Date: 25.01.2008
Country: Germany
Number: 12 U 39/00
Court: Oberlandesgericht Hamburg
Parties: --
A Dutch seller and a Spanish company entered into a contract for the sale of equipment, as well as items for ice production, to be used in a café in Palma de Mallorca. The contract provided that the seller would make the equipment available in a ready for use condition and that any party failing to perform in total or in part the contract would pay a penalty. After the seller’s death, the buyer’s assignees claimed that the seller had delivered defective goods and had failed to make them available in a ready for use condition. Therefore, they requested the Court to order the seller’s heirs to reimburse part of the price already paid, as well as to pay the contractual penalty. The Court of first instance dismissed the buyer’s assignees’ action on the ground of lack of necessary parties to the proceedings.

On appeal, the Court found that, since the contract contained a forum selection clause in favour of German Courts, and a contrary intent could not be inferred from the circumstances, the parties were held to have tacitly agreed on the application of German law. In particular, CISG had to be applied to the case at hand, it being the part of substantive German law governing international sales contracts.

In addition, the Court considered the claim for reimbursement of part of the purchase price unjustified both under Art. 81(2) and Art. 50 CISG. After examining, in the light of Art. 8(2) CISG, the letters sent by the buyer to the seller, the Court concluded that they did not constitute a notification of lack of conformity and, therefore, that the buyer had lost its right to rely on Art. 39 CISG. Consequently, the buyer’s assignees were not in a position to declare the contract avoided under Art. 49(1)(a) CISG for the purpose of claiming either reimbursement of the purchase price under Art. 81(2) CISG or a price reduction under Art. 50 CISG. Nor could the contract clause according to which the seller was obliged to make the equipment available in a ready for use condition be interpreted as a warranty for lack of defects and thereby as derogating from the requirements set out in Art. 39 CISG.

Moreover, the Court affirmed that in the case at hand no fundamental breach had occurred that would entitle the buyer to ask for avoidance (termination) of the entire contract (Arts 25 and 49 CISG). It was undisputed that the inventory provided was capable of operating to some extent and had indeed been used by the buyer. For this reason, and because no partial avoidance had been declared by the buyer, the Court did not address the issue as to whether declaration of avoidance of the contract had been timely and effective pursuant to Art. 49(2)(b)(i) CISG.

However, the Court held the buyer’s assignees entitled to recover the contractual penalty. In so doing, the Court left open the problem as to whether an exemption from the obligation to pay the contractual penalty should be decided on the basis of CISG or on the basis of the applicable domestic law, given that in the case at hand neither system would release the seller from its obligation. With respect to CISG, the Court pointed out that an exemption would only be allowed if proper installation had been impossible due to an unforeseeable impediment beyond the seller’s control (Art. 79(1) CISG) or conduct by the buyer (Art. 80 CISG).

Finally, in considering whether the revocation of assignment of contractual rights by the buyer’s assignees was effective, the Court referred to Art. 16 CISG which provides that a declaration of intent may only be revoked before the other party dispatches an acceptance and concluded that in the case at hand the revocation was not possible. Finding that Art. 78 CISG also applies to contractual penalties stipulated in sales contracts that are governed by CISG, the Court granted the buyer’s assignees interest, in accordance with the relevant provisions of German law, that had accrued accruing from the time of payment of the contractual penalty.