Source: http://cisgw3.law.pace.edu/cases/060213g1.html
Timestamp: 2017-03-27 00:47:57
Document Index: 350175685

Matched Legal Cases: ['Art. 1495', 'Art.\n1495', 'Art. 28', 'Art. 74', 'Art. 1495', 'Art. 2943', 'Art. 1219', 'Art. 1495', 'Art. 1219', 'Art. 1495', 'Art. 1495', 'Art. 2', 'Art. 24', 'Art. 24', 'Art. 28', 'Art. 1243', 'Art. 1243', 'Art. 1495', 'Art. 1243', 'Art. 78', 'Art.\n1284']

Germany 13 February 2006 Appellate Court Köln (Woolen cloth case) [translation available] Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography CISG CASE PRESENTATION
Germany 13 February 2006 Appellate Court Köln (Woolen cloth case) [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/060213g1.html] Primary source(s) of information for case presentation: Case text Case Table of Contents
DATE OF DECISION: 20060213 (13 February 2006) JURISDICTION: Germany TRIBUNAL: OLG Köln [OLG = Oberlandesgericht = Provincial Appellate Court] JUDGE(S): Unavailable CASE NUMBER/DOCKET NUMBER: 16 U 17/05 CASE NAME: German case citations do not identify parties to proceedings CASE HISTORY: 1st instance Landgericht Köln (5 O 435/03) [reversed]
SELLER'S COUNTRY: Italy (defendant) BUYER'S COUNTRY: Germany (plaintiff) GOODS INVOLVED: Woolen cloth Case headnote
The claimant purchased from the defendant, an Italian textile supplier, woollen cloth
for trousers, sport jackets and skirts. While processing the cloth, creases cropped up, which could not be fixed. The claimant complained about this defect in a letter to
the defendant. It then tried to sell the processed cloth to its customers in vain, as
they refused acceptance of the goods due to lack of conformity because of the
creases. The claimant refused to pay for the defective goods and, also, for a delivery
of conforming goods. It then sued the seller for damages resulting from the lack of
conformity and from the failed resale. The defendant denied the alleged lack of
conformity, raised the defence of time limitation and filed a counterclaim
demanding the payment of the purchase price plus interest for a previous
conforming delivery.
The court granted the claimant's claim. Upon the defendant's appeal, the appellate
court reversed the lower court's decision, rejected the claimant's claim and granted
the defendant's counterclaim.
The appellate court noted that the contract between the parties was governed by the
CISG in principle, but pointed out that the CISG did not contain provisions on the
limitation period and the right to set-off. Therefore, the limitation period was
governed by the applicable national law according to the rules of private
international law of the forum state. Italian law was thus applicable pursuant to the
German rules of conflict of laws (EGBGB), subsidiary to the CISG. The court held
that the buyer had complied with the requirements of articles 38 and 43 CISG and,
therefore, was entitled to damages under article 74 CISG. However, the court found
that the claimant's claim fell under the statute of limitations pursuant to Italian law.
With regard to the defendant's counterclaim, the court held that the defendant was
entitled to claim the full price for the conforming delivery. The court rejected the
claimant's argument that relied on set-off for the time barred claim for the
non-conforming delivery since the applicable Italian law (as the CISG did not
regulate the matter of set-off) did not permit set-off.
Therefore, the court held that the claimant was not entitled to damages. On the
contrary, the defendant was entitled to payment of the purchase price plus interest
for the conforming delivery with the claim to interest based on article 78 CISG on
its merits and the rate of interest based on Italian law.
APPLICATION OF CISG: Yes [Article 1(1)(a)] APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Article 4 [Also cited: Articles 38 ; 43 ; 74 ; 78 ] Classification of issues using UNCITRAL classification code
Descriptors: Scope of Convention ; Statute of limitations ; Set-off Go to Case Table of Contents Editorial remarks
CITATIONS TO OTHER ABSTRACTS OF DECISION English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1138&step=Abstract>
CITATIONS TO TEXT OF DECISION Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1219.pdf>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=1138&step=FullText> Internationales Handelsrecht (4/2006) 145-147
The 16th Civil Division of the Higher Regional Court of Köln, as Appellate Court, in the matter
of Defendant-Appellant [Seller] of Italy against Plaintiff-Appellee [Buyer] of Germany in a
lawsuit involving 15,423.38 Euros:
I. In July 2002 [Buyer] purchased from [Seller], an Italian textile supplier, 500 meters of
woolen cloth for trousers, sport coats and skirts. [Buyer] retained a firm in Austria for further
processing of the cloth. During the processing, irreparable creases appeared. [Buyer] notified
[Seller] of this in writing on 26 July 2002. Nevertheless, [Buyer] subsequently delivered the
finished articles of clothing to its customers. The customers returned them because of the
defects. [Buyer] refused to pay the invoice for this delivery of cloth in the amount of �6,907.67, and for
another -- unobjectionable-- delivery of 10 June 2002, which is the subject of an invoice dated
the same day for �12,117.82.
In the Court of First Instance [District Court], [Buyer] alleged that it suffered a total loss of
�26,624.07 as a result of lost sales due to [Seller]'s defective delivery. [Buyer] also claimed a
part of the sum thereof in the amount of �3,305.56 relating to business connections with
customers P and M. [Seller], in turn, denied the alleged defects, raised a statute of limitations
defense, and demanded the undisputed open amount from the invoice of 10 June 2002 in the
amount of �12,117.82 by way of counterclaim. Applying Italian law, the District Court ruled against [Seller] on the grounds that [Seller] did not
sufficiently counter [Buyer]'s allegation of defective performance and did not sufficiently refute
[Buyer]'s allegation of damages for lost profits. The District Court held that the statute of
limitations did not bar [Buyer]'s claim, ruling that a buyer who is sued for breach of contract can
always raise warranty claims, provided he gave timely notice of the defect of the goods -- as
was done by [Buyer] in the present case. [Seller] appeals this judgment and alleges that the District Court wrongly considered [Buyer]'s
claim to be enforceable and wrongfully discounted [Seller]'s objections as to the damages.
[Seller] alleged that, according to the applicable Italian law, [Buyer]'s claim is barred; the
provision of Art. 1495 Codice civile [Cc = Italian Civil Code], which the District Court
consulted to justify its contrary opinion, only applies if the seller sues the buyer for the purchase
price, not however if the buyer itself is making a warranty claim, as in the present case.
Accordingly, [Seller] requests dismissal of the action under modification of the District Court's
decision, and on [Seller]'s counterclaim that [Buyer] be ordered to pay [Seller] �12,117.82
together with 3.5 % interest since 10 June 2002.
[Buyer] defends the appealed decision and in particular alleges that the District Court ruled
properly that the claim was not time-barred. According to [Buyer], this would follow from Art.
1495(3) Cc [*], which would apply, according to the correct understanding, not only in an
action by the seller for payment from the same order, but (at least within the scope of an
ongoing business connection) also in an action from a parallel order -- here filed by way of
counterclaim. Furthermore, the prescription period would also have been interrupted through
the transmission of the jurisdiction agreement of 29 November/2 December 2002 -- which
should be interpreted as reminder/demand -- and would have been suspended during the
ongoing negotiations before transmission of the jurisdiction agreement. This Court obtained an expert report from the Institute of International and Foreign Private Law
at University L ___ regarding the question of the enforceability of [Buyer]'s warranty claims
according to Italian law. Regarding the individual evidence questions, reference is directed to
the evidence order of 29 August 2005 (GA 234) and with regard to the results of the taking of
evidence, reference is directed to the expert report of 16 November 2005 (page 244 GA). REASONS
II. [Seller]'s appeal was filed in a timely manner, complies with formal requirements, and is
successful. [Buyer]'s warranty claims are no longer enforceable because they are barred under
the statute of limitation. [Seller] is entitled to claim the invoiced amount of �12,117.82, which
was asserted by way of counterclaim. In detail, the following applies: 1. With regard to the appraisal of [Seller]'s purchase price claims and their
enforceability, Italian law is applicable (as the parties correctly presumed), since pursuant to
Art. 28(2) EGBGB [*], in default of a jurisdiction agreement the contractual relationship of the
parties is assessed according to the law at seller's domicile, and here [Seller] is domiciled in
Italy. However, Italian law only applies secondarily. Primarily, the CISG applies to the contract
concluded between the parties, as both parties have their places of business in different States
and Italy and Germany are Contracting States to the CISG. As with the District Court, this Court presumes that the prerequisites of a damages claim
pursuant to Art. 74 CISG are generally at hand, as [Seller] did not deliver goods in conformity
with the contract and [Buyer] fulfilled its duty of examination and notification according to Arts.
38, 43 CISG. The latter is undisputed according to [Buyer]'s express submission in the brief on
appeal; the deficiencies themselves follow from the expert report of Research Institute J___ of
17 September 2002, already presented by [Buyer] in the First Instance. However, this
damages claim is no longer enforceable since [Seller] properly invoked the statute of limitations
defense for [Buyer]'s claim.
As the CISG does not contain provisions regarding limitation and set-off, the prescription
period is not based upon the CISG but upon the additionally applicable Italian Codice civile.
Art. 1495(3) of the Cc sets a prescription period of one year for warranty claims, which
commences with delivery of the goods; thus here on 15 July 2002 with the pickup of the cloth
by [Buyer] in N ___. Accordingly, [Buyer]'s warranty claim expired on 15 July 2003. The prerequisites for an interruption of the limitations period are not present -- as can be
ascertained from the expert report of the Director of the Institute of International and Foreign
Private Law of the University of L ___. A first possible cause for interruption is the filing of the
action (Art. 2943 Cc), which in the present case was not until after the expiration of the
prescription period, namely by service to [Seller] on 20 November 2003. For the same reason
also, the writing from [Buyer]'s legal counsel dated 30 August 2002 (page 60 GA), even if one
would understand it as a delay-causing reminder/demand in terms of Art. 1219 Cc, would not
have made [Buyer]'s claim enforceable. The tolling interruption caused thereby would have
ended at the latest with the expiration of the fixed deadline, i.e. on 17 September 2002, and the
claim would have -- again pursuant to Art. 1495(3) Cc - expired on 17 September 2003
before the filing of the action. In the jurisdiction agreement of 29 November/2 December 2002 (page 20 GA) no delay-causing (and thus pursuant to Art. 1219 Cc limitation-interrupting) reminder/demand of [Buyer]
can be found, since it does not contain a request for performance directed to the obligor, but
merely a means of settling a difference of opinion which emerged between the parties at that
time. Finally, it follows from the legal opinion obtained by the Court that, unlike German Law (�
203 BGB [*]), negotiations over the claim contested between the parties have no influence on
the running of the statute of limitations. Italian law contains no corresponding tolling or
interruption elements. Contrary to [Buyer]'s opinion, the application of Art. 1495(3) Cc also does not lead to the
enforceability of its claims. That provision allows a buyer to assert warranty claims against the
purchase price claim of its contractual partner even if they are already barred, provided notice
was timely given. From the convincing expert reports, it follows that according to the wording
as well as a systematic interpretation of the provision and Italian legal practice, this provides
merely an objection, which can accordingly be asserted as a counter-right against a claim for
payment of the purchase price brought by the contractual partner; however it cannot be brought
as an active claim. Moreover, this applies only to the concrete contract: A claim for payment
out of another legal relationship has no influence on this. Therefore, the fact that [Seller] asserts
a purchase price claim out of the further order of 11 March/13 March 2002 cannot lead to
another result. Art. 1495(3) Cc is to be narrowly interpreted as providing an exception to the
general effect of the statute of limitations and according to its meaning and purpose, it works to
preserve otherwise expired warranty claims only within the context of a specific contract.
Exceptions to this, in the sense of transferability to actions of the contractual partner from other
deliveries, even with ongoing business relationships, are not justified. [Buyer] could only further
enforce its warranty claims if, unlike the case under consideration, [Seller] asserted its claims
from this contract by way of filing an action. Thus it can be left open whether [Buyer]'s damages calculations are correct for the full claim or
only concerning the claimed amounts from the transactions with customers P and M. The fact
that the District Court dealt with [Seller]'s denial in this connection as being unsubstantiated also
does not change the result. [Buyer]'s alleged facts in this regard are exclusively out of its own
business area, one in which [Seller] neither had nor could have had any insight; for this reason
[Seller] was undoubtedly entitled to deny these facts as unknown pursuant to � 138(4) ZPO.
2. [Seller]'s counterclaim is permissible. Contrary to [Buyer]'s opinion, and also
contrary to the (non-binding) remarks contained in the expert report, German courts have
international jurisdiction here. Despite � 513(2) ZPO [*], [Buyer] is permitted to raise the
jurisdiction objection in appellate proceedings as well because this provision does not apply to
international jurisdiction (BGH NJW 2003, 426; BGHZ 157, 224; Zöller, Kommentar zur
Zivilprozessordnung [Commentary on the Code of Civil Procedure], 25th ed. 2005, � 513
ZPO para. 8). However, the jurisdiction of German courts follows from the fact that [Buyer] is
domiciled in Germany (Art. 2(1) EuGVVO [*]), and from [Buyer]'s answer without objection
to the counterclaim in the First Instance. In this respect according to common opinion Art. 24
EuGVVO applies -- also for the counterclaim (see Geimer/Schütze, Europäisches
Zivilverfahrensrecht [European Law of Civil Procedure], 2nd ed., Art. 24 EuGVVO para.
11 and references). [Seller]'s purchase price claim arising from the delivery performed in June
2002 asserted with the counterclaim is undisputed; [Buyer] defends against this merely with the
warranty claims, which according to its opinion, permit a set-off to claims from the underlying
However, this set-off is impermissible, as can be ascertained from the expert report, which is
persuasive in this respect. As the CISG contains neither provisions regarding the question of
limitation, nor provisions regarding the question of a set-off, then pursuant to Art. 28(2)
EGBGB [*], Italian law is authoritative for judgment of these questions. Under Italian law a
differentiation is made between a so-called "legal set-off" and the judicial set-off. The liquidity of the counterclaim, which is necessary in this connection for a legal set-off
pursuant to Art. 1243(1) Cc, is missing here -- as the expert convincingly demonstrates.
According to the authoritative prevailing opinion in Italian law, a counterclaim is liquid in this
sense not only if it is undisputed or judicially ascertained, but also if it is legitimately disputed by
the opponent. Such a dispute is deemed illegitimate or misused in Italian jurisprudence only if it
appears to be obviously unfounded and apparently only serves the purpose of delaying the
decision of the lawsuit. This is not the case here: - First -- as shown -- it was neither possible nor reasonable for [Seller] to contest the amount
of damages claimed by [Buyer] in any more substantiated way as was done.
- Second, [Buyer]'s list of damages appears to be, in consideration of the unusually high profit
margin of about 100%, at least at first glance not clearly evident so that for this reason as well
[Seller]'s dispute does not appear to be in any way abusive of law, but rather served the
realization of legitimate procedural interests.
As for the judicial set-off (Art. 1243(2) Cc), the restriction of the application of Art. 1495(3)
Cc again applies, which does not override the provision of Art. 1243(2) Cc as special provision
and which then has no claim-conserving effect if -- as in the case under consideration -- it is not
a matter of mutual claims from the same contractual relationship. Contrary to [Buyer]'s view,
there is nothing indicating an agreed upon set-off in the present case. 3. The claim for interest is based on Art. 78 CISG and, regarding its extent, on Art.
1284(1) sentence 2 Cc in conjunction with the Ministerial Decree of 11 December 2000. The order as to costs is based on � 91 ZPO [*]; the decision on provisional enforceability is
based on �� 708 No. 10, 713 ZPO. The amount in dispute is �15,423.38.
There is no reason to allow a further appeal (� 543(1) No. 1, (2) ZPO). The legal matter has
neither fundamental importance nor do interests of the development of the law or of the
protection of a uniform jurisprudence require a decision of the Federal Supreme Court. FOOTNOTES
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Defendant-Appellant of Italy is referred to as [Seller] and
the Plaintiff-Appellee of Germany is referred to as [Buyer].
Cc = Codice civile [Italian Civil Code]; EGBGB = Einführungsgesetz zum Bürgerlichen
Gesetzbuch [German Code on Private International Law]; EuGVVO = Verordnung über die
in Zivil- und Handelssachen [Council Regulation of December 2000 on Jurisdiction and the
Recognition and Enforcement of Judgments in Civil and Commercial Matters]; ZPO =