Source: http://cisgw3.law.pace.edu/cases/060208g1.html
Timestamp: 2019-04-23 00:15:23+00:00

Document:
"1. If the buyer accepts the goods without immediate notice he has to prove their lack of conformity regardless of whether the time span of Art. 39 has already elapsed. When taking over the goods under FOB terms that point in time is decisive.
"2. The buyer may retain the right to rely on the lack of conformity only by giving a notice which identifies the non-conformity and shows intention to object in accordance with Art. 39(1) CISG. In this respect, it is insufficient if the unconformity is only mentioned incidentally amongst other such notices and it is stated therein that this specific unconformity is no longer of importance."
The decision of the Higher Regional Court of Karlsruhe affirms the buyer's burden of proof for lack of conformity and the requirements of notice under article 39 CISG.
The claimant, a Hungarian company, entered into two contracts of sale FOB Budapest Sepal dated 10 and 16 October 2001 with the defendant, a dealer from Germany, for the delivery of Hungarian wheat. The defendant's carrier took the first delivery on 19 October and the second on 25 October. In a letter dated 14 November 2001 the defendant gave notice of lack of conformity, arguing that the wheat had been contaminated with excessive lead content and vomitoxin. The defendant also argued that the falling number of the wheat was only 210 sec or 215 sec although a falling number of 230 sec was agreed in the contract. The defendant relied on the right of price reduction under article 50 CISG and claimed damages under articles 45 (1)(b), 74 CISG which it set off against the claim for the purchase price. The claimant denied the non-conformity of the wheat delivered by him and sued the defendant for payment of the purchase price and damages due to delay in taking the first delivery.
The Higher Regional Court dismissed the defendant's appeal against the judgement of the Regional Court Mannheim, which had granted the claimant the full purchase price plus interest and compensation for storage costs.
With reference to a consolidated line of decisions, the Higher Regional Court held that the buyer has to prove the lack of conformity if he takes the goods without complaining about defects. In the court's opinion the defendant failed to prove the contamination with lead as well as with vomitoxin. Concerning the differing falling number the court stated that the buyer had lost the right to rely on the lack of conformity because it had failed to give notice in compliance with article 39 CISG. The notice under article 39 CISG must show the intention to object and identify the lack of conformity exactly. These requirements are not met if the non-conformity is only mentioned incidentally among other such notices and if it is stated that this specific non-conformity is no longer of importance. Therefore the court denied the defendant's right to reduce the price under article 50 CISG and to claim damages under article 45 (1)(b), 74. On the contrary, it granted the claimant the purchase price plus interest and storage charges, with the rate of interest following from the respective provisions of the Hungarian law applicable according to the parties' agreement.
The Plaintiff [Seller] seeks payment of 69,285,840.00 Hungarian forints [HUF] plus interest for the delivery of 2,664.84t of Hungarian wheat as well as a further 203,475.00 HUF for storage costs due to a late acceptance of the goods.
The decision of the Court of First Instance, which is under dispute, affirmed the [Seller]'s claim as the [Seller] had sent the certificates as agreed on in the contract and the Defendant [Buyer] had not proven the lack of conformity of the wheat -- due to an alleged contamination with lead.
The [Buyer] filed for dismissal of the [Seller]'s action. [Buyer] argues that the [Seller] had to prove the conformity of the goods. The [Buyer] further alleges that it had proven that the wheat was contaminated with lead by the test results of Company S. In addition, [Buyer] claims that the Court of First Instance had failed to consider the contamination of the wheat with vomitoxin in its judgment as well as failing to qualify the low Hagberg Falling Numbers as a lack of conformity.
The [Seller] seeks the dismissal of the [Buyer]'s appeal and the reaffirmation of the original judgment.
The [Buyer]'s appeal is admissible but not justified. The [Seller] is entitled to the payment of 69,285,840.00 HUF for the delivery of 2,664.84t of Hungarian wheat according to Arts. 1(1)(a), 53 CISG and to claim damages in the amount of 203,475.00 HUF for storage costs due to a late acceptance of the goods according to Arts. 61(1)(b), 74 CISG.
On 10 October 2001 and 16 October 2001, the parties concluded contracts for the delivery of 2664.84 t of Hungarian wheat at a price of 26,000.00 HUF/t. Neither the [Buyer]'s claim for reduction of the price according to Arts. 45(1)(a), 50 CISG, nor a claimed set-off for damages according to Arts. 45(1)(b), 74 CISG avoids the [Seller]'s claim for payment based on these contracts as the [Buyer] has not proven a lack of conformity of the delivered wheat (Art. 35 CISG).
The [Buyer] has to prove the non-conformity. According to the jurisprudence of the German Federal Supreme Court, courts of other Contracting States and the leading doctrine, it is the duty of the [Buyer] and not the [Seller] to prove a lack of conformity after having accepted the goods without giving immediate notice (cf. BGH [*], NJW [*] 2002, 1651, 1653 [ = IHR [*] 2002, 16]; BGH NJW 1997, 3311, 3313; BGH, NJW 1995, 2099,2100; Suisse Federal Supreme Court, IHR 2004, 215, 218; US District Court for the Northern District of Illinois, Eastern Division, IHR 2004, 156, 159; Schlechtriem/Schwenzer, Kommentar zum einheitlichen UN-Kaufrecht - CISG -, 4th ed., Art. 35, Rn. 49; Staudinger/Magmes, Bearbeitung 2004, Art. 35 CISG Rn. 55; Piltz, NJW 2005, 2126, 2129) .
The acceptance of the goods as the actual taking over (of the goods) -- cf. Art. 60(b) CISG -- took place on 19 October 2001 and 25 October 2001 when the goods were loaded onto the freighters which had been made available by the [Buyer] according to FOB terms in the harbor Budapest Csepel.
The [Seller] has fulfilled its contractual obligation to deliver on these dates and the [Buyer] did not give notice of the lack of conformity in time.
This cannot be refuted by the argument of the [Buyer] that, according to GAFTA Rules, a lack of reaction to a notice of non-conformity within 48 hours is to be seen as a confirmation. The argument has only been brought forward in the appellate proceedings and is not to be considered according to �531 II ZPO [*].
In addition to this, the [Seller] contested an inclusion of GAFTA Rules in the contract. The [Buyer] has not substantiated its allegation and has not offered any proof. Therefore, the Court does not consider it necessary to get an official expert opinion.
The Court of First Instance has rightfully decided that the Buyer failed to prove the alleged contamination of the wheat with lead. The facts which led to this decision do not justify doubts as to its correctness or completeness.
The question, whether the limit of contamination is to be determined according to Regulation No. 17/1999 on Chemical Pollution of Food of the Hungarian Health Department, which sets the limit at 0.15 mg/kg for the contamination of flour with lead, or according to Regulation No. 466/2001 (3 August 2001) on the limit of contamination of food of the European Commission, which sets the limit at 0.2 mg/kg for the contamination of wheat with lead, does not have to be decided. There is no proof that either of the two limits has been exceeded in the present case.
The expert opinion of Dr. P. could not prove this. The samples he tested showed a contamination of 0.04 mg/kg. It is true that the bags of the samples had been glued together. The assumption of the [Buyer] that they had been manipulated, however, remains doubtful.
This is further supported by the fact that the plastic bags that contained the samples, which had been put in paper bags, have not been damaged.
It has additionally to be taken into account that the note of the civil servant of the Court of First Instance confirmed that the samples had been put undamaged into brown envelopes which had been sealed and directly sent to the expert. This supports the assumption that the damage of the paper bags was caused during the transport. There is no proof of the alleged manipulation.
The [Buyer] has to prove the contamination of the wheat as the [Buyer] claims that there was an excessive level of contaminants.
Even if the samples had been manipulated there is still no proof that there actually was an excessive level of lead.
There is no possibility for the expert Dr. P. to test further samples, as all of the other samples, especially the primary sample which had been handed over to the [Buyer] and made available to Company S are no longer available. The samples that have been tested by Company S have been destroyed in the meantime. The remaining samples have been made available to a subsequent purchaser according to the [Buyer], who did not reveal this fact up until the first proceedings. The [Buyer] has not explained why these samples cannot be made available for further tests. This comes as a surprise as by the time the [Buyer] handed over the samples to its purchaser a dispute on a potential non-conformity of the wheat had already been present between the parties.
No other samples are available as they had either been consumed or destroyed after the expiry of the preservation period -- as was done in the case of Company S.
Taking these facts into account, there cannot be brought relief to the burden of proof of the [Buyer].
In contrast to the assumption of the [Buyer], the test results of Company S cannot be seen as proof of contamination with lead. It can be assumed that these results showed a high level of contaminants; hence, a further questioning of Witness W is not necessary.
The [Seller] has raised doubts about the test results of Company S. The [Seller] has questioned whether the wheat samples tested by this company belonged to the wheat delivered by the [Seller] on 27 October 2001.
As the samples are no longer available, additional tests are impossible. Furthermore, Expert Witness Dr. P explained that a vast variety of legal and possible tests exists and no institute has revealed the manner of testing it used. Therefore, it cannot be assumed that the test results of Company S are more reliable than the results of the Hungarian laboratory on 28 November 2001 or of Company S&S on 22 April 2002, each of which showed a level of contamination below the official limits and which have been contested by the [Buyer].
The Court of First Instance has rightfully not gone into the particulars of the alleged vomitoxin contamination in its decision. The [Seller] has acknowledged in its claim that the Buyer alleged a high contamination of the goods with vomitoxin in a letter dated 14 November 2001. However, the test results of Company S have been contested by the [Seller] who additionally explained that neither the European Union nor national German law has any official limit for the legal percentage of vomitoxin, which is a sub-type of fusariotoxin.
The [Buyer] has not mentioned or repeated the allegation of contamination with vomitoxin in the court proceedings. Hence, a further hearing of evidence was rightfully omitted. The Buyer does not comment on the statement of the [Seller] in the appellate proceedings as well, but generally and wrongfully criticizes the Court of First Instance for not considering its allegations.
In addition, the Buyer cannot rely on the Hagberg Falling Numbers as proof of the lack of conformity of the goods. It is true that the parties had agreed on a Hagberg Falling Number of 230 sec. And the test results of Company GC of 27 October 2001 and 7 November 2001 showed 210 sec. (995.56t) and 215 sec. (902.06 t), respectively. However, according to Art. 39(1) CISG, the [Buyer] lost his right to rely on a lack conformity of the goods as it has not given notice within a reasonable period of time.
A notice in the sense of Art. 39 CISG has to show the buyer's desire to contest the conformity of the goods and it has to specify the nature of the lack of conformity, so that the seller gets an idea of the claimed lack of conformity. (cf. Münchner Kommentar/Gruber, BGB, 4th ed., Art. 39 CISG Rn. 7; Schlechtriem/Schwenzer, ibid, Art. 39 Rn. 6 et seq.). These prerequisites have not been met in this case. The [Buyer]'s letter of 14 November 2001 does not contain a claim of lack of conformity in respect to the Hagberg Falling Numbers. The letter primarily serves to inform the [Seller] about the test results of Company S in respect to the concentration of lead and vomitoxin in the wheat. Furthermore, the [Seller] is informed by this letter that the (sub-)purchaser of the wheat had rejected acceptance the wheat in Rotterdam because of bug infestation.
There is only a small hint in the letter saying that it would not matter in this case that the goods additionally showed lower Hagberg Falling Numbers than agreed on in the contract.
The further conduct of the [Buyer] shows that this was not intended to be a claim of lack of conformity.
Both the letter of 21 November 2001 and the letter of the Hungarian attorneys of the [Buyer] of 3 December 2001 only mention the contamination of the wheat with vomitoxin and the thereby caused impossibility to sell the wheat. Additionally, in the court proceedings, the [Buyer] only mentioned the high level of lead as a reason for a lack of conformity. The Hagberg Falling Numbers have only been mentioned by the [Buyer] in respect to the certificates of quality of Company GC by the [Buyer]. These certificates have not been accepted by the [Buyer] due to the partially low Hagberg Falling Numbers. However, warranty rights have not been based upon this by the [Buyer]; the [Buyer] only referred to the facts that the payment was not due and that the certificates did not meet the contractually agreed quality in the first instance. It is not clear to what extend the [Buyer] wants to rely on the lower Hagberg Falling Numbers in the appellate proceedings, as well.
The [Seller]'s claim for payment is due (Art. 58(1) CISG). This Court shares the opinion of the Court of First Instance that the certificates are sufficient proof. This has not been contested in the appellate proceedings by the [Buyer].
The [Seller] is entitled to damages in the amount of 203,475.00 HUF in accordance with Arts. 61(1)(b), 74 CISG. It is undisputed that a first part of the wheat should have been loaded onto ship "A 20", which had to be made available by the [Buyer], on 17 October 2001. Due to dirtiness of the hold, it was not possible to load the goods until 19 October 2001. Therefore, the [Seller] suffered storage costs in the amount of 203,475.00 HUF according to a letter of Company DK Kft.Thus the amount and basis of the claim of the [Seller] is undisputed.
The [Buyer] wants to set off this claim with a claim for damages, which is not justified.
The decision on the granting of interest is based on Arts. 53, 58(1), 61(1)(b), 74 CISG. The amount of interest is not contested by the [Buyer] and is in accordance with Hungarian law, which is applicable to the contract.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Hungary is referred to as [Seller] and the Defendant-Appellant of Germany is referred to as [Buyer]. Amounts in the currency of Hungary (Hungarian forints) are indicated as [HUF].
Translator's note on other abbreviations: BGH = Bundesgerichtshof [German Federal Supreme Court]; IHR = Internationales Handelsrecht [German law journal]; NJW = Neue Juristische Wochenschrift [German law journal]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

References: Art. 39
 Art. 39
 Art. 35
 Art. 35
 Art. 60
 Art. 39
 Art. 39
 Art. 39
 Art. 39