Source: http://cisgw3.law.pace.edu/cases/040630g1.html
Timestamp: 2017-01-23 00:26:36
Document Index: 777051824

Matched Legal Cases: ['Art. 39', 'Art. 44', 'Art. 40', 'Art. 1', 'Art. 39', 'Art. 36', 'Art. 39', 'Art. 40', 'Art. 39', 'Art. 40', 'Art.\n38', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 39', 'Art. 1', 'Art. 4', 'Art. 4', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', 'Art. 40', '§ 563']

Germany 30 June 2004 Supreme Court (Paprika case) [translation available] Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography CISG CASE PRESENTATION
[Cite as: http://cisgw3.law.pace.edu/cases/040630g1.html] Primary source(s) of information for case presentation: Case text Case Table of Contents
DATE OF DECISION: 20040630 (30 June 2004) JURISDICTION: Germany TRIBUNAL: Bundesgerichtshof [Federal Supreme Court] JUDGE(S): Dr. Deppert, Dr. Beyer, Wiechers, Dr. Wolst, Hermanns CASE NUMBER/DOCKET NUMBER: VIII ZR 321/03 CASE NAME: German case citations do not identify parties to proceedings CASE HISTORY: 1st instance LG Stade, 2d instance OLG Celle 24 September 2003 [reversed]
The plaintiff, a company located in Spain, sold the defendant paprika powder and
oil. The defendant set it off against an alleged claim for damages as a result of nonconformity
of the goods previously delivered.
The previous delivery consisted of sweet paprika, which were not to be irradiated
according to the parties' agreement. The buyer inspected the goods merely with
respect to the degree of purity but not for radiation exposure, as such an
examination is costly and time-consuming. Only after an article in a test magazine
had given an indication for radiation exposure the defendant initiated tests of four
samples of the delivered goods proving radiation exposure. Following the test
reports, the defendant complained by letter about the radiation exposure of the
goods delivered. Subsequently it demanded damages. The plaintiff disputed the
radiation exposure of the goods.
The Regional Court granted the seller the full purchase price and the Higher
Regional Court rejected the buyer's appeal. The buyer appealed to the Federal Court
The Federal Court found, in accordance with the judgment of the Higher Regional
Court, that the buyer lost his right to rely on a lack of conformity of the goods under
article 39(1) CISG as it had failed to give notice of the non-conformity within
reasonable time. The Federal Court stated that the period of notice had started as of
the receipt of the test report, because a prior routine testing of the paprika powder
for radiation exposure was unreasonable for the buyer in view of the expenditure
related to such a measure. It held that the period of more than two months between
the buyer's knowledge of the first test report and its notice of complaint however
could not be deemed to be within a reasonable time as per article 39(1) CISG.
In the Higher Regional Court's judgment it was assumed that the buyer did not
present a reasonable excuse for its failure to give timely notice (article 44 CISG)
and had not provided evidence that the seller knew or could not have been unaware
of facts concerning the irradiation of the paprika powder (article 40 CISG). The
Federal Court, however, did not agree with the lower Court as far as article 40 CISG
is concerned. While in principle the buyer has to prove the factual requirements of
article 40 CISG because this article is the exception to article 39 CISG, the Federal
Court stated that the Higher Regional Court had not sufficiently considered the question of which of the parties can provide evidence of the factual requirements
more easily (proof proximity). The Court stated that if the production of evidence
means unreasonable difficulties of proof for the buyer, the burden of proof can shift
to the seller, claiming that this principle is accepted within the scope of the CISG
and is taken into account by article 40 CISG. The article not only refers to the
seller's actual knowledge of the facts on which the breach of contract is based, but
also covers its negligent ignorance. Furthermore, gross negligence is to be assumed,
if the goods widely deviate from what is required by the contract and the
non-conformity results from a fact within the seller's domain.
In the present case, however, the Federal Court did not affirm that gross negligence
was to be assumed, due to the difficulty to detect radiation exposure, but found that
it resulted from the principle of "proof proximity". While the buyer should prove
that the goods delivered by the seller were irradiated, the seller should demonstrate
that it did not act with gross negligence. If the buyer's allegations were correct, it
should further be proved either that the irradiation took place at the seller's facilities
or at the facilities of the seller's supplier. In this case it would be for the seller to
explain that it did not act with gross negligence since the breach of contract
occurred in its domain.
APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Article 7 ; 40 [Also cited: Articles 4 ; 36 ; 38 ; 39(1) ; 44 ]
Descriptors: Lack of conformity known to seller ; Burden of proof 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=992&step=Abstract>
CITATIONS TO TEXT OF DECISION Original language (German): BGH website <http://www.bundesgerichtshof.de> [Aktenzeichen: VIII ZR 321/03]; see also CISG-online.ch <http://www.cisg-online.ch/cisg/overview.cfm?test=847>; [5/2004] Internationales Handelsrecht [IHR] 201-203; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=992&step=FullText>; [2004] BGH Report, 1645; [2004] Recht der internationalen Wirtschaft (RIW), 788; [2004] Neue Juristische Wochenschrift (NJW), 3181; [2004] Monatsschrift für Deutsches Recht (MDR), 1305; [2004] The European Legal Forum (EuLF), 385
Translation (English): Text presented below CITATIONS TO COMMENTS ON DECISION English: Harry M. Flechtner, Notice of lack of conformity (Article 39) and burden of proof in the Bundesgerichtshof opinion of 30 June 2004, in: Tomljenovic / Erauw / Volken ed., Liber memorialis Petar Sarcevic, Universalism, tradition and the individual, Munich: Sellier European Law Publishers (2006) 457-470
German: Müller, Internationales Handelsrecht (1/2005) 16-20 Go to Case Table of Contents Case text (English translation)
Upon the hearing of 30 June 2004, by the Presiding Justice Dr. Deppert and Justices Dr. Beyer, Wiechers,
Dr. Wolst, as well as Justice Hermanns, the Eighth Civil Panel of the Federal Supreme Court of Germany
for Civil and Criminal Matters has adjudged that:
- Upon the Defendant [Buyer]'s appeal, the judgment of the 3d Civil Panel of the Court of Appeals of Celle, dated 24 September 2003, is herewith reversed; - The matter is remanded to the Court of Appeals for a new hearing and judgment, also with regard to the costs of the appeal to the Supreme Court.
The parties are in dispute over a claim for damages with which Defendant [Buyer] has set off the Plaintiff
[Seller]'s purchase price demand, which is uncontested as to basis and amount.
[Seller], a company located in Spain, and [Buyer], which is located in L. and produces and distributes
spices, have had a long-standing business relationship. On 28 February 2001, [Seller] supplied [Buyer]
with paprika powder and oil for a total amount of Euro 30,816. [Buyer] has acknowledged the basis and
amount of the demand, but has set off the amount of the claim against a claim for damages based on the
alleged contractual non-conformity of the goods delivered earlier. The set-off claim is based on the
In September 2000, a delivery of 5,000 kilograms of "sweet paprika" was made, which was not to have
been irradiated according to the terms of the agreements between the parties. Upon delivery, [Buyer]
examined the goods merely with respect to the degree of purity; [Buyer] did not examine the goods for
radiation exposure because this procedure is very time-consuming and costly and, therefore, is not part of
the regularly performed lab tests. Thereafter, [Buyer] processed the paprika powder by mixing it with
"chili" to produce the product "paprika, hot, ground", and sold it to one of its customers in December
2000. By registered letter dated 26 March 2001, [Buyer] complained to [Seller] that the paprika powder
delivered in September 2000 had been irradiated. In a letter dated 20 April 2001, [Buyer] listed the
damages it incurred - replacement to its customer, cost of an expert's report and miscellaneous costs -
at a total of Deutsche Mark [DM] 65,309.48; [Buyer] later lowered its claim for damages to DM
41,613.48.
[Buyer] claims that the goods were irradiated; it received an indication of this only from an article in a
consumer test magazine. [Buyer] had also agreed with its customer to deliver non-irradiated goods. Upon
an inquiry, [Seller] stated on 8 January 2001, that the goods had not been irradiated. A laboratory test of
four samples from the goods delivered by [Seller], however, proved radiation exposure, as shown in the
test reports dated 22 January, 5 February and 20 February 2001.
The Landgericht [Court of First Instance] granted [Seller]'s claim for the full purchase price. [Buyer]'s
appeal of this decision was rejected by the Oberlandesgericht [Court of Appeals]. Through its appeal
to the Supreme Court, which was accepted by the Panel, [Buyer] continues to prosecute its motion to
dismiss the complaint. GROUNDS FOR THE DECISION
I. The Court of Appeals did not decide whether the paprika powder delivered by [Seller] was actually
irradiated and explained: The notice given by [Buyer] was untimely according to Art. 39(1) CISG, which
applies here, so that [Buyer] lost the right to rely on a lack of conformity of the goods with the contract. The Court held that [Buyer] was already aware that the powder was irradiated since the test report was
dated 22 January 2001; nonetheless, it waited until 26 March 2001, to complain. Since a reasonable time
period to complain is usually two weeks, the notice was given too late. [Buyer] did not present any excuse
within the meaning of Art. 44 CISG. The Court stated that, finally, [Buyer] could not invoke Art. 40 CISG
because it did not proffer the necessary evidence that [Seller] knew or should have known of the irradiation
of the paprika powder. [Seller] was not obligated to test the goods because that type of laboratory test
would have been economically unreasonable according to [Buyer]'s submission.
1. The Court of Appeals correctly assumed that any rights of [Buyer] based on the alleged lack of
conformity of the goods with the contract are governed by the provisions of the UN Sales Convention
(CISG) because the parties are each domiciled in a member state of the treaty (Art. 1(1)(a) CISG). It also
correctly assumed that, according to Art. 39(1) CISG, the buyer loses the right to rely on the lack of
conformity of the goods with the contract (Art. 36 CISG) if he does not give notice to the seller within a
reasonable period of time after he discovered or should have discovered it, specifying the exact nature of
the lack of conformity. Finally, the Court of Appeals was also correct in ruling that while, in this case, the
notice period did not start before receipt of the test report dated 22 January 2001, because - as was the
tacit assumption of the Court of Appeals - an earlier routine testing of the paprika powder was
economically unreasonable for the [Buyer] due to the related expense, but the period of more than two
months could no longer be deemed a reasonable period within the meaning of Art. 39(1) CISG.
2. We cannot, however, agree with the Court of Appeals to the extent it finds that the requirements
of Art. 40 CISG are not met, based on the determinations reached thus far and [Buyer]'s submissions on
appeal. According to this provision, the seller cannot rely on the untimeliness of a notice of non-conformity
(Art. 39 CISG) if the contractual non-conformity of the goods is based on facts he knew or of which he
could not have been unaware.
a) The Court of Appeals reasoned that [Seller] cannot be denied the right to rely on the
untimeliness of the notice because [Buyer] had not proffered evidence showing that [Seller] knew or should
have known of the (alleged) non-conformity of the goods with the contract. It is correct that, generally,
the burden of proof lies with the buyer as to the seller's bad faith; that is so because, as the Panel previously
decided, the CISG, even to the extent it does not expressly determine the burden of proof, follows the
principle of rule and exception (Panel decision of 9 January 2002 - VIII ZR 304/00, NJW 2002, 1651
= WM 2002, 1022 under II 2 b with further citations). Most lower courts have ruled that the burden of
proof lies with the buyer (OLG Karlsruhe, BB 1998, 393, 395; OLG Munich, Transp.R-IHR 1999, 20,
22; OLG Koblenz, OLGR Koblenz 199, 49, 50). The question as to the burden of proof within the
framework of Art. 40 CISG has also been the subject of a number of foreign rulings (Arbitral Panel of the
Stockholm Chamber of Commerce, decision of 5 June 1998, www.cisg-online.ch 379;
Arrondissementsrechtbank Roermond/Netherlands, decision of 19 December 1991, CISG-online 29,
900336; ICC International Court of Arbitration, CISG-online 705; Ontario Superior Court of Justice
(Canada), IHR 2001, 46).
Also according to the majority of the commentators in legal literature, the burden of proof generally lies with
the buyer with respect to the factual requirements because he wants to avoid the legal consequences of Art.
38 et seq. CISG (Bamberger/Roth/Saenger, BGB [*], Vol. 3, Art. 40 CISG, ¶ 6;
Baumgärtel/Laumen/Hepting, Handbuch der Beweislast im Privatrecht [Manual of the Burden of Proof in
Civil Law], 2d ed., Vol. 2, Art. 40 WKR ¶ 1; Schlechtriem/ Schwenzer, CISG, 3d ed., Art. 40 ¶ 12).
b) For cases like the present one, this means first that, in principle, the buyer must present, and
possibly also prove, the factual requirements of Art. 40 CISG, since he relies on the exception to the (rule)
provision of Art. 39 CISG regarding the loss of the right to give notice of a contractual non-conformity. The Court of Appeals, however, did not sufficiently consider that an exception in an individual case must
be allowed under the aspect of "proof-proximity" [Beweisnähe] [**] or if an evidentiary showing results
in unreasonable difficulties of proof for the buyer.
Within the scope of the CISG, it is recognized that a strict application of the exception-to-the-rule principle
can lead to inequities and that, therefore, a correction is necessary according to the principles set forth
herein (compare Baumgärtel/Laumen/Hepting, supra, ¶¶ 28 to 30 before Art. 1 WKR; Staudinger/Magnus
(1999) Art. 4 CISG ¶ 69; Schlechtriem/Ferrari, supra, Art. 4 ¶ 51), but prudence is appropriate. The law
allows for this aspect within the framework of Art. 40 CISG in that it does not always demand proof of the
seller's knowledge of the facts on which the contractual breach is based, but rather deems it sufficient that
the seller "could not have been unaware of" those facts; thus, Art. 40 CISG also covers cases of negligent
ignorance (Achilles, Kommentar zum UN-Kaufrechtsübereinkommen [Commentary on the UN Treaty on
the Sale of Goods (CISG)], Art. 40 ¶ 1; Soergel/Lüderitz, 12th ed., EKG [*] Art. 40 ¶ 1;
Soergel/Lüderitz/Schüßler-Langeheine, 13th ed., CISG Art. 40 ¶¶ 1, 2). Under certain circumstances, the
required proof can already be deduced from the type of defect itself so that, in the case of extreme
deviations from the contractually agreed upon condition, gross negligence is assumed if the breach of
contract occurred in the seller's domain (Achilles, supra, Art. 40 ¶ 4; Soergel/Lüderitz, supra, Art. 40 EKG
[*] ¶ 1; see also Soergel/Lüderitz/Schüßler-Langeheine, supra, Art. 40 CISG ¶ 3; Staudinger/Magnus,
supra, Art. 40 ¶ 13). According to the principles mentioned above, it may be necessary to limit the buyer's
burden of proof in the case of a gross breach of contract and in view of the aspect of "proof-proximity"
in order to avoid unreasonable difficulties in providing proof.
c) In the instant case, the type of breach of contract assumed on appeal does not in itself allow
conclusions to be drawn as to the knowledge or grossly negligent ignorance of [Seller] as to the breach;
that is so because the irradiation of the paprika powder was not externally identifiable and could only be
determined upon expensive laboratory testing. This works to [Seller]'s advantage with respect to the
question whether gross misconduct on its part must be assumed. Based on conclusions reached thus far,
and considering the facts submitted by [Buyer] on appeal, it appears possible, however, that, considering
the aspect of [Seller]'s "proof-proximity" and the unreasonable expectation that [Buyer] make a full
evidentiary showing that also addresses [Seller]'s needs, proof requirements must be eased.
It is true that [Buyer] must first provide full proof of the fact that the goods supplied by [Seller] were
irradiated; this requires that the material tested by the laboratory was the paprika powder delivered by
[Seller] - which [Seller] has denied - and that the goods, per [Buyer]'s statement, were irradiated neither
in its own, [Buyer]'s, domain, nor in the domain of its customer. If these allegations of [Buyer] should turn
out to be correct, the proof of the breach of contract would at the same time prove its claim that the
powder was irradiated either in [Seller]'s facility or at the facility of [Seller]'s supplier. Based on its own
knowledge, [Buyer] is unable to determine which of these two possible causes, which were not within the
scope of its responsibility, led to the contractual non-conformity of the paprika powder. [Buyer] could only
allege "into the blue" as to the internal operations of [Seller]; it cannot be expected, as an outside buyer,
to have sufficient knowledge of the internal production conditions of its seller, which produced the supplied
goods or processed them. In contrast, [Seller] was certainly able to make a statement in this regard. In
this connection, [Seller] testified that the paprika powder was not irradiated in its facility and that this is
excluded already by the fact that it does not possess the necessary equipment. If [Buyer] is able to provide
proof that the goods were irradiated before delivery, it will need to address [Seller]'s evidence to support
its claims to the contrary. If the paprika powder was in fact irradiated in [Seller]'s facility, it could, if this
was merely a mistake, claim slightly negligent behavior only if it could sufficiently explain how this type of
serious error occurred in its facility, despite appropriate precautions, and why it did not become aware of
this; that is so because the burden of explanation must be put on the seller, in whose domain the breach of
contract occurred, as to why such a serious error occurred and how it went undetected in its facility
(compare Panel Decision of 5 July 1989 - VIII ZR 123/88, NJW 1989, 3097 under 2 d re. Art. 40 EKG
A different consideration applies under the aspect of grossly negligent ignorance if the raw material that
[Seller] purchased from its supplier was already contaminated. It is true that the delivery of irradiated
powder to [Buyer], contrary to the agreements made, would constitute a significant breach of contract. But this is not an indication yet that [Seller] remained unaware, as a result of gross negligence, of the pre-contamination of the goods. To that extent, it must be taken into consideration that at least a random sample
testing of the paprika powder for irradiation could be expected as little from [Seller] as from [Buyer] due
to the related costs. There would be no gross negligence if [Seller] could show that it had taken suitable
other precautions, for example, appropriate contractual stipulations with its supplier, ensuring that only
uncontaminated raw material would be used for [Buyer]'s order. 3. If, according to the conclusions reached thus far, it can therefore not be excluded that the paprika
powder delivered to [Buyer] - according to its statements on appeal that the irradiation allegedly took place
at [Seller]'s facility or in that of its supplier - was irradiated at the time of the passing of the risk, contrary
to the contractual agreements, and if it must further be assumed, on the basis of [Buyer]'s assertions, that
the breach of contract could not have been concealed from [Seller], then [Seller] could not rely on the
untimeliness of [Buyer]'s notice pursuant to Art. 40 CISG. As a result, the set-off declared by [Buyer] of
its claim for damages against [Seller]'s price demand would prevail.
III. In view of the above, the appealed judgment cannot stand because, based on the above, additional
clarification is required for a ruling on this legal dispute. Upon [Buyer]'s appeal to the Supreme Court, the
judgment by the Court of Appeals is therefore vacated, and the matter is remanded to the Court of Appeals
for a new hearing and decision (§ 563(1) ZPO [*]). In the new hearing on appeal, the parties will have
the opportunity to supplement their submissions regarding the factual and legal aspects addressed here.
Dr. Deppert Dr. Beyer Wiechers Dr. Wolst Hermanns FOOTNOTES
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellee of Spain is referred to as [Seller] and the
Defendant-Appellant of Germany is referred to as [Buyer].
Translator's note on abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; EKG =
Einheitliches Kaufgesetz [Uniform Law of International Sales (ULIS) done at The Hague on 1 July 1964];
ZPO = Zivilprozessordnung [German Civil Procedure Act].
** The German term "Beweisnähe", which is translated as "proof-proximity" refers to which of the parties
is "closer" to certain proof. The party who can prove certain circumstances more easily is the one with the
higher "Beweisnähe" regarding this circumstance.
Institute of International Commercial Law - Last updated May 29, 2008