelling. This is incorrect. The [buyer] is not entitled to sell or to use the machines in the EU without CE labelling. Therefore, there was a fraudulent misrepresentation and the [buyer] is entitled to a reduction of the purchase price. [Buyer] gave notice of the missing CE labelling in time; additionally, [buyer] has a counterclaim of DM 69,999 against the [seller].
On 6 April 1998 the [buyer's] director, seated in Austria, ordered after a telephone conference in Salzburg, via fax, four used machines from the [seller], a company seated in Germany. The parties had already had long business connections with each other. Similar machines had already been sold to the [buyer] before the business deal at issue. In the telephone conference, they agreed that the machines should be inspected and delivered if they meet the requirements of the [buyer]. On 16 April 1998, the first three machines were inspected by the [buyer]. They met the requirements of the [buyer's] director. But she already pointed out that CE labelling was missing. All prior sold machines had no CE labelling. After the inspection of the machines that were placed with the company G*****, the [buyer's] director and an employee of the [seller] drove to the company of the [seller]. There, the fourth machine was just being delivered by a Slovakian carrier. Because they settled the deal in this way, the [buyer's] director was of the opinion that the fourth machine was not from the EU area.
It could not be ascertained whether the [buyer's] director has said that the machine came from the (former) Eastern bloc or not; whether the machine actually came from the Czech Republic or Slovakia or not; whether the machine was traded intermediate by G***** or not; whether the fourth machine came from the EU area or not.
In a further telephone conference, the [buyer's] director pointed out that the fourth machine has no CE labelling, although this was necessary in her opinion. The [seller's] director assured her that CE labelling was not necessary and that she can resell the machines as agreed.
The fourth machine was principally without a handling system. G***** had added such a system to the machine. It was agreed that this system should be removed. This was done before the [buyer's] director inspected the machine. On 16 April 1998, the invoice for the four machines was issued. Immediately after inspection, the machines were delivered. The exact date of the delivery cannot be ascertained. It must have been between 16 April and 25 April 1998.
A balance of DM 70,000 remained unsettled.
The [buyer's] director wrote down on the delivery note that the documentation and the executive programmes on the disk were missing. On the following day she provided notice of this by telephone. She also called attention to the missing CE labelling. She was assured that CE labelling was not necessary and that she can resell the products without impediments. On 11 May 1998, the complete documentation was delivered.
On 18 May 1998, the [buyer's] director still held the opinion that the machine came from the Czech Republic. In a letter, she therefore persisted on the missing CE labelling. Because she was not sure about CE labelling, she entrusted a legal representative to inform her on the subject. On 3 June 1998, she was informed that CE labelling is also necessary for the EU area. On 8 June 1998, the [buyer's] legal representative claimed the upgrading of the machines according to the standard of the EU. CE labelling was important to the [buyer's] director because she was only a dealer. This fact was well known to the [seller]. The [buyer's] director was afraid of problems caused by the missing CE labelling of the machines from the Czech Republic. After consulting her legal representative, she became aware that the same problems could also arise with the machines from the EU. Out of four machines, two were sold; the others were not. The machines are not suitable for resale within the EU because of the missing CE labelling. A sale at a reduced price to Asia might be possible. The value of a machine is about ATS 40,000.
As to the legal issues, the Court of First Instance stated that, according to � 36 IPRG [Austrian Act on Conflict of Law Rules], German law is applicable. Art 100a(3) EG-Vertrag [Vertrag der Europ�ischen Gemeinschaft (European Community Treaty)] provides that Directives can be enacted to regulate the security and the uniform labelling of lawfully produced products for all Member States. CE labelling is regulated in Directive 89/392 EEC. Therefore, the Geraetesicherungsgesetz [German Act on Safety of Equipment] (hereinafter referred to as "GSG") is applicable in Germany. � 1 GSG applies to putting into circulation and instalment of technical material within an enterprise for commercial purposes. Importing products into the European Community is regarded the same as putting into circulation. By selling the machine to the [buyer], the [seller] has put the machine into circulation, regardless of whether the machines are from the EU area or from the former Eastern bloc. In both cases, the GSG and the ninth subordinated legislation to the GSG (hereinafter referred to as "GSGVG") are applicable. According to � 3 GSGVG, all machines must be labelled "CE" when put into circulation. � 3(3) GSGVG is also applicable for machines from outside the EU area. It provides that for new and used machines originated outside the EU area, the same provisions apply as to the first putting into circulation of new machines. If the machine is brought from Czech Republic to Europe, the same procedure is necessary as when putting a new machine into circulation. Therefore, CE labelling is necessary. Also, if one modifies used machines essentially or imports used machines to the European Economic Area, he has to comply with the new statutory basis. Before the sale, the machines at issue were modified by removing the handling system. The original machines were restored and sold. The statutory basis for the first putting into circulation is therefore applicable. The CE labelling was necessary for all four machines. The warranty that the [buyer] can resell the machines was not met by the [seller]. The necessary notification of the defect was made within a few days; therefore, according to � 377 HGB [Austrian Commercial Code], in time. Also, if the view is taken that the period for notification starts after the complete delivery - after the delivery of the documentation - the notification on 18 May 1998 was in time. Summarized, it can be concluded that CE labelling was necessary for all four machines. The buyer (defendant) has notified the [seller] of the defect in time. Therefore, the seller (plaintiff) cannot demand payment at present.
The Court of Appeals reversed the decision and remanded the matter back to the Court of First Instance for further trial and decision. It held that the appeal to the Supreme Court was admissible.
The Court of Appeals first dealt with the notification of the defect and stated further that until now it was not noticed that the UN Convention on Contracts for the International Sale of Goods (hereinafter referred to as "CISG") is applicable. Article 45 CISG lays down the claims of a seller against a buyer in a comprehensive and final way. Recourse to national rules is ruled out. Further claims which are not regulated by the Convention but at national law cannot be claimed under national law. Despite Art. 4(a) CISG, this applies also to the avoidance on grounds of error.
If a supplementary application of national law is necessary, this has to be done according to the provisions of the IPRG [Austrian Act on Conflict of Law Rules]. This Act has to be applied in its original version because the contract was concluded before 30 November 1998 (� 50(2) IPRG).
Although the applicable law was not chosen by the parties, this is still possible within the pending procedure. If no applicable law is chosen, German law is applicable to the purchase agreement at issue and will resolve the determination.
According to Art. 13 of the Maschinenrichtlinie [Council Directive of the European Community] of 14 June 1989, 89/392/EEC, [the Laws of Member States relating to Machines] had to be transformed to national laws. In Germany, this was done by the Geraetesicherungsgesetz [German Act on Safety of Equipment] and the Maschinenverordnung [German safety regulations] and in Austria, by the Machinen-Sicherheitsverordung [Austrian Act on Safety of Equipment], BGBl 1994/306 (hereinafter referred to as "MSV").
Because the machines were delivered to and because they might have been put into circulation in Austria, the MSV is applicable. According to � 3(1) MSV, the first import of a machine to use it in Austria is regarded as "putting it into circulation". It can be derived from the ascertainment of the facts by the Court of First Instance and the objections made by the [buyer], that she wanted to resell the machines. An import of goods to use them in Austria is therefore given. It can be seen that the requirement of CE labelling was given at the time of delivery. Directive 91/368/EWG of 20 June 1991 and the amendment 89/392/EEC provide in the Preamble that transitional arrangements have to be made for the putting into circulation and service of machines which were lawfully produced till 31 December 1992. According to the new Art. 13, transitional arrangements have to end on 31 December 1995. Langner (in Dauss, Handbuch des EU-Wirtschaftsrechtes, Z. VI, RN 38 ff) describes a transitional period as a period to sell products produced according to the old law, turning away the material damage of the enterprise caused by the change of the law. The author lays down that used products in circulation before the fixed date do not have to comply with the requirements of the Directive in case of resale and therefore CE labelling is not required. But the author definitely bases his views on the different definition of the term "putting into circulation" of � 2(3) of the German [Act on Safety of Equipment]. This view of � 152 MSV does not contradict the European regulations because the Directive wanted to ensure a period of sell-off. Thereafter CE labelling was necessary for the delivery into Austria.
According to Art. 35 CISG, it is of exclusive importance whether the products are according to the contract or not. The legal consequences result from the quality of the [seller's] breach of the contract. Because of the clear differences between Austrian and German law and the CISG, and because the allegations of the parties were made according to the ABGB, BGB and HGB [Austrian Civil Code, German Civil Code, and Austrian Commercial Code], the following procedure of the factual and legal position and the necessary ascertainment of facts will be made on the basis of the CISG. The parties should not be surprised by the different legal position of the CISG.
Therefore, it is not necessary to make a remark to the final and legal statements of the appeal. After supplementing the procedure, it will be shown which fact finding is relevant for the decision and if further questions of law arise.
The Court of Appeals held the appeal to the Supreme Court admissible because many questions of law must be solved where court rulings are not available or not secured. Notably, rulings on CE labelling in the national warranty provisions and under the CISG are missing.
[Seller] appealed and applied to grant relief sought in the petition.
[Buyer] objected and applied to dismiss the appeal.
The appeal is rightful, but not justified.
The grounds of gross-errors of the proceedings and of errors of matters of records are not given (� 528a, � 520(3) ZPO [Austrian Civil Procedure Code]).
[Seller] claimed an error in the ratio decidendi. [Seller] alleges that instead of the Austrian [Act on Safety of Equipment], the German [Act on Safety of Equipment] and the German safety regulations are decisive. According to Art. 34 EGBGB [German Introductory Law of the Civil Code], it is mandatory to apply German intervention rules. Also, the German Supreme Court follows the prevailing doctrine that, in international trade, the standards of the seller's country are applicable. It is therefore not important that public law provisions of the importing country are opposed to the use of products. Any trading with used machines would be impossible if, according to the view of the Court of Appeals, the seller has to comply with the safety regulations of the buyer's country or the country where the machines might be used. The provisions of the buyer's country are only applicable if the same provision exists in the seller's country, or if the provisions are known by the seller due to particular relevant circumstances. According to the German [Act on Safety of Equipment], CE labelling is not necessary. Due to the missing domestic element, the Austrian [Act on Safety of Equipment] is not applicable. This element cannot be established just because the machines might have been put into circulation in Austria. The Court of Appeals should have taken the view that the German [Act on Safety of Equipment] is applicable. Due to the different definition of the term "putting into circulation" of the Act, CE labelling is not required. Therefore, the Court of Appeals would have had to find the action justified.
The Court of Appeals has shown correctly that the CISG applies to the purchase agreement at issue. At the time of the formation of the purchase agreement, the CISG was in force in Austria as well as in Germany (SZ 71/115) [SZ: Sammlung der Entscheidungen des Obersten Gerichtshofs in Zivilsachen (Official Collection of Austrian Supreme Court decisions)]. Issues that are not regulated by CISG have to be looked at in accordance with conflict of law rules of national laws (SZ 71/115). According to � 36 IPRG [Austrian Act on Conflict of Law Rules], which according to � 50(2) IPRG is still applicable to this case, German law applies because products were delivered from Germany into Austria. According to German law, a renvoi or a transmission cannot be found in the present case (compare SZ 71/115).
Likewise, the Court of Appeals has shown correctly that the submission of the parties with regard to the provisions of the BGB, ABGB and HGB [German Civil Code, Austrian Civil Code, and Austrian Commercial Code] have to be dismissed on the basis of the CISG (SZ 71/21). This and the Court of Appeals' legal opinion were not opposed in the appeal. Therefore, a decision in this case is not possible at present.
[Seller] correctly objected that, according to Art. 35 CISG, conformity of the contract has to be judged by the [Austrian Act on Safety of Equipment]. According to Art. 35(1) CISG, the seller has to deliver the contracted quantity, quality and packaging or container. If parties to an international purchase agreement have failed to specify the composition of the products, minimum standards of Art. 35(2) CISG will apply. An infringement is given if the objects do not correspond to an ordinary or special purpose of usage, or to a sample, or are not packed in an ordinary and adequate way (Posch in Schwimann**2, ABGB, Rz 7 zu Art. 35 UN-Kaufrecht). The standards of the seller's country specify the suitability of an ordinary usage. This does not include that products meet the safety, labelling and composition requirements of the importing country (Posch, aaO, Rz 7 zu Art. 35UN-K; Magnus in Staudinger, KommzBGB, Rz 22 zu Art. 35 CISG; the same in Honsell, KommzUN-Kaufrecht, Rz 14 zu Art. 35; Piltz, Internationales Kaufrecht, Rz 41 zu � 5). A seller cannot be expected to know all special rules of the buyer's country or the country of usage. It cannot be derived from the information of the country of destination that the seller is bound to observe the public law provisions of this country. It is rather for the buyer to observe her country's public law provisions and specify these requirements - either according to Art. 35(1) or (2)(b) CISG - in the sales contract (Schwenzer in Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht 3, Rz 17 zu Art. 35). The requirements of the buyer's country should only be taken into account if they also apply in the seller's country, if they are agreed on, or if they are submitted to the seller at the time of the formation of the contract, according to Art 35(2)(b) CISG (Magnus in Staudinger, aaO, Rz 22 zu Art. 35 CISG; BGH IPRax 1996, 29).
The legal issues and the reprimand error of facts in the appeal have not been dealt with. Therefore, it cannot be judged at present which safety provisions the machines at issue have to meet and if they do so.
The decision of nullity of the Court of Appeals has therefore to remain.
The court order as to the costs is based on � 52 ZPO [Austrian Civil Procedure Act].

References: Art 100
 Art. 4
 Art. 13
 Art. 13
 Art. 35
 Art. 34
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art. 35
 Art 35
 Art. 35