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Austria 28 April 2000 Supreme Court (Jewelry case) [translation available] Go to Database Directory || Go to CISG Table of Contents
Austria 28 April 2000 Supreme Court (Jewelry case) [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/000428a3.html] Primary source(s) of information for case presentation: Case text Case Table of Contents
DATE OF DECISION: 20000428 (28 April 2000) JURISDICTION: Austria TRIBUNAL: Oberster Gerichtshof [Supreme Court] JUDGE(S): Unavailable CASE NUMBER/DOCKET NUMBER: 1 Ob 292/99v
CASE NAME: Austrian case citations do not generally identify parties to proceedings CASE HISTORY: 1st instance LG Feldkirch (GZ 6 Cg 205/98d-9) 3 March 1999 [affirmed]; 2d instance OLG Innsbruck (GZ 4 122/99v-13) 11 June 1999 [affirmed] SELLER'S COUNTRY: Germany (plaintiff)
AUSTRIA: : Oberster Gerichtshof, lOb 292/99v, 28 April 2000 Case law on UNCITRAL texts (CLOUT) abstract no. 427
Abstract prepared by Christian Mosser The German plaintiff (seller) sold jewelry to two Austrian defendants (buyers) based on several orders which explicitly contained a clause whereby the purchase price should be paid in advance. After three reminders the seller in a letter eventually fixed an additional period of time for payment by the buyer, stating that after the expiration of that period he would refuse to accept any payment and consequently claim damages or declare the contract avoided. The buyers refused to pay the price in advance asserting that the parties had agreed on payment after delivery. The seller suffered loss of profit and claimed damages for breach of contract.
APPLICABLE CISG PROVISIONS AND ISSUES Key CISG provisions at issue: Articles 6 ; 63(1) ; 64(1)(b) ; 74 ; 75 ; 76 ; 77 [Also cited: Article 49(2) ] Classification of issues using UNCITRAL classification code numbers:
Descriptors: Applicability; Choice of law ; Avoidance ; Nachfrist ; Damages ; Profits, loss of ; Foreseeability ; Cover transactions ; Mitigation of loss Go to Case Table of Contents Editorial remarks
Excerpt from analysis of Austrian case law by Willibald Posch & Thomas Petz* * "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 19-20, 22-23. Avoidance ; Nachfrist. "On 11 September 1997 and on 28 April 2000, the Austrian Supreme
Court rendered decisions on the fixing of an additional period of time for performance. In the
earlier decision, it held in ambiguous language that CISG, which is applicable on the merits
of the case, 'also' required that an additional period of time for performance was fixed and
the contract declared void according to Articles 63(1) and 64(1)(b) CISG. In the later
decision the Court stated that, according to Article 63 CISG, the seller was entitled to fix an
additional period of time of reasonable length for performance, and, if the buyer either failed
to pay the purchase price within this additional period or refused to pay at all, the seller might
unilaterally declare the contract void. The Court emphasized that there are no formal
requirements for this declaration of avoidance and that it must not fix a time limit. What has
to be clearly expressed, however, is that neither party shall remain bound by the contract.
"In the relevant case, the meaning of a statement made by the seller's lawyer, after having
brought an action against the buyer, was at issue. In this statement, the lawyer declared that
no performance would be accepted if the buyer failed to perform within the additional period
of time. Notwithstanding the ambiguity of the statement that made it appear as if the
avoidance of the contract was just meant as an alternative, the Court regarded it as sufficiently
definite to constitute a declaration of avoidance after an action had been brought by the
seller." [pages 19-20]
Damages. "[In] the Austrian Court's � judgment on Article 74 � on 28 April 2000 � [i]n the
view of the Court, the principle of awarding damages for breach of contract that amount to
full compensation of the loss, including loss of profit, ought to be understood as a
continuation of legal conceptions that had been developed by national courts interpreting their
domestic law prior to CISG. Thus the courts came to acknowledge the general rule that
merchants, whose business is the trading of goods like those of the avoided contract in
question [a German manufacturer of jewelry sold jewels to an Austrian jeweler], would
always be able to conclude a contract on the basis of the market price. The only advantage
that a merchant would draw from being released from the duty to perform the avoided
contract is that he or she would not have to purchase additional goods when performing the
substitute transaction. The merchant would save the acquisition costs and the difference
between the defaulted purchase price of the avoided contract and his or her savings of
acquisition costs; in other words, the profit margin would constitute the amount of damages
suffered by the seller of fungible goods. The loss of this profit would qualify as 'actual
damages', because it had already been a part of the seller's assets at the time of conclusion
of the contract. In the end, the Austrian Supreme Court stated in explicit wording that the
seller's usual trade margin would usually be his or her foreseeable loss of profit within the
"Furthermore, the Supreme Court mentioned in this decision that, in the same way as
provided by the relevant rules of Austrian domestic law, damages may be assessed under
CISG either on the basis of a 'concrete method of computation', viz. by substitute
transactions according to Article 75 CISG, or on an 'abstract basis of calculation', viz. by
reference to the current market price according to Article 76 CISG. However, neither Article
75 nor Article 76 precludes the creditor's right to assess damages in accordance with the
general rule of Article 74 CISG. [pages 22-23]
CITATIONS TO OTHER ABSTRACTS OF DECISION English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=481&step=Abstract>
CITATIONS TO TEXT OF DECISION Original language (German): CISG-Austria website <http://www.cisg.at/1_29299v.htm>; CISG online.ch website <http://www.cisg-online.ch/cisg/urteile/581.htm>; [2000] Österreichisches Recht der Wirtschaft (RdW) No. 643; [2000] EvBl No. 167; [2000] Zeitschrift für Rechtsvergleichung (ZfRV) 80; [2000] Östereichische Juristenzeitung (ÖJZ); Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=481&step=FullText>
CITATIONS TO COMMENTS ON DECISION English: Saidov, Damages under the CISG (December 2001) nn.72, 298, 300; Willibald Posch & Thomas Petz, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 1-24, at 19-20, 22-23 [English translation of German commentary cited below] [Go to these commentaries for an excellent comprehensive analysis of Austrian case law on the CISG]; Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) § 6-28 n.337; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 49 para. 23 Art. 74 para. 44; Schwenzer & Fountoulakis ed., International Sales Law, Routledge-Cavendish (2007) at p. 461 German: Willibald Posch & Ulfried Terlitza, Internationales Handelsrecht (2001) 47-56, at relevant pages
[For an in-print adaptation of this translation accompanied by the full text of the commentary by Posch & Petz cited above, go to 6 Vindobona Journal of International Law and Arbitration (2002) 184-190. To help persons cite this case translation to either this Internet publication or the Vindobona publication, we have included paginations that accord with those of the Vindobona Journal.] 1. Facts of the case
5 % discount for immediate payment Date of payment: 10 November 1997 (receipt in the account of seller)" [page 184]
Both orders contained the note: "Proprietary rights are reserved until complete payment of the delivered goods has been made. Our general conditions, which were handed over to you in connection with this order, are part of the contract."
[Seller] handed over the general conditions together with the orders. Section 5 of the general conditions reads: "Payment ... Delivery to companies unknown to us is made only in case of advance payment or COD. The same applies to customers outside of the Federal Republic of Germany."
In its letter of 14 November 1997, [seller] reminded the [buyer] of the payment due and told it that the goods were ready to ship and would be sent to [buyer] as soon as an irrevocable receipt of payment had occurred. In a second reminder letter of 17 November 1997, [seller] fixed an additional period of time for payment of the purchase price, until 26 November 1997. On 3 December 1997, [buyer] sent [seller] two checks for the amount of the two invoices. [Seller's] bank refused to cash the checks for lack of funds. In its letter of 22 December 1997, [seller] informed [buyer] about these events and told it that as a result [seller] would be unable to ship the goods. On 12 January 1998, [seller's] German attorney sent [buyer] the following letter: "With reference to the contracts and invoices referred to above as well as to our client's letter of 17 November 1997, we point out that you have been delayed with your contractual obligations to pay the purchase price for the ordered jewelry since 10 November 1997. Furthermore you have sent our client two uncovered [page 185] checks and thereby committed check fraud punishable by law. In order to avoid litigation and prevent any further damages, our client is willing to give you a final opportunity to fulfill your contractual obligations. In the name and with power of attorney of our client, we therefore fix a final additional period of time for payment of the above-mentioned invoices - until 2 February 1998.
[Buyer's] failure to take delivery of the selected jewelry caused a loss of profit on the part of [seller] in the amount of DM 21,314.75 - the difference between the purchase price and its manufacturing costs. This damage arises regardless of a possible resale of the goods ordered to a subsequent buyer, as the later contract would have been formed independently of the [buyer's] order. In its statement of claim - which was lodged with the Court of First Instance on 23 September 1998 - [seller] is asking for damages for loss of profit in the amount of DM 21,314. [Seller] states: The pieces of jewelry were predominantly manufactured specifically for [buyer]. [Buyer] did not fulfil its obligation to pay the price in advance. [Seller] informed [buyer] in its last payment reminder that it would withdraw from the contract and claim damages if the latter did not perform. Since no payment was made, [seller] withdrew from the contract and is now asking for damages for loss of profit. [Buyer] raises the following objections: According to the agreement between the parties, the payment was to be made after delivery and inspection of the goods. Payment was made by the two checks, which were however later stopped because delivery was not made. The basis for the contract ceased to exist as the jewelry was not at the [buyer's] disposal for the Christmas business. Furthermore, [seller] neither took the necessary steps to cause the payment to be in arrears under the law, nor was the contract avoided. [Seller] did not mitigate its damages, obviously resold the goods far under value and thereby caused the harm himself. [Seller] did not inform the [buyer] of the intended sale. The amount asked for includes the profit margin, which [seller] is not entitled to demand. [Buyer] raises a counterclaim for DM 30,862.94, reasoning that this amount is equivalent to the typical profit margin in its own industry, which is double the amount of the net purchasing price. The counterclaim is based on damages for loss of the Christmas business. [page 186] 2. Findings of Court of First Instance
The Court of First Instance found that [seller's] demand for DM 21,340.75 was justified, whereas [buyer's] counterclaim was unfounded, and ordered [buyer] to pay [seller] DM 21,314.75 with interest of 5% since 1 March 1998, payable in the equivalent of Austrian Schillings according to the exchange rate for goods at the Vienna stock exchange. It denied the claim for further damages. It set out the following: The applicable law is the United Nations Convention on Contracts for the Sale of International Goods (CISG) and - in matters not settled by the Convention - German law according to � 36 IPRG.[*] The consequences of a payment in arrears are therefore to be settled according to � 326 BGB.[*] [Seller] satisfies the requirements to receive damages set out by this provision. Despite the fixing of an additional period of time, [buyer] failed to fulfil its obligations under the contract and is therefore liable for damages. The damage consists of the difference between the value of the promisor's performance and the promisee's saved expenses. [Buyer] is therefore liable to pay the purchase price minus [seller's] saved expenses (which are equivalent to the manufacturing costs).
The Court of Appeal rejected [buyer's] appeal and allowed the appeal to the final instance. Starting from the first court's observation it decided:
Under Art. 63(1) CISG, the seller may fix an additional period of time for performance by the buyer of its obligation. According to Art. 64(1)(b) CISG, the seller may declare the contract avoided if the buyer does not, within the additional period of time fixed by the seller, perform its or its obligation to pay the price or take delivery of the goods. Avoidance of contract is effected by a unilateral declaration of the non-breaching party to the other party. The declaration of avoidance does not have to satisfy any form requirements and there are no time limits imposed - apart from Art. 49(2) CISG, which is not relevant in the present case. The declaration must be unambiguous in that the [page 188] [aggrieved party] does not wish to keep the contract on foot (SZ 69/26 with further references). In the letter of 17 November 1997, [seller's] attorney declared that [seller] would refuse to accept payment of the purchase price should [buyer] not perform its obligation within the additional period of time fixed. As the Court of Appeal correctly pointed out, this is to be understood as a conditional declaration by [seller] to (then) avoid the contract. Insofar as the meaning of this declaration was blurred by the alternative "... or withdraw from the contract" this ambiguity was certainly resolved by the statement of claim, which unequivocally declared the contract avoided. As has already been pointed out, the declaration of avoidance is generally not bound to any specific form or time frame under the CISG, so that the statement of claim can replace the declaration of avoidance - comparable to established case law with respect to �� 918 AGBG [*] (1 OB 203/98d; SZ 52/154; JBl 1974, 368). According to both Austrian as well as German case law outside the sphere of application of the CISG,
businesspersons, who regularly trade with goods as the ones involved in the avoided contract at hand, will
- as a general rule - always be in a position to replace the failed transaction by a substitute transaction
selling the goods of the avoided contract or different goods on the basis of the current market price. The
seller's only advantage gained from the failed transaction consists in not having to acquire additional
goods for the following transaction, therefore in saving acquisition costs. The difference between the
purchase price of the first transaction and the above-mentioned advantage, i.e., the "profit margin", therefore constitutes the loss of the seller in the trade with fungible goods. The loss of this profit qualifies
as actual or direct loss since this profit had already become part of the seller's assets at the time the
contract was concluded (6 Ob 797/80; Koziol, Österreichisches Haftpflichtrecht I, 3rd ed., n. 2/84;
Emmerich in MünchKomm, 3rd ed., � 325 n. 93 f.). This analysis developed by the courts is taken up in CISG Art. 74, according to which damages for breach of contract by one party consist of a sum equal to the loss, including the loss of profit, suffered by the other party. Under the second sentence of Art. 74, a claim for damages is only limited by the foreseeability of the loss for the party in breach. It is being said that loss of profit - the typical sales margin of the seller - is a damage that is foreseeable for a buyer who refuses to take delivery of the goods (Staudinger, KommzBGB, CISG , Art. 74 n. 43 with further references). We concur in view of the above-mentioned literature and case law. As in Austrian law under �� 920, 921 ABGB,[*] the CISG enables the non-breaching party to calculate its loss "concretely" by reference to a substitute transaction (Art. 75 CISG) or via an abstract calculation of loss by reference to the current price of the goods [page 189] (Art. 76 CISG). However, neither Art. 75 nor Art. 76 excludes the possibility that, after the contract has been avoided, the promisee can calculate its damage for non-performance concretely according to the general rule under Art. 74 (Schlechtriem, UN-Kaufrecht, 3rd ed., Art. 75 n. 12). Where the party regularly concludes similar transactions, the abstract calculation of damages under Art. 76 CISG is excluded only if it identifies one of them as a specific substitute transaction (Sch�nle in Honsell, UN-Kaufrecht, Art. 76 n. 5). Apart from the fact that the proceedings do not indicate the conclusion of such specific substitute transactions, [buyer's] objection that [seller] failed to mitigate the loss (Art. 77 CISG) is ineffective as far as the promisee, in performing the substitute transaction, would have lost another similar transaction bringing the same profit as the first transaction. In this case, the seller can assess its contractual interest according to the principle of full reparation by taking the difference between its own costs (i.e., the costs of acquisition or manufacture) and the contract price (Schlechtriem, UN-Kaufrecht, 3rd ed., Art. 75 n. 12; Karollus, UN-Kaufrecht, 220). In the end, [buyer's] (completely unsubstantiated) objection that [seller] failed to mitigate damages is therefore irrelevant, because the Court of First Instance found that a miscellaneous resale of the goods intended for the [buyer] would have materialized independently of the [buyer's] order. Appeal denied. The decision on costs is based on �� 40, 41 ZPO [*]. [page 190]
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the German Plaintiff-Respondent is referred to as
[seller], the Austrian Defendant-Appellant as [buyer]. Monetary amounts in German
currench (Deutsche Mark) are indicated as [DM].