|In 1992 a German seller and a Dutch buyer concluded a contract for the sale of living lambs. The goods remained unpaid. The seller commenced action for payment of the price and for the contractual penalty. The first instance Court held that the buyer was responsible for the contract price and the penalty. On appeal the buyer alleged that the Court should reduce the penalty on the basis of Arts. 7, 8 and 77 CISG.
The appellate Court held that no provision in CISG (not even Arts. 8 or 77) provides a basis for reduction of a contractual penalty. Therefore, the question is to be solved according to the domestic law otherwise applicable to the contract: in the case at hand German law under which reduction was not possible.