|An Austrian owner of a vine nursery (the buyer) was in a longstanding business relationship with a German company (the seller) for the purchase of a special kind of wax, which it regularly used in order to prevent excessive drying out and limit danger of infection. As in the past, the buyer asked the seller to send an offer concerning "ca. 5000 kg. black vinewax". The wax was neither received nor inspected by the seller before delivery. It was delivered to the buyer in its original packaging directly from a third party, which the seller's supplier had entrusted with the production. The buyer partly used the delivered wax on its own vines fields and partly sold it on to other vine nurseries. After a large quantity of plants treated with the wax had suffered severe damage, the buyer complained thereof to the seller, then filed an action for damages. The seller objected, inter alia, that the vines had been damaged by a cause beyond its control.
While the first instance court rejected the claim, on appeal the judgment was reverted in the buyer's favor. The seller appealed to the Supreme Court.
The Supreme Court confirmed the lower instance decisions as to the existence of a lack of conformity of the goods under Art. 35(2)(a) CISG, since the wax did not meet the industry standards that were known to and applied by both parties.
As to the seller's claim that the buyer had used part of the wax for a purpose other than that intended, i.e. for treatment of young vines, the Court remanded the case to the lower courts in order to ascertain the facts. If this were indeed the case, there would be no causal connection between the lack of conformity and the damage and consequently no liability of the seller concerning young vine fields.
The Court rejected the contention that the seller had not produced the wax itself and therefore it should not be liable for its lack of conformity. In reaching this conclusion, the Court avoided to decide expressly whether Art. 79 CISG covers all possible cases of non-performance, or whether its application has to be excluded for lack of conformity.
In any event, Art. 79 CISG was not considered applicable because the seller did not prove that the impediment lay beyond its control. Art. 79 CISG does not alter the contract's distribution of risks, by which the seller is obliged to deliver (conforming) goods. According to Art. 79(2) CISG, the seller has to bear the risk of a lack of conformity deriving from its own suppliers' non-performance, unless it brings evidence that the impediment did not lie in its and its supplier's control. This was not proved in the case at hand, nor had the seller successfully excluded liability through its standard terms, both because they were not part of the contract, and because such a general exclusion would be invalid according to German domestic law.
The Court moreover observed that the seller's failure to inspect the goods before delivery was of no consequence (contrary to the lower court's opinion), because its obligation is to be construed as a warranty and does not depend on fault.
Finally the Court held that the lower instance court should have dealt with the issue of mitigation of damages by the buyer (Art. 77 CISG), and should not have remanded it to separate proceedings concerning the amount of the claim. In the Court's opinion this is supported by the German domestic law rules on contributory negligence, which are applicable notwithstanding the principle of autonomous interpretation of CISG (Art. 7(1) CISG), since the issue is a procedural one. Art. 77 CISG must be considered ex officio and may lead to exclude the seller's liability altogether. The case was thus remanded to the appellate court for decision on the alleged buyer's failure to mitigate damages by not stopping to use the wax as soon as it became aware of its damaging effects.