CISG CASE PRESENTATION

       2. Because of the lack of a serious procedural error by the Court of First Instance, the appealed decision can therefore not stand.

III. The Panel is, however, not able to issue its own decision pursuant to § 565(3) (No.1) ZPO. It is true that such a decision is available to the Supreme Court in the case of a vacating decision by the Court of Appeals for reasons of judicial economy if the analysis to be performed under § 539 ZPO [*] shows that the substantive analysis of the relationship between the parties leads to a final and conclusive result (Decision of the Panel of January 31, 1996 - VIII ZR 324/94, WM 1996, 822 under III; Decision of the Panel of January 22, 1997 - VIII ZR 339/95, WM 1997, 1713 under II 4; Federal Supreme Court, Decision of April 3, 2000 - II ZR 194/98, NJW 2000, 2099 = BGHR ZPO § 539 remand 2 under B II 3 a). That would be the case if the [seller] had effectively precluded its liability for breach of contract within the meaning of Art. 45 CISG. As the Court of Appeals correctly found, however, a valid inclusion of the Sales and Delivery Terms of the [seller], which provide the exclusion of warranties for used machines in Item No. 6, into the agreement existing between the [buyer] and the [seller], is missing.

       1. According to the general view, the inclusion of general terms and conditions into a contract that is governed by the CISG is subject to the provisions regarding the conclusion of a contract (Arts. 14, 18 CISG); recourse to the national law that is applicable based on a conflict of laws analysis is generally not available (Staudinger/Magnus, 2000, Art. 14 CISG ¶ 40; Schlechtriem/Schlechtriem, CISG, 3d ed., Art. 14 ¶ 16; Soergel/Lüderitz/Fenge, 13th ed., Art. 14 CISG ¶ 10; Schmidt in Ulmer/Brandner/Hensen, AGBG, 9th ed., Appendix § 2 ¶ 12; Lindacher in Wolf/Horn/Lindacher, AGBG, 4th ed., Appendix § 2 ¶ 76; Piltz, International Sales Law, 1993, Art. 3 ¶ 75; Piltz, NJW 1996, 2768, 2770). The CISG does not, however, contain special rules regarding the inclusion of standard terms and conditions into a contract. This was not deemed necessary because the Convention already contains rules regarding the interpretation of contracts (Schlechtriem/Schlechtriem, supra, fn.100).

       2. Thus, through an interpretation according to Art. 8 CISG, it must be determined whether the general terms and conditions are part of the offer, which can already follow from the negotiations between the parties, the existing practices between the parties, or international customs (Art. 8(3) CISG). As for the rest, it must be analyzed how a "reasonable person of the same kind as the other party" would have understood the offer (Art. 8(2) CISG).

It is unanimously required that the recipient of a contract offer that is supposed to be based on general terms and conditions have the possibility to become aware of them in a reasonable manner (Staudinger/Magnus, Art. 14 ¶ 41; Schlechtriem/Schlechtriem, supra; Soergel/Lüderitz/Fenge, supra; Reithmann/Martiny, International Sales Law, 5th ed., ¶ 651). An effective inclusion of general terms and conditions thus first requires that the intention of the offeror that he wants to include his terms and conditions into the contract be apparent to the recipient of the offer. In addition, as the Court of Appeals correctly assumed, the Uniform Sales Law requires the user of general terms and conditions to transmit the text or make it available in another way (see also Piltz, Sales Law, § 3 ¶ 77 et seq.; Piltz, NJW, supra; Teklote, The Uniform Sales Law and the German Law on General Terms and Conditions, 1994, p. 112 et seq.; Hennemann, General Terms and Conditions Control and the CISG from the German and French Viewpoints, Ph.D. Thesis 2001, p. 72 et seq.; similarly, Staudinger/Magnus, supra, with reference to the Supreme Court of Austria, RdW 1996, 203, 204, with an annotation by Karollus RdW 1996, 197 et seq.; different view, Holthausen, RIW 1989, 513, 517).

The opponent [other party] of the user of the clause can often not foresee to what clause text he agrees in a specific case because significant differences exist between the particular national clauses in view of the different national legal systems and customs; also, a control of the content of general terms and conditions under national law (Art. 4 (second sentence)(a) CISG) is not always guaranteed (Soergel/Lüderitz/Fenge, supra). It is true that, in many cases, there will be the possibility to make inquiries into the content of the general terms and conditions. This can, however, lead to delays in the conclusion of the contract, in which neither party can have an interest. For the user of the clauses, however, it is easily possible to attach to his offer the general terms and conditions, which generally favor him. It would, therefore, contradict the principle of good faith in international trade (Art. 7(1) CISG) as well as the general obligations of cooperation and information of the parties (Staudinger/Magnus, Art. 7 ¶ 47; Schlechtriem/Ferrari, Art. 7 ¶ 54) to impose on the other party an obligation to inquire concerning the clauses that have not been transmitted and to burden him with the risks and disadvantages of the unknown general terms and conditions of the other party (Teklote, supra, p. 114; Hennemann, supra, p. 74).

       3. Insofar as the general terms and conditions at issue become a part of the contract under German non-CISG law and/or in commercial relations between merchants where the customer does not know them but has the possibility of reasonable notice - e.g., by requesting them from the user (compare BGHZ 117, 190, 198; Panel Decision of June 30, 1976 - VIII ZR 267/75, NJW 1976, 1886 under II 1, each with further citations), this does not lead to a different result. In the national legal system, the clauses within one industry sector are often similar and usually known to the participating merchants. To the extent that this does not apply to a commercially-active contract party, it can be expected of him, in good faith, that he make the clauses available to the other party, if he wants to close the deal - as offered by the user based on the general terms and conditions. These requirements do not, however, apply to the same extent to international commercial relations, so that, under the principles of good faith of the other party, a duty to inquire cannot be expected of him.

       4. The Court of Appeals correctly notes that, pursuant to Art. 1(3) CISG, it is irrelevant to the application of the Convention whether the parties are "merchants or non-merchants," so that, in a different interpretation, non-merchants would also be subject to the heightened duty of inquiry. To the extent that the appeal argues that a "consumer purchase" under Art. 2(a) CISG is excluded from the application of the Convention, this argument cannot be followed. The purchase referred to in Art. 2(a) CISG requires that the seller know or should have known the purpose before or at the time of the conclusion of the contract, whereas, if the buyer is a consumer within the meaning of § 13 BGB [*], it does not require such knowledge of the seller. This can, therefore, lead to an overlap, where sales contracts are subject to binding national consumer protection laws and, at the same time, to the CISG (Staudinger/Magnus, Art. 2 ¶ 29; Schlechtriem/Ferrari, Art. 2 ¶ 24). In the interest of a practical application of the law as well as to avoid discrimination against non-commercial contract parties, it is, therefore, necessary to make the inclusion of general terms and conditions for contracts governed by the CISG subject to uniform principles.

       5. If, therefore, the effective inclusion of the Sales and Delivery Terms of the [seller] into its contract with the [buyer] is missing, the objections raised - in the alternative - by the [buyer] against the effectiveness of a complete exclusion of warranties in the sale of used machines, is irrelevant.

IV. The appealed judgment is thus vacated, and the matter remanded to the Court of Appeals for further clarification concerning the defects in the delivered rolling-milling machine alleged by the [buyer] and, if appropriate, concerning the extent of the necessary expenses for removal.

FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Spain is referred to as [buyer], Defendant No. 1 of Germany is referred to as [seller], and Defendant No. 2, the personally liable shareholder of Defendant No. 1, remains referred to as Defendant No. 2. Also, monetary amounts in German currency (Deutsche Mark) are indicated by [DM].

Translator's note on other abbreviations: BGB = Bürgerliches Gesetzbuch [German Civil Code]; HGB = Handelgesetzbuch [German Commercial Code]; ZPO = Zivilprozessordnung [German Code of Civil Procedure].

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Case Commentary

INTRODUCTION

The use of general terms and conditions of business (standard terms) is part of the daily bread of international commerce. For some branches and types of business, standard terms have attained such an importance that a separate normative value is ascribed to them and the principles contained within them under the heading "lex mercatoria."[2] Such clauses are in any case generally suitable to establish usage of trade and guidelines of contract interpretation for the branch of business concerned.[3] However, beneath this threshold, under what conditions do the standard terms of the individual parties become part of the contracts they conclude? It was this question that the VIIIth Panel of the Federal Supreme Court had to ask itself with regard to contracts subject to the CISG in the decision commented upon.

The question concerning the inclusion of standard terms in a contract under the CISG becomes even more important due to the common practice of excluding the application of the Convention in standard terms.[4] Whether such standard terms effectively become part of the contract is predominantly decided by the CISG itself and not by autonomous national law.[5]

The reason for this lies in Art. 1(1)(b) CISG, which makes the Convention national substantive law for international sales contracts. Should the parties wish to exclude the Convention in their standard terms, then their rules on inclusion, as part of the national law of the relevant Contracting State designated through the rules of private international law, decide over the effectiveness of that exclusion.[6] The conflicts of law rule that the validity of a choice of law agreement depends on the intended legal system [7] is not applicable to this purely substantive exclusion of the CISG. This result could only be avoided by choosing the law of a Non-Contracting State, which is usually not an attractive option.

I. THE DECISION OF THE FEDERAL SUPREME COURT

The German defendant had sold the Spanish plaintiff a used machine. According to the seller's Sales and Delivery Terms, used machines are sold "without any warranty against defects." The seller's order confirmation was expressly "based" on its Sales and Delivery Terms, which, however, were not enclosed with the order confirmation. The buyer later requested damages suffered due to difficulties in getting the machine to operate. The case would have been dismissed before the Federal Supreme Court had the seller effectively disclaimed its warranty. However, the Supreme Court held that the Sales and Delivery Terms were not part of the contract and remanded the case to the appellate court. Under the CISG - according to the decisive sentence of the decision - "the user of general terms and conditions is required to transmit the text to the other party or make it available in another way."

II. INCLUSION "CONTROL" UNDER THE CISG

The decision causes considerable concern because it oversteps the requirements for the inclusion of standard terms in international contracts for the sale of goods. A general duty to transmit such terms cannot be inferred from the provisions of the CISG. Nor does it accord with the provisions on the substantive sphere of application. This decision therefore goes against the liberal commercial spirit of the Convention.

1. The Inclusion of Standard Terms According to the Convention

The Supreme Court's starting-point is correct:[8] If the CISG is applicable to an international sales contract, then whether standard terms become part of this contract depends on the rules of the Convention.[9] The Convention does not contain any particular rules for this problem and the question is therefore dealt with under the provisions on interpretation (Art. 8 CISG) and contract formation (Arts. 14-24 CISG). With the exception of § 305(2), (3) BGB [*] [special requirements for consumer contracts], this corresponds exactly with the situation in German law. Since, therefore, there is regarding the inclusion of standard terms neither an external gap nor a gap within the meaning of Art. 7(2) CISG, recourse to national law is excluded.

2. Awareness of Party Intent

The buyer had apparently not contested the reference to the Sales and Delivery Terms; decisive for their inclusion in the contract was therefore the interpretation of the seller's order confirmation. If standard terms should be considered part of a contract's formation, then the requirements of Art. 8 CISG must be fulfilled. This provision requires either knowledge or grossly negligent unawareness of the other party's intent (Art. 8(1) CISG), or the corresponding understanding that a reasonable person of the same kind would have had (Art. 8(2) CISG). The Supreme Court concisely but correctly combines these two alternatives into a requirement of awareness of party intent and rightly does not call this into question here.[10]

3. Duty to Transmit

Apart from the requirement of awareness of party intent to include standard terms, the Supreme Court now requires that the terms be transmitted, a position which differs from that supported in the German literature.[11] The Supreme Court also consciously deviates [12] from the prevailing jurisprudence on the inclusion of standard terms under internal German law; this jurisprudence merely demands the possibility for appropriate awareness and therefore allows the possibility to request such terms from the user to suffice.[13] If one takes this decision literally, it even goes beyond the requirements for consumer contracts, since § 305(2) & (3) BGB do not require the standard terms to be conveyed in every case.

An opposing opinion has correspondingly allowed the possibility for appropriate awareness to suffice under the CISG as well.[14] It is certainly possible that Art. 8 CISG might occasionally require such a transmission - or, as likely envisaged by the Supreme Court in view of Internet business, an equivalent way of making such terms available - however, a general duty to transmit rightly finds no support in the Convention. The Supreme Court's three lines of argument can also not establish such a duty.

     a) Considerations of speed and cooperation

     In one argument, the Supreme Court refers to the interest of speed and the duty of cooperation of both parties. The Supreme Court asserts that if one party must first make inquiries about the content of the general terms and conditions, it could lead to delays in the conclusion of the contract. The user of the standard terms, however, can easily supply the terms along with his offer. Furthermore, burdening a party with the risks and disadvantages of non-transmitted clauses through a duty to inquire would contradict Art. 7(1) CISG and the parties' general obligation to cooperate.[15]

Both these arguments are ambivalent. The user of the standard terms willingly assents to a delay due to a duty to inquire when he does not supply his general terms and conditions with his offer. Moreover, the cooperation obligations do not just concern him, but the other party as well; as a general duty to check with the other party, such obligations are set under the objective standard of Art. 8 CISG.

     b) Consumer protection

     In another argument, the Supreme Court refers to the fact that the Convention also is applicable to non-merchants. The diverging delimitation of consumer contracts in Art. 2(a) CISG and § 13 BGB [definition of consumer] could lead to an overlap of legal provisions. "In the interest of a practical application of the law as well as to avoid discrimination against non-commercial parties, it is therefore necessary to make the inclusion of general terms and conditions for contracts governed by the CISG subject to uniform principles."

The Supreme Court is basing its argument here on a distinction unknown to the CISG, namely the difference between commercial and non-commercial parties. In fact, Art. 1(3) of the CISG explicitly rejects exactly this type of distinction. The only boundary that the Convention itself sets is the characteristics of a consumer sale in Art. 2(a) CISG. In introducing - not as a flexible indication, but rather as a normative element such as in § 13 BGB - the figure of the non-commercial contracting party into the interpretation of Art. 8, the decision violates the mandate to promote a uniform interpretation of the Convention. The CISG forbids the consideration of obligatory national consumer protection laws within the sphere of its application.[16]

     c) Hidden content control [versteckte Inhaltskontrolle]

     The actual key to the decision, however, likely lies in the Supreme Court's concern over the lack of assurance of controls on the content of standard terms. The Convention does not expressly regulate this (Art. 4(a) CISG) and leaves such control to the relevant national law. Of course, as the Supreme Court correctly noted,[17] such circumstances do not always ensure control of the content of the terms. The tightening here of the constraints for inclusion is meant to offer a certain substitute; the stated deliberations over consumer protection also attest to this.

However, such a hidden content control on the constraints for inclusion, regardless of the fact that it is known to several legal systems,[18] is not reconcilable with the CISG. This follows first of all from the conscious rejection of validity rules in Art. 4(a) CISG, which forbids imparting the idea of protection against "false" content into the provisions on interpretation and contract formation. Moreover, the catalogue in Art. 19(3) CISG makes clear that contract content is to be guided by agreement and not by conscientious legislative or judicial valuations.

     d) A deviating foreign decision

     Furthermore, the decision of the Federal Supreme Court is open to attack on the basis of Art. 7(1) CISG since the decision does not address the differing opinion of the Tibunal Commercial of Nivelles (Belgium).[19] The issue in that case was whether the mere reference to the standard terms of the Swiss Machine Industry Association by the Swiss seller in his acceptance sufficed for their inclusion in a Swiss-Belgian sales contract. The court, with reference to Art. 8(1), (3) CISG, supposed so and dismissed the action as inadmissible due to the jurisdiction clause contained in the standard terms. In failing to give attention to this decision, the Supreme Court ignores the mandate to promote a uniform interpretation of the Convention.

4. Consequences

Finally, the decision also does not convince because its consequences do not do justice to commercial practice. The development of a general duty to transmit without recognizable exceptions would have the effect that other, better known standard clauses - such as Incoterms 2000, the several ECE-Terms, or branch-specific terms such as GAFTA 100 or the rules of the Sugar Association of London - could not become the basis of contracts without being transmitted. For established market participants, a solution to this problem could easily be found through Art. 9(1) CISG; for new market participants, however, this presents an (surely unwanted) access barrier.

COMMENTS ON CONTENT CONTROL

The Supreme Court did thus not affect a content control; such a control would also probably not have seriously endangered the effectiveness of the clause. Domestic German law, which according to Art. 4(a) CISG and Art. 28(1), (2) EGBGB [*] [terms implied by law on choice of law] would have applied, would have had to answer the question here on the basis of § 9 AGBG [*] [former general clause on content control] (now § 307(1), (2) BGB). The provisions of the Convention, in particular Arts. 45(1)(b), 35(1) and 74 CISG, would have been the proper model to use as a standard for the content control. In accord with the prevailing national jurisprudence on warranty disclaimers in the sale of used goods,[20] which particularly takes into consideration the price reduction allowed in these cases, it would have been reasonable to consider the warranty disclaimer permissible.

FOOTNOTES

* Translator's notes on abbreviations: AGBG = Allgemeine Geschäftsbedingungensgesetz [former General Terms and Conditions of Business Act of Germany]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; EGBGB = Einführungsgesetz zum BGB [Introductory Act to the German Civil Code, containing the conflict of law rules]; HGB = Handelsgesetzbuch [German Commercial Code].

1. Translation of German text of commentary prepared for publication in Neue Juristische Wochenschrift (2002).

2. See Andreas Kappus, "Lex mercatoria" in Europa und Wiener UN-Kaufrechtskonvention 1980: "Conflict avoidance" in Theorie und Praxis schiedrichterlicher und ordentlicher Rechtsprechung in Konkurrenz zum Einheitskaufrecht der Vereinten Nationen (1990); Klaus Peter Berger, Formalisierte oder "schleichende" Kodifizierung des transnationalen Wirtschaftsrechts: zu den methodischen und praktischen Grundlagen der lex mercatoria (1996).

3. Wolfgang Witz et al., international einheitliches kaufrecht: Praktiker-Kommentar und Vertragsgestaltung zum CISG [Commentary on the CISG] vor Art. 14, Rn. 12 (2000); see also Art. 9 CISG, Art. 1.8 UNIDROIT Principles of International Commercial Contracts, § 346 HGB [*], Peter Schlechtriem et al., Kommentar zum Einheitlichen UN-Kaufrecht [Commentary on the CISG] Art. 9, Rn. 8 (3d ed. 2000).

4. This practice clearly seems questionable, especially since with the application of the CISG one of the few possibilities to excape the burdens of the new § 478 BGB [recourse for the seller of consumer goods against his supplier] exists, possibly even with regard to paragraph (4) of this provision. The failure to consider this option in legal consultation could be a liability risk.

5. See Witz et al., supra note 3, at vor Art. 14, Rn. 16.

6. This does not apply for States that have declared a reservation under Art. 95 CISG. Of the 61 Contracting States only China, Saint Vincent and the Grenadines, Singapore, Slovakia, the Czech Republic and the United States have declared such a reservation.

7. Münchener Kommentar zum Bürgerlichen Gesetzbuch [Commentary to BGB] § 12 AGBG, Rn. 27 (4th ed. 2001) [hereafter Münchener Commentary].

8. See sub III. 1. of the reasons for the decision.

9. This is the general view, see Schlechtriem et al., supra note 3, at Art. 14, Rn. 16 with further citations.

10. See sub III. 2. of the reasons for the decision.

11. Except for the views cited in the decision, for instance, Witz et al., supra note 3, at vor Art. 14, Rn. 12 ("regularly"). The notion goes back to Burghard Pilz.

12. See sub III. 3. of the reasons for the decision.

13. Entscheidungen des Bundesgerichtshofs in Zivilsachen [BGHZ] 117, 190 (198) (F.R.G.); criticizing the decisions, see Münchener Commentary, supra note 7, at § 2 AGBG, Rn. 48 (limited to standard terms that are usual in the branch).

14. See Schlechtriem et al., supra note 3, at Art. 14, Rn. 16; Soergel et al., Band 13, Bürgerliches Gesetzbuch mit Einführungsgesetz und Nebengesetzen, Art. 14, Rn. 10 (13th ed. 2000). See also Landgericht Oldenburg, 28 February 1996, 12 O 2943/94, CISG-Online 189 [<http://cisgw3.law.pace.edu/cases/960228g1.html>] (no inclusion); Amtsgericht Nordhorn, 14 June 1994, 3 C 75/94, CISG-Online 259 [<http://cisgw3.law.pace.edu/cases/940614g1.html>] (inclusion).

15. See sub III. 2. of the reasons for the decision.

16. To the extent that the Supreme Court probably contemplated a conflict between the CISG and the requirements of European Communty law, such a conflict is, in the end, to be decided under the relevant "conflict norms" of the Convention (Arts. 90, 94 CISG) and those of the EEC Treaty (particularly Art. 305 of said treaty).

17. See sub III. 2. of the reasons for the decision.

18. See Art. 1341(2) of the Italian Codice civile.

19. Tribunal Commercial de Nivelles, 19 September 1995, R.G. 1707/93, UNILEX D.1995, 24.2 [<http://cisgw3.law.pace.edu/cases/950919b1.html>]. But cf. Cour d'Appel de Paris, 13 December 1995, J.C.P. 1997, II, 22772 [<http://cisgw3.law.pace.edu/cases/951213f1.html>] (obiter dictum), which conforms in result with the opinion of the Supreme Court, and the decision of the Austrian Supreme Court, OHG, 6 February 1996, 10 Ob 518/95, CISG-Online 224 [<http://cisgw3.law.pace.edu/cases/960206a3.html>], in which a reference to the standard terms was lacking.

20. Entscheidungen des Bundesgerichtshofs in Zivilsachen [BGHZ] 74, 389 (F.R.G.); Otto Palandt et al., Bürgerliches Gesetzbuch (Commentary on BGB) § 11 AGBG, Rn. 74 (61st ed. 2002).