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Germany 11 April 2005 Landgericht [District Court] Frankfurt (Used shoes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050411g1.html]
DATE OF DECISION: 20050411 (11 April 2005)
CASE NUMBER/DOCKET NUMBER: 12/26 O 264/04
BUYER'S COUNTRY: Uganda (plaintiff)
GOODS INVOLVED: Used shoes
GERMANY: Landgericht Frankfurt 11 April 2005 (Used shoes case)
Case law on UNCITRAL texts (CLOUT) abstract no. 775
The case deals with issues of fundamental breach of contract, examination of goods and lack of conformity.
The buyer, a company based in Kampala/Uganda, entered into a contract with a German seller for purchasing second-hand shoes of first quality level and secondhand shoes of second quality level. The parties agreed upon C&F FOB Mombasa, Kenya. The goods were shipped by the seller to Mombasa. The original bill of lading was handed over by the seller, after the last instalment of the purchase price had been paid. After the buyer had redispatched the shoes to Kampala/Uganda and examined them, it sent a notice of non-conformity of the goods to the seller. Moreover, the Uganda National Bureau of Standards refused to grant the import license because of the bad and unhygienic condition of the shoes. The buyer gave notice of non-conformity for the second time and fixed an additional period of time for performance. Eventually, it declared the contract avoided by letter.
The buyer brought an action to the German Regional Court of Frankfurt am Main against the seller for reimbursement of the purchase price as well as of the costs incurred, such as customs and handling fees and freight charges. The plaintiff argued that the shoes delivered did not conform to the quality levels the contract provided for. Regarding the timeliness of the notice of non-conformity, it states that the seller knew about the redispatch from Mombasa to Kampala and that there was no reasonable opportunity for examination in Mombasa, since an examination would have caused additional customs duties in consequence of damaging the customs seal. In defence, the seller relied on article 39 CISG arguing that the plaintiff had failed to give notice of non-conformity of the goods in time. He also denied all knowledge of the redispatch by the buyer.
Despite affirming a fundamental breach of contract, the court rejected the plaintiff's claim, holding that the plaintiff was not entitled to any payment under articles 45(1)(b), 74 CISG and article 81(2) CISG, nor under any other provisions.
The court found that the notice of lack of conformity had not been given within a reasonable time, so that the plaintiff had lost its right to rely on the non-conformity of the goods under article 39(1) CISG. Examining the goods more than three weeks after the receipt of the bill of lading, the plaintiff did not meet the condition of article 38(1) as the non-conformity of the shoes could have been detected without any effort by merely taking a random sample.
In addition, the Court denied the plaintiff's reference to article 38(3) CISG. Concerning the seller's knowledge of the possibility of a redispatch of the goods at the time of the conclusion of the contract, as required by article 38(3), the court stated that the fact that the buyer was based in Kampala/Uganda alone was not sufficient to impose notice of the possibility of a redispatch. As for the missing opportunity for examination, the court held that the additional payment of customs duty in Kenya cannot be regarded as rendering the opportunity for examination unreasonable in the sense of article 38(3) CISG since it was the purchaser's affair to take into account the number and the amount of the customs duties.
Denying the plaintiff's right to reduce the purchase price under article 44 CISG, the court argued that the plaintiff had not presented a reasonable excuse for the failure of a timely notice of non-conformity according to article 44 CISG. The court did not address the issue of whether this case qualified under article 40 CISG.
Key CISG provisions at issue: Articles 25 ; 38 ; 39(1) ; 40 ; 44 [Also cited: Articles 45(1)(b) ; 74 ; 84(1) ]
38A ; 38B ; 38C [Buyer's obligation to examine goods: time for examining goods; When contract involves carriage of goods: postponement until after arrival at destination; Deferral of examination in case of redirection or redispatch];
44A [Excuse for failure to notify pursuant to art. 39(1)].
Descriptors: Fundamental breach ; Examination of goods ; Lack of conformity notice, timeliness ; Lack of conformity known to seller ; Excuse
Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1014.htm>; [2005] Internationales Handelsrecht (IHR) 161
District Court (Landgericht) Frankfurt (Main)
11 April 2005 [2-26 O 264/04]
The court has, on the basis of the written proceeding decided: The claim by the Plaintiff [Buyer] is rejected.
The Buyer has to bear the costs of the proceeding.
This judgment is provisionally enforceable. The enforcing party has to provide security in the amount of 110% of the costs which are still to be set.
The Plaintiff [Buyer] is a society that has its place of business in Kampala, Uganda. Because of an announcement on the Internet placed by the Defendant [Seller], it bought from the Seller 360 bags of used shoes, quality class one and 360 bags of used shoes, quality class two (9,000 kg each) at a price of 27,000 EUR plus C&F FOB Mombassa, Kenya (3,750 EUR), thus at a total price of 30,750 EUR. Quality class one consists of used shoes in a very good condition, i.e., without rips or holes and if at all with only slight, minor signs of use. Quality class two means shoes of good quality, i.e., with slight signs of use, but also without rips or holes. The goods sent by the Seller arrived in Mombassa on 26 April 2004. After the Buyer had paid the last installment of the purchase price on 18 May 2004, it received the original Bill of Lading document from the Seller on 24 May 2005. [Translator's note: The date "24 May 2005" appears to be in error, with the date "24 May 2004" intended.] The Buyer had the goods transported to Kampala then, Uganda, where it examined them on 16 June 2004. On 17 June 2004, the Buyer reprimanded the Seller for the bad condition of the goods. The Buyer complained about the condition of the goods again by a letter of 23 June 2004 and set an extension until 22 July 2004. The Uganda National Bureau of Standards declined the import of the shoes by letter of 24 June 2004. For the wording of that statement, reference is made to page 14 of the record. The Bureau stated that the shoes were not acceptable for the Ugandan market because of their bad and unhygienic condition. It declared the shoes to be unfit for usage and recommended their destruction at the parties' cost.
The Buyer declared avoidance of the contract by letter of 2 July 2004.
The Buyer contends that the shoes that were delivered had not been in conformity with the contract. Instead of the quality agreed upon, the bags had only contained defective and unusable shoes, among them high-heel woman's shoes, inline-skates and shoe trees. With respect to the timeliness of the notice of non-conformity, it states that the Seller had known that the shoes would be forwarded from Mombassa to Uganda. Buyer also states that the goods could not be examined in Mombassa because of international regulations on freight and customs, as the containers had been sealed in Germany. An examination in Mombassa would have required damage to the customs seal and would thus have caused a payment of customs duty for the goods in Kenya. The Buyer argues that paying additional customs in Kenya would have been an unreasonable burden.
The Buyer demands reimbursement of the purchase price as well as of the costs incurred such as customs, handling fees and freight costs.
The Buyer has requested the court to order the Seller to pay EUR 62,301.63 plus interest 8 % above the base interest level on
- EUR 10,000 since 11 March 2004;
- EUR 5,000 since 6 April 2004;
- EUR 10,000 since 28 April 2004;
- EUR 5,000 since 30 April 2004;
- EUR 475 since 18 May 2004;
- EUR 4,4475.17 since 10 July 2004; and
- EUR 27,351.46 since the claim has been served upon the Seller.
The Seller has requested that the claim be dismissed. The Seller argues that the notice of non-conformity of the goods was not sent in time. It also contests the amount of the damage.
In addition to the parties' arguments stated here, reference is made to the memoranda that have been added to the file.
The Buyer's claim is admissible but not justified.
1. The Convention on Contracts for the International Sale of Goods (CISG) is applicable to the present dispute, as the contract is for the sale of goods and the parties have their place of business in different States which are parties to the Convention (Art. 1(1)(a) CISG). The Federal Republic of Germany has been party to the Convention since 1 January 1991, Uganda since 1 March 1993.
2. The Buyer is not entitled to any payment under Arts. 45(1)(b), 74, 8[4](1) CISG nor under any other provision.
a) The Seller has fundamentally breached the contract concluded between the parties by delivering shoes not in conformity with the contract. This can be inferred from the letter by the Uganda National Bureau of Standards of 24 June 2004 (page 14 of the record) according to which the shoes were in a bad and unhygienic condition and not acceptable for the Ugandan market. The fact that this document refers to the goods delivered can be inferred from the wording of the letter and the enclosure, which states the number of the bags as well as the sender and recipient of the goods. According to this letter, the shoes delivered were not in conformity with the quality classes one and two agreed upon in the contract. As the Seller itself has stated that shoes are not perishable items and therefore cannot "rot" in a container in a warehouse (page 55 of the record), it is assumed that the goods had been in the same bad condition before they arrived in Mombassa.
b) The Buyer is, however, precluded from relying on a lack of conformity (Art. 39(1), 38 CISG). This is because the Buyer did not examine the goods soon enough and also did not give notice of the non-conformity of the goods within a reasonable period of time.
The Buyer detected the non-conformity of the shoes delivered on 16 June 2004 in Kampala, Uganda and gave notice to the Seller on 17 June 2004. The Seller was thus given notice of the lack of conformity only one day after it had been detected. The examination of the goods, and consequently the notice was, however, too late.
According to Art. 38(1) CISG, the Buyer was obliged to examine the goods within the shortest period practicable under the circumstances. Mombassa, Kenya was the goods' contractual destination. Therefore, the examination of the goods was to be conducted there, Art. 38(2). The goods arrived in Mombassa on 26 April 2004. The court will, however, assume in favor of the Buyer that the period for examination did not begin before 24 May 2004 as this is the date when the Buyer received the original Bill of Lading document after having paid the last installment of the purchase price. But even under the assumption that this was the date when the time to examine the goods began, the notice was made too late, as it was only made on 17 June 2004, which is three weeks after the time for examination started. Art. 38(1) CISG does not give a special period of time but only states that the goods have to be examined "within as short a period as is practicable in the circumstances." The strict measure of � 377 HGB [*] [translator's note: "immediately"] cannot be applied here (Schlechtriem/Schwenzer, Handbuch zum Einheitlichen UN-Kaufrecht, 4. ed. Art. 38 para. 16; MüKo [*] / Benicke, Handelsgesetzbuch �� 373-406, CISG Vol. 6, before Art. 38, 39 para. 1). However, an examination that did not take place until more than three weeks had passed has to be regarded as too late and unreasonable in international commerce. The Buyer had known for several weeks that the goods had arrived in Mombassa and would have been able to organize an examination (cf. Achilles, Kommentar zum UN-Kaufrechtsübereinkommen (CISG), Art. 38 para. 9). The goods were neither complicated technical equipment nor was it necessary to assemble or process them in order to examine them (Schlechtriem/Schwenzer, Art. 38 para. 17). The non-conformity of the goods could have been detected by only looking at a sample. As the examination did not require much effort, the Seller could expect that it would be conducted within a short period of time (MüKo/Benicke, Art. 38 para. 7). The Buyer has not presented any facts that would justify a longer period. Consequently, the Buyer had no right to postpone the examination until the goods had arrived in Uganda.
The Buyer cannot rely on Art. 38(3) CISG according to which the examination can be postponed until the goods have arrived at their final destination. Article 38(3) would only be applicable if the Buyer did not have a sufficient possibility to examine the goods and if the Seller knew or ought to have known the possibility that the goods would be forwarded. Art. 38(3) is generally applicable in this case, because the Buyer redirected the shoes to Kampala, Uganda, after they had arrived in Mombassa and the goods were examined immediately after their arrival in Uganda. It is, however, questionable, whether the Seller knew or ought to have known of the possibility that the goods would be forwarded to Uganda at the time the contract was concluded. The Seller has contested this. The fact that the Buyer has its place of business in Uganda is insofar insufficient. The e-mail of 13 April 2004 (page 91 of the record) is irrelevant in this context as it was sent after the conclusion of the contract.
This question, which is in dispute between the parties, does, however, not need to be decided. The Buyer has not convinced the court that it did not have a reasonable opportunity to examine the goods before they were forwarded (Art. 38(3) CISG). As shown above, the Buyer had sufficient time to organize and conduct the examination of the goods in Mombassa. It was under no pressure of time as the goods were not forwarded immediately after their arrival in Mombassa. Eventually, the goods were forwarded three weeks after the Buyer had received the Bill of Lading and seven weeks after their arrival in Mombassa. In addition, the packaging did not have any distinct features that would have made an examination on the spot unreasonable. The shoes were packed in simple plastic bags which could be opened without difficulties and without destroying the packaging (Schlechtriem/Schwenzer, Art. 38 para. 25; Honsell, Kommentar zum UN-Kaufrecht, Art. 38 para. 31). Repacking which could have caused costs was not necessary as well (Achilles, para. 15). In addition, the court cannot see why opening the containers would have been inadequate or unreasonable in the present case. The argument presented by the Buyer that it would have been unreasonable to fly from Uganda to Kenya to examine the goods is not convincing. The Buyer, or respectively its manager, did not need to fly to Kenya itself to examine the goods. It could have ordered somebody else to examine the goods (Art. 38(1) CISG - "cause them to be examined"). In addition, the inconvenience of a flight from Uganda to Kenya cannot be an argument against the Seller, as the Buyer itself has chosen Mombassa as the goods' destination. It was free to agree upon a different destination with the Seller.
The Buyer's argument that the goods could not be examined in Mombassa because of international regulations for freight and customs as the customs seal would have been damaged which would have caused an obligation to pay customs duties in Kenya is not convincing. The argument that paying the customs duties would have been unreasonable, cannot be followed because the obligation to pay customs duties does not represent a lack of a reasonable opportunity in the sense of Art. 38(3) CISG which could be used to construct a disadvantage for the Seller. The number and the amount of customs duties that would have to be paid were factors that the Buyer had to take into account in its commercial consideration. The Buyer had to consider whether the deal would be profitable with respect to the purchase price and the resale price. In addition, it would have been possible for the Buyer to agree upon Kampala, Uganda and not Mombassa, Kenya as the destination of the goods.
Apart from that, it is doubtful whether the buyer would have needed to pay additional customs duties if the customs seal had been damaged in Kenya for an examination of the goods. This has not sufficiently been demonstrated by the buyer. Even if double customs duties would have had to be paid, this does not automatically make the examination unreasonable. Reasons for unreasonableness have not been presented by the Buyer. The Buyer has not even specified how high the customs duties in Kenya would have been. Consequently, Art. 38(3) CISG does not lead to an extended period for examination and notice.
3. The Buyer also cannot reduce the price. The lack of a timely notice of non-conformity has not been supported by an acceptable excuse by the Buyer (Art. 44 CISG). Accordingly, the claim had to be declined.
The decision on costs is based on � 91 ZPO [*], the decision on provisional enforceability on 709 ZPO.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Kampala, Uganda is referred to as [Buyer]; Defendant of Germany is referred to as [Seller]. Amounts in European currency are indicated as [EUR].
Translator's note on other abbreviations: HGB = Handelsgesetzbuch [German Commercial Code]; MüKo = Münchener Kommentar [German commentary on commercial law]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].
** Linus Meyer is a law student at the University of Osnabrueck, Germany.
Pace Law School Institute of International Commercial Law - Last updated December 10, 2008