Case number: 133
Article number: sales convention / 7; 25; 45; 49; 61; 74; 84
Thessaurs issue:
Country of decision: Germany
Year of decision: 1995
Type of decision: Judicial decision
Case 133: CISG 7; 25; 45; 49; 61; 74; 84
Germany: Oberlandesgericht Mnchen; 7 U 1720/94 8 February 1995
Unpublished
The plaintiff, an Italian trading company, and the defendant, a German automobile marketing company, concluded a sales contract concerning eleven cars for the price of about DM 400.000,--. The contract provided that the plaintiff was to furnish a bank guarantee for the sales price. A bank guarantee in the amount of DM 55.000 was granted in favour of the defendant. After the conclusion of the contract, the parties had some communications on the time of delivery and special features of the ordered cars. Five cars were finally ready for delivery in August, the remaining six in October. In October, the plaintiff informed the defendant that, due to extreme exchange rate fluctuations between the Lira and the Mark, acceptance of delivery of the cars was impossible. The plaintiff asked the defendant to try to defer delivery from the supplier. In the beginning of November, the defendant cancelled all orders it had made with its suppliers and demanded payment of the bank guarantee which was paid out. The plaintiff clai
med repayment of the guaranty sum and damages.
The appellate court found the plaintiff to have a repayment claim against the defendant. It was held that, although the CISG will normally apply to German-Italian sales, it does not regulate the seller's rights concerning bank guaranties. The court, applying its rules of private international law, determined that German law was applicable.
The court found the defendant to have been unjustifiedly enriched according to 812 (1) 1 German Civil Code since the defendant obtained the payment of the bank guarantee without legal grounds. The court held that the bank guarantee was agreed upon to cover an obligation to pay and dismissed the defendant's argument that the bank guaranty should serve as a penalty for not taking delivery by the plaintiff.
Furthermore the court found that the defendant had not taken the appropriate legal measures to mitigate its loss (art. 77 CISG). By giving notice that the cars were ready to be picked up, the defendant had in fact fulfilled its contractual obligations (art. 31 CISG) and the plaintiff committed a breach of contract by not taking delivery of the cars (art. 53 CISG). The defendant, therefore, was entitled to the remedies provided by articles 61 (1) (b) and 74 CISG. But, as the defendant never avoided the contract, it had disregarded its duty to mitigate its loss and could not claim damages. Therefore, the defendant was not entitled to the guaranty sum.
However, the court dismissed the plaintiff's claim for damages against the defendant according to articles 45 (1) (b), 45 (2), 49 (1) (a) and 25 CISG. Since the parties had not agreed on a precise date of delivery, the defendant's readiness to deliver in August and October was no breach of contract, let alone a fundamental one. Thus, the right to declare the contract avoided because of the non-delivery of the cars was lost by the plaintiff. To allow the plaintiff now, i.e., 2 1/2 years later, to declare the contract avoided would violate the principle of good faith (art. 7 (1) CISG).
The court held that the plaintiff was entitled to interest according to article 84 CISG. Even though the claim for repayment was based on article 812 German Civil Code, the claim for interest derived from the CISG, because the repayment was a refund of the price. As the CISG does not regulate the interest rate, German Law was applicable. In view of the fact that both parties were merchants, the interest rate of 5% applied (article 352 German Commercial Code) .