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CISG CASE PRESENTATION

Germany 24 October 1979 Supreme Court [ULIS precedent] (Cheese case) [digest available]
[Cite as: http://cisgw3.law.pace.edu/cases/791024g1.html]

Primary source(s) of information for case presentation: Case digest; case commentary

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Case identification

DATE OF DECISIONS: 19791024 (24 October 1979)

JURISDICTION: Germany

TRIBUNAL: Bundesgerichtshof [Federal Supreme Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: VIII ZR 210/78

CASE NAME: German case citations do not identify parties to proceedings

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Netherlands (plaintiff)

BUYER'S COUNTRY: Germany (plaintiff)

GOODS INVOLVED: Cheese

Case abstract

Excerpt from Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 420-421 (citations omitted)

"Doctrine of Foreseeability.

The Supreme Court of Germany applied the foreseeability limitation at the time of contract formation, rather than, as under national law, at the time of the breach. In that case, the buyer was a German cheese importer who entered into a contract to purchase cheese from a Dutch exporter. Because three percent of the cheese delivered was defective, the buyer sought damages, including lost profits as a result of the loss of four wholesale customers, damages paid to one of buyer's customers who lost his own customers as a result of the defective cheese, and the loss of a group delivery arrangement causing an increase in the buyer's transportation costs. Two lower courts denied the buyer's claims, stating that he could only recover lost profits if the seller could have foreseen such damages because 3% of the cheese was defective. The German Supreme Court reversed and remanded noting that the seller knew at the time of the formation of the contract that the buyer was a middleman or reseller of the goods."

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Case digest

Supreme Court Bundesgerichtshof 24 October 1979

Digest based on data provided by Eric C. Schneider

Facts and damage claims

Buyer was a German cheese importer who resold cheese to other customers, including wholesalers. Seller was a Dutch exporter of cheese. The transaction involved a sale of a quantity of Gouda cheese for 466,732.28 DM. Three percent of the cheese was defective. Buyer sought damages for loss of profits alleging:

a. Four of his customers who were bulk buyers (wholesalers) discontinued doing business with [buyer], which cost buyer lost profits over four years totaling 288,000 DM;

b. One of buyer's customers (Firm H) lost customers as a result of the defective cheese, for which buyer had to pay Firm H 80,000 DM in damages; and

c. As a result of losing business relations with another customer (Firm I), buyer lost a group delivery arrangement which will increase buyer's transportation costs by 62,000 DM over four years.

Lower court rulings

The District Court (Landgericht) denied buyer's claims, holding that it was simply entitled to have the purchase price reduced by three percent. The Court of Appeals (Oberlandesgericht) affirmed, stating:

1. Buyer can only recover lost profits under ULIS Article 82 if, at the time of the contract, the seller could have foreseen that, as a consequence of the breach, buyer's customers would break off relations because merely three percent of the cheese was defective;

2. Based on a survey of two trade associations, seller could not reasonably have foreseen this loss.

 Supreme Court ruling

The Supreme Court reversed the Court of Appeals and remanded the case for re-examination.

1. The Supreme Court agreed that under ULIS Article 82 a seller is liable for damages for a delivery of defective goods, including lost profit, but only to the extent that losses and lost profit should have been foreseen by seller at the time of formation of the contract, considering the conditions which seller knew or should have known would possibly result from a breach of contract.

2. Seller knew at the time of formation of the contract that buyer was a middleman who would resell the goods. The question is whether seller should be liable for buyer's lost profits from customers who discontinued dealing with buyer and for one of buyer's customer's damages due to lost customers because 3% of the cheese that seller delivered to buyer was defective.

3. It is clear that at the time of contract formation both seller and buyer knew that the cheese market in Germany was saturated with Dutch imports so that the threat existed that purchasers such as buyer's customers might change suppliers even for trivially unsatisfactory deliveries other than the defects complained of by buyer.

4. Although the Court of Appeals addressed the correct issue, it relied for its answer on a written inquiry to the Industrial and Trade Association of Dusseldorf and the German-Dutch Trade Association regarding the state of mind of merchants in this field on 4 April 1978 as to whether a Dutch exporter in December 1976, who is to deliver cheese to a German importer in January 1977, should have foreseen that customers of the German importer would break off business if three percent of the goods delivered by the Dutch importer were defective as was the cheese in this case.

5. The Court of Appeals was also correct that ULIS Article 82 requires a subjective and objective test, that the test can conclusively be met by a showing of trade custom as to foreseeability, and that a survey of persons in the trade is a proper means of determining those facts under Code of Civil Procedure, section 346.

6. Based on this survey, the Court of Appeals found the damages claimed by buyer to be unforeseeable. However, the Supreme Court held that the administration of the survey was procedurally flawed because the Court of Appeals did not let the buyer know the basic questions asked, the identity of the persons who were asked, and the competence of those persons asked.

7. The Supreme Court found that the most important error committed by the Court of Appeals was its failure to disclose the questions asked. The Supreme Court said that this resulted in uncertainty as to whether the Court of Appeals survey asked about the foreseeability of the importer buyer losing business as a result of the defects or about the foreseeable behavior of the buyer's customers.

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Classification of issues present

APPLICATION OF CISG: No, however, ULIS issue is present that is also relevant to the CISG

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74 can be said to be at issue because analysis of ULIS Article 82 is relevant to interpretation of CISG Article 74

Classification of issues using UNCITRAL classification code numbers:

74B [General rules for measuring damages: foreseeability of loss]

Descriptors: Damages ; Foreseeability of damages

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Editorial remarks

EDITOR: Albert H. Kritzer

The parallel language of ULIS Article 82 and CISG Article 74. ULIS Article 82 states that "damages shall not exceed the loss which the party in breach ought to have foreseen at the time of the conclusion of the contract in the light of the facts and matters which then were known or ought to have been known to him, as a possible consequence of the breach of the contract."

CISG Article 74 states that "damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."

At issue in this case is the meaning of foreseeability in the context of ULIS Article 82.

Use of ULIS jurisprudence as an aid to interpreting the CISG. Citing century old precedent to the effect that where a term is used in one statute, a subsequent statute that incorporates the same term in a similar context must be construed so that the term is interpreted according to the meaning that has been previously assigned to it, Mann adds: "It is simply common sense that if the Convention adopts a phrase which appears to have been taken from . . . where it is used in a specified sense, the international legislators are likely to have had that sense in mind and to intend its introduction into the Convention." F.A. Mann, Uniform Statutes in English Law, 99 Law Quarterly Review (1983) 382-383 [citations omitted]. In the same vein, Audit states:"The international character of the Convention should encourage courts to refer to the Convention's legislative history and prior instruments (i.e., the ULIS . . .) in order to as certain the most likely intent underlying the wording of a given provision." Bernard Audit, the Vienna Sales Convention and the Lex Mercatoria, in: Thomas E. Carbonneau ed., rev. ed., Lex Mercatoria and Arbitration (Juris Publishing 1998) 188.

For examples of other case law interpretations of ULIS Article 82, go to the Match-up of ULIS Article 82 with CISG Article 74 and the section of that presentation entitled, ULIS case precedents aiding in interpretation of CISG Article 74. The ULIS citations presented are taken from the chapter on CISG Article 74 by Hans Stoll in Peter Schlechtriem ed., Commentary on the UN Convention on the International Sale of Goods (Clarendon Press: Oxford 1998) 552-572.

Further remarks on this 1979 ULIS case in the context of the CISG: excerpt from a commentary by Peter Schlechtriem on Uniform Sales Law in the Decisions of the Bundesgerichtshof*

         * Commentary on CISG issues considered by the BGH, presented in "50 Years of the Bundesgerichtshof [Federal Supreme Court of Germany]: A Celebration Anthology from the Academic Community". Click here for the full text of this commentary.

Foreseeability of damages. "The Convention does not differ much from the sales law of the German Commercial Code (BGB) in prerequisites and scope of a claim for damages. Under the CISG, every breach of obligation produces a claim for damages as long as the obligor cannot exempt himself from liability under Art. 79 CISG. Differently than in the BGB, the seller is therefore also liable in damages for the harm caused by the defect. More important, however, is the introduction of the so-called foreseeability rule in the second sentence of Art. 74 CISG in order to limit the scope of damages. This rule was originally rejected by the drafters of the BGB and only found a place in the first alternative of § 254(2) BGB.61 It is based on the Anglo-Saxon 'contemplation rule' which is founded upon the basic idea of the obligor's assumption of risk in agreeing to a contract. In the event that one party should breach the contract and cannot exempt itself from liability, each contractual party assumes the risk of damages which ordinarily arise in such a breach or which were foreseeable; should the party not wish to assume this discernable risk, then it must either forsake entering into the contract or contractually limit its liability.62

"Even before a direct application of this rule for limiting damages, contained in Arts. 82, 86 ULIS, the Bundesgerichtshof had taken it into consideration and applied it in delimiting admissible liability limitations in contracts based on standard terms and general conditions forms: A clause in boilerplate standard terms that excludes liability for non-foreseeable damages is permissible.63

"It is therefore a question of the extent of a contractual assumption of risk and its limits; foreseeability should therefore not be taken literally. 'Foreseeability' is quite amenable to a normative characterization, as Detlev König proved in 1973.64 In a 1979 ULIS case,65 a German cheese importer claimed damages for alleged defects in cheese delivered by a Dutch seller. Three percent of the total delivery was affected. Damage suffered included not only the general damages because of the goods, but also the loss of large customers who rescinded their contracts with the importer on account of the defect, and the indemnification of a purchaser. The Bundesgerichtshof held to be decisive whether, in view of the saturated cheese market in Germany, it was foreseeable that minor deficiencies in performance could lead to a loss of customers. The Court sanctioned the fact that the appellate court had obtained written information from chambers of commerce and industry concerning the question of foreseeability in this case in which non-foreseeability was presumed.66 The decision was criticized because it considered factual foreseeability rather than foreseeability as an element in the assessment of the degree of the seller's risk assumption at the time of the conclusion of the contract.67 In my opinion, the decision was nevertheless correct in its core: Whether the Dutch supplier assumed the risk that a lack of conformity which only affected a comparatively small portion of his delivery could cause a diminution of the buyer's good will and therefore induce a considerable loss through the abandonment of important customers, was indeed a question of foreseeability for this supplier.68 Liability with regard to customers (indemnification), however, should at least have been 'foreseeable' within the normative meaning of this criterion since it is to be expected in the usual course of delivery of defective goods to a middleman. These types of damages are ('quite simply') considered 'foreseeable' not only for goods delivered to a middleman for resale but also for products for further processing, whose defects create replacement obligations for the buyer/manufacturer with respect to its customers.69 On the other hand, whether unnecessary and excessive costs (in relation to the value of the goods) incurred in attempts to cure are recoverable damages is not a question of foreseeability, but rather one of the duty of the buyer entitled to avoidance and damages in the particular case to mitigate losses.70"

        61. Recovery of unusually high damages is excluded if the obligee failed to bring attention to the risk of such damages and the obligor neither knew nor should have known the risk. For discussions on the foreseeability rule and the "remains" of its consideration in § 254(2) BGB, see König, Voraussehbarkeit des Schadens als Grenze vertraglicher Haftung - zu Art. 82, 86, 87 EKG - in Das Haager Einheitliche Kaufgesetz und das Deutsche Schuldrecht. Kolloquium zum 65. Geburtstag von Ernst v. Caemmerer, Karlsruhe (1973) 75 ff., 110 ff.; Schlechtriem, Voraussehbarkeit und Schutzzweck einer verletzten Pflicht, in Recht in Ost und West, Festschrift zum 30 jährigen Jubiläum des Instituts für Rechtsvergleichung der Waseda-Universität, (1988) 505 ff., 510 f.; see also Rabel, Das Recht des Warenkaufs Bd. 1 (1936) 493.
        62. Still a basic authority, see Rabel, supra note 61, at 494 ff.
        63. See BGH of 23 February 1984, NJW 1985, 3016; BGH of 29 November 1988, NJW-RR 1989, 953, 956 sub II. B.; BGH of 11 November 1992, NJW 1993, 335, 336. On the adherence to the Convention's foreseeability rule, see Wolf/Horn/Lindacher, AGB-Gesetz. Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen (AGBG) - Kommentar, § 11 para. 55 (4 ed. 1999).
        64. See König, supra note 61.
        65. BGH of 24 October 1979, RIW 1980, 143 ff.
        66. Id. at sub II. 2. c). The fact that one of the statements in an advisory opinion was based on a survey whose basis was not disclosed was, however, reproached as a procedural mistake.
        67. See Weitnauer, Nichtvoraussehbarkeit eines Schadens nach Art. 82 S. 1 des Einheitlichen Gesetzes über den internationalen Kauf beweglicher Sachen. Comment to BGH of 24 October 1979, IPRax 1981, 83, 84 sub IV. 1.
        68. In as much as consequences should not have been foreseeable, the importer could have assigned the risk to the seller if at the time of the conclusion of the contract the importer had made him aware of the risk of unusually high damages. Here the status of § 254(2) BGB as part of this "contemplation rule," correctly understood as a risk allocation rule, becomes clear.
        69. See BGH of 25 November 1998, NJW 1999, 1259, 1261 [case presentation also at <http://cisgw3.law.pace.edu/cases/981125g1.html>] (consequential damages, which the plaintiff manufacturer suffered through its substitute performance on behalf of its customer due to the lack of conformity of delivered foil).
        70. Unconvincing is therefore in this respect BGH of 23 July 1997, 3309, 3311 sub III. 2 [case presentation also at <http://cisgw3.law.pace.edu/cases/970723g2.html>] ("These costs for remedying the defect were no longer reasonable in view of their amount in proportion to the claim for the sales price still outstanding. The seller is therefore not accountable for them under Art. 74 CISG. Recoverable damages are only reasonable expenditures for the ascertainment of the harm and for a settlement or reduction of the price …").

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Citations to other case abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

German: Schlechtriem/Magnus, Internationale Rechtsprechung zu EKG und EAG [International case law on ULIS and ULF], Baden-Baden: Nomos (1987), Art. 82 EKG No. 1, 410

CITATIONS TO TEXT OF DECISION

Original language (German): Schlechtriem/Magnus, id. at 410-415; BGH Lindenmaier-Möhring, Nachschlagewerk des Bundesgerichtshof zum EKG, No. 3, Warn. 1979, No. 274, 827 et seq.; Der Betrieb (DB) 1980, 343-344; Praxis des Internationalen Privat- und Verfahrensrechts (IPRax) 1981, 96 et seq.; Recht der Internationalen Wirtschaft, Außenwirtschaftsdienst des Betriebsberaters (RIW/AWD) 1980, 143-145; Wertpapier-Mitteilungen (WM) 1980, 36-37; Monatsschrift für Deutsches Recht (MDR) 1980, 308-309.

Translation (English): Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Schneider, 16 Journal of International Business Law (1995) 615-668 [cited as 24 October 1980] (text presented below); Schlechtriem, in: Uniform Sales Law in the Decisions of the Bundesgerichtshof (2001), at n.65; Saidov, Damages under the CISG (December 2001) nn.137, 166, 331; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 74 para. 38

German: Weitnauer, Nichtvoraussehbarkeit eines Schadens nach Art. 82 S.2 des Einheitlichen Gesetzes über den internationalen Kauf beweglicher Sachen [Unforeseeable damages under Art. 82 ULIS: commenting on BGH 24 October 1979], 4 Praxis des Internationalen Privat- und Verfahrensrechts (1984) 185-196

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Case commentary

Reproduced with permission from 16 Journal of International Business Law (1995) 615-668

excerpt from

Consequential Damages in the International Sale of Goods: Analysis of Two Decisions

Eric C. Schneider [*]

1. Introduction

Two courts have applied consequential damage provisions found in international conventions. A court in the United States recently applied provisions of the United Nations Convention on Contracts for the International Sale of Goods ("CISG" or "Convention").[1] In 1980, the German Supreme Court applied a substantively similar consequential damage provision of the earlier Hague Convention on the International Sale of Goods ("ULIS") [2] in a decision that has predictive value for future applications of the CISG.[3] This Article will analyze whether these two courts approached consequential damages in a manner that is more consistent with prior national law than with the development of a unified international approach to international sales disputes.[4]

Section 2 of this Article explores a U.S. district court's approach to damages under the CISG in the case of Delchi Carrier, SpA v. Rotorex Corp.[5] After analyzing the rationale behind the damage award in Delchi, Section 3 discusses a German Supreme Court decision applying a provision analogous to the CISG. Finally, Section 4 concludes that the U.S. court applied the international CISG provisions in a manner consistent with its national law, while the German Court elevated international principles over national law. Because of the U.S. court's inability to set aside its own national thinking, this case represents an unfortunate first decision on the subject of consequential damages under the CISG.

[For Section 2, the portion of this analysis devoted to the U.S. District Court case, go to the entire text of the Schneider commentary]

3. The German Case

The German case concerning consequential damage provisions similar to CISG Article 74 involved a buyer who attempted to recover damages for future lost profits due to his customer's dissatisfaction with the delivered goods. The decision, handed down by the Federal Supreme Court of Germany in 1980,[159] addressed consequential damages for breach of a contract for the international sale of cheese.

3.1. Factual Background and Lower Court Decisions

Plaintiff ("Seller") was a Dutch exporter of cheese and Defendant ("Buyer") was a German importer of cheese who resold the cheese to customers, including wholesalers.[160] In December 1976, after lengthy negotiations, the parties finalized a contract for the cheese to be delivered to Germany in January 1977.[161] Seller delivered the cheese, but when Buyer did not pay the full contract price, Seller sued.[162] Buyer claimed that: (1) Seller had agreed to discount the sales price;[163] and (2) Seller had breached the contract because three percent of the cheese delivered was defective.[164]

As a result of this defective delivery, Buyer alleged the following damages: (1) four of Buyer's customers, who were bulk buyers, discontinued business with Buyer, costing Buyer 288,000 DM in lost profits over four years; (2) one of Buyer's customers, Firm H, lost customers as a result of the defective cheese, for which Buyer had to pay Firm H 80,000 DM; and (3) as a result of losing business relations with one customer, Firm I, Buyer lost a group delivery arrangement, which would increase Buyer's transportation costs by 62,400 DM over four years.[165] At trial, Seller argued that Buyer's customers left for other reasons.[166]

The trial court[167] found for Seller and denied Buyer's claims for consequential damages, but reduced the contract price by three percent for the defective cheese.[168] Buyer then appealed to the intermediate court of appeals[169] and renewed its claim for consequential damages.[170] After finding that three percent of the cheese delivered was defective, the court of appeals affirmed the trial court's judgment in favor of Seller.[171] The court of appeals held that Buyer's claims for consequential damages were to be determined under Article 82 of the Unified Law of the International Sale of Movable Things [ULIS], the controlling law of the contract.[172] The [ULIS], however, was superseded in 1990 in Germany by the CISG.[173] Since CISG Article 74 is substantively identical to [ULIS] Article 82, decisions under [ULIS] Article 82 are informative as to how German courts will treat consequential damages under the CISG.[174]

In denying Buyer's claims for consequential damages,[175] the court of appeals reasoned that a buyer can only recover lost profits under [ULIS] Article 82(2) if the Seller can foresee at the time of the contract that Buyer's customers would discontinue relations as a consequence of a mere three percent rate of defective delivery.[176] Based on a survey of trade associations,[177] the court of appeals concluded that Seller could not reasonably have foreseen loss from discontinued relations.[178]

3.2. The German Supreme Court Decision

On further appeal, the German Supreme Court[179] pointed out that the court of appeals erred in its finding that the contracting parties affirmatively chose [ULIS] as the controlling law of this contract.[180] Nevertheless, the German Supreme Court agreed that [ULIS] applied to this contract because "there is nothing express or implied to rule it out."[181] Additionally, the German Supreme Court determined that Seller did not contest the fact that three percent of the cheese delivered under the contract was defective.[182] Finally, the German Supreme Court noted that the lost profits claimed by Buyer and Firm H might not have been caused by Seller's breach, but rather by Buyer's delivery of defective cheese that was in stock prior to the contract with Seller.[183] Seller, however, did not raise this issue. After reviewing the facts and legal analysis of the appeals court, the German Supreme Court held that the court of appeals erred in regard to the issue of foreseeability because it improperly used a survey of trade organizations to determine trade custom.[184]

The German Supreme Court agreed with the court of appeals that under [ULIS] Article 82(1) a seller is liable for lost profit damages resulting from a delivery of defective goods.[185] Damages for lost profits, however, are available only to the extent that the seller should have foreseen the lost profit at the time of contract formation, under the conditions that the seller knew or should have known would possibly result from a breach.[186] The test formulated by the German Supreme Court is what a "reasonable, ideally typical obligor would expect to happen under the circumstances."[187] Because Seller knew that Buyer was a middleman, the German Supreme Court determined that it was foreseeable that Buyer would intend to resell the cheese for a profit.[188] An industry survey could determine whether profits beyond those lost on the resale of the specific defective cheese were foreseeable to the Buyer.[189] In fact, the German Supreme Court cited a prior 1965 German Supreme Court decision approving the use of survey evidence of trade custom and knowledge.[190]

The German Supreme Court suggested that the proper survey question was: whether a seller who knows at the time of contract formation that a buyer will resell the goods should be liable for either a buyer's lost profits due to lost customers or for a buyer's damages resulting from the buyer's customer losing sales because of its lost customers, when three percent of a product delivered on the original contract was defective.[191] Furthermore, a proper survey question would indicate that, at the time of contract formation, both the seller and the buyer knew that Dutch imports saturated the German cheese market.[192] With such market saturation, a threat existed that the customers of middlemen-buyers might readily change suppliers, even for trivial reasons aside from the substantial defects complained of by Buyer.[193]

After reviewing the survey and the legal findings of the court below, the German Supreme Court found that the court of appeals addressed the correct legal issue.[194] According to the German Supreme Court, [ULIS] Article 82 requires a subjective and an objective test that can conclusively be met by a survey demonstrating a trade custom of foreseeability.[195] The German Supreme Court, however, found that the court of appeal's survey was procedurally flawed because the survey did not allow Seller to know the contents of the basic survey questions, the people surveyed, or the competence of survey respondents.[196] The appeals court's decision was remanded for a re-examination of the foreseeability issue.[197]

Because German civil procedure allows a trial de novo in an appeal to the intermediate court,[198] a court of appeals can make its own determination of the facts and utilize a survey in order to determine foreseeability. The German Supreme Court hears appeals on errors of law only, and, in the instant case, found the flawed survey process to be an error of law.[199] The German Supreme Court, although it did articulate a rule of foreseeability, did not rule as a matter of law whether the damages Buyer suffered due to lost customers were foreseeable.

3.3. The Background of German Law on Consequential Damages

It is difficult to make generalizations about contract remedies in German law.[200] It is fair to conclude, however, that although German law, unlike the U.C.C., favors specific relief in theory, it shares a common principle with the U.C.C. and the CISG: a remedy is intended "to put the obligee in the same position, economically speaking, as he would have enjoyed had the breach not occurred."[201] This underlying philosophy has led German courts to develop concepts of breach and remedies beyond what the BGB [Introductory Law to the German Civil Code] literally allows, particularly in the area of damages for a delivery of defective goods.[202]

Under the BGB, a buyer can obtain damages for delivery of defective goods for breach of warranty[203] in only two situations: (1) when the defect destroys or significantly diminishes the value or fitness of the goods for ordinary use or for the purpose provided for in the contract; or (2) when the goods lack the quality which seller expressly guaranteed.[204] Under BGB section 463, if the seller has guaranteed that the goods sold have a specific attribute, or if the seller fails to disclose a known defect, then a buyer may be able either to rescind the contract or seek a reduction in price and claim damages.[205] Implied guarantees or warranties are not easily established,[206] however, and without such a guarantee or without evidence of fraudulent conduct by the seller, the buyer's remedies under the BGB are limited to either rescission ("Wandelung") or a reduction of the sales price ("Minderung").[207] If the goods are fungible, then the buyer can demand substitute goods.[208] These remedies are exclusive, and the BGB does not otherwise allow consequential damages.[209]

Since 1902, German courts have developed an alternative means to make a buyer whole for a partial breach resulting from a seller's delivery of defective goods. Buyers can now make a claim on the basis of a "positive breach," but in order to prevail there must be proof that the seller was at fault.[210] Section 287 of the Code of Civil Procedure sets the standard of proof as "mere probability," which is arguably a lower standard than reasonable certainty under U.S. law.[211]

The German Supreme Court in applying [ULIS] to the cheese case did not impose any of these BGB or court developed restrictions on Buyer's right to claim consequential damages. Instead, the German Supreme Court referred to [ULIS] Article 82(1) which allows consequential damages without evidence of warranty, fraud, or fault.[212]

It is questionable whether the German Supreme Court used the principles of the [ULIS], or was influenced equally by national legal doctrines when stating the standards for determining the recoverable amount of consequential damages. BGB section 252 sets forth the German Code standard for calculating consequential damages. Section 252 provides that "damages to be recovered include lost profits . . . [p]rofit is deemed to be lost which could have been expected with probability according to the ordinary course of events or in view of particular circumstances, especially the preparations and provisions made."[213] Under the BGB, this probability determination is made at the time of breach.[214] Plaintiff must prove only that the circumstances referred to in the second sentence of BGB section 252, "ordinary course of events or particular circumstances," existed. After proving that these circumstances existed, it is presumed that the profits would have been earned but for the occurrence of the breach.[215] Defendant, to avoid liability for lost profit, must then show that "his default [did not] appreciably increase the objective possibility of loss of a kind that in fact occurred."[216]

The BGB does not distinguish contractual liability from tort liability, and sections 241 through 304 apply to obligations arising from both.[217] The limitations on consequential damages set forth in these sections of the BGB include general principles of avoidability[218] and comparative fault.[219] Furthermore, the BGB does not limit the recovery of consequential damages to those which are foreseeable.[220]

Early commentary on the BGB suggested an interpretation of BGB section 252 that would limit lost profits to those foreseeable under the circumstances as a probable consequence of breach.[221] Until the late 1970s, this interpretation was rejected in favor of an approach which viewed section 252 as simplifying proof of causation rather than acting as limiting damages to those that were foreseeable. Section 252 was interpreted as permitting the use of objective market evidence, such as what damage reasonable sellers would expect a breach to cause under market conditions, rather than having to present evidence of the particular subjective intention the BGB. The traditional test for recovery of consequential damages was whether the obligor's breach, "as judged by ordinary human standards at the time of its occurrence, renders more likely damages of the kind actually suffered."[222]

In the late 1970s, as legal scholars again debated the necessity of adopting a foreseeability limitation on contract damages,[223] German courts began to apply the foreseeability limitation to certain types of contract damages.[224] The German cheese case has been cited as an early example of the development by German courts of the foreseeability limitation to cases where a defendant, after selling goods to a middleman, is sued for goodwill damages resulting in lost profits and lost customers because of the delivery of defective goods.[225]

3.4. The German Supreme Court's Interpretation of [ULIS]

In the cheese case, the German Supreme Court applied [ULIS] doctrine of foreseeability as a limit on damages for lost profit, using the time of contract formation, rather than the time of breach, as the vantage point from which to determine foreseeability.[226] Given the contemporaneous development by German courts of a foreseeability limitation, it is difficult to determine if the German Supreme Court's decision in the cheese case was a faithful application of [ULIS], or merely an application of a developing doctrine of German national law.

As stated earlier, the German law for damages arising out of the domestic sale of goods initially "reject[ed] foreseeability as a method of limiting liability for default in the performance of a contract."[227] Instead, until several years before the cheese case, courts used a theory of "adequate causation" as the primary test to determine contract damages.[228] Under the "adequate causation" test, which German courts still apply,[229] a breaching party "is liable for a loss if his default appreciably increased the objective possibility of loss of a kind that in fact occurred."[230] A breaching party is not liable if the default was, in the ordinary course of events, a matter of indifference with regard to what actually occurred and only became a "condition of the occurrence of the loss as a result of unusual or intervening events."[231] Whether a breach is an adequate cause is determined by a court applying the objective standard of an:

experienced observer at the time of the default, or even according to one formulation, that of the most experienced observer (optimaler Beobachter). To such an observer the court attributes knowledge of all the circumstances of which a person of that kind could have known, as well as any additional circumstances of which the wrongdoer himself actually knew.[232]

Thus, under the "adequate causation" test there is both an objective and a subjective test of causation, which does not limit, but rather, expands damage.

In applying [ULIS], the German Supreme Court referred to the subjective and objective limitations of the foreseeability test.[233] The German Supreme Court held that the seller is liable for damages that a "reasonable, ideally typical obligor would know to be a serious consequence of a breach in light of the circumstances."[234] In reaching its formulation of foreseeability, the German Supreme Court cited commentaries comparing the doctrines of foreseeability in numerous other legal systems.[235] Of primary influence were commentaries on [ULIS] Articles 13 and 82 concerning the meaning of "what a party knew or should have known."[236] Based on these commentaries, the German Supreme Court determined that a judge should ask not "what the obligor in the situation knew or should have known, but what the `ideal obligor' should have known,"[237] a test that seems to combine foreseeability with the Court's prior standard of adequate causation.

Whether there is really a significant difference between how German courts have applied the "adequate causation test" and the way in which most U.S. courts apply the foreseeability test is a question raised by legal scholars.[238] Both tests refer to the recovery of losses that occur "in the ordinary course of things," or according to the "common experience of mankind."[239] These formulations are similar to the first rule of Hadley -- that the loss must flow naturally from the breach.[240] Both the German and the U.S. tests also seem to employ the second Hadley prong:[241] the German courts use an objective test to ask what an optimal obligor would expect to happen in the ordinary course of things, while U.S. courts ask what a reasonable person would expect to happen.[242] Both German and U.S. courts first attribute the knowledge of surrounding circumstances to the reasonable person, knowledge that an ordinary person could normally be expected to have, and then add the knowledge which the defendant actually had.[243] Despite the similarities, the German approach of adequate causation, in borderline cases, is thought to be more favorable to plaintiffs than the foreseeability limitation.[244]

At the time of the cheese case, the German Supreme Court also was aware that U.S. jurisdictions did not uniformly apply the test of foreseeability.[245] One author cited by the German Supreme Court concluded, after a description of the development of the "contemplation of the parties" test in the United States, that foreseeability "is not simply determined by empirical standards but involves a question of policy . . . [it is] essentially a question of allocating risks and losses."[246]

Clearly, the German Supreme Court did not use a "tacit agreement-contemplation of the parties" test of foreseeability under the [ULIS]. The German Supreme Court's application of foreseeability more closely resembled that of the U.S. courts that do not use the tacit agreement test. Now that German courts take into account both the adequate causation test and the foreseeability test, one would expect that damages would be granted on a more limited basis in German judgments. Cases cited as evidence of the German development of the foreseeability limitation tend to be generous in determining what risks the ideal obligor has undertaken,[247] perhaps because of a lingering hesitancy to stray too far from a tradition based on adequate causation. It also is not surprising that a German court would apply the newly adopted foreseeability test of the ULIS or the CISG in a manner consistent with its prior national law, which is generally more favorable to the obligee than the obligor.

The German Supreme Court's decision in the cheese case does, however, clearly reflect German legal tradition in the manner in which foreseeability was proved. The proof used by both the court of appeals and German Supreme Court was a survey of trade associations.[248] The German Supreme Court justified this evidentiary device on the basis of a 1966 decision under German law.[249] This approach is compatible with German procedure, under which the intermediate court of appeals effectively conducts a trial de novo. [250]

An appellate court in the United States would not utilize a survey of persons in the cheese industry, as did the German Court of Appeals. In the United States, even at the trial court level, such evidence would be considered hearsay and likely would be excluded on either of two grounds: (1) it deprives the parties of the right to cross-examination and (2) it lacks probative value.[251] In the United States, an expert may testify based upon a poll, but a party wishing to use a poll should have available "a complete record of the methods by which the universe and sample were selected, and of the techniques for selecting and instructing the interviewers."[252] Additionally, interviewers should be available for cross-examination.[253] The German Supreme Court is generally more willing to use opinion polls, in accordance with a German legal tradition that predates the adoption of [ULIS]. In the cheese case, however, the German Supreme Court indicated in its opinion that it had a healthy skepticism of the reliability of opinion polls, insisting that the party seeking to use the survey divulge the fundamental structure of the survey to the other party.[254]

4. Conclusion

In both of the cases discussed, courts denied a buyer's damage claims for both lost profit damages on prospective contracts and loss of goodwill because of lack of sufficient proof. That the courts arrived at similar conclusions was not, however, due to the identical application of the principles of similar international sales convention articles. The U.S. district court in Delchi referred briefly to scholarly comments[255] on the CISG before applying the CISG in a manner totally consistent with the law of New York, which was the seller's place of business. The district court did not use a more detailed analysis, which was readily available in the literature,[256] nor make any other attempt to "set aside national thinking."[257]

The German Supreme Court, in applying the ULIS. . . in the cheese case, made a greater effort to consult the available literature on the principles underlying the ULIS Convention. The German Supreme Court, in many particulars, followed international principles rather than its own national law. In accordance with the ULIS, the German Supreme Court was willing to allow damages for a delivery of defective goods amounting to only three percent of the total contract amount, without requiring proof of fault or an express guarantee of quality. The German Supreme Court cited numerous authorities on the ULIS and discussed the principle of foreseeability as a limitation on contract damages for lost profit. The German Supreme Court applied the foreseeability limitation at the time of contract formation rather than, as under national law, at the time of breach.

The German Supreme Court also discussed the subjective and objective nature of the foreseeability limitation under the ULIS, although it finally used an objective test that resembled both its national tradition of determining adequate causation and the emerging court-developed doctrine of foreseeability. The German Supreme Court's decision ultimately rested on a national approach to adequate causation, foreseeability, and manner of proof. Thus, because of Germany's less formal rules of evidence and its less limiting application of foreseeability, plaintiffs such as Delchi would more likely obtain damages for lost profit or goodwill under the CISG in a German court than in a U.S. court. Of course, this situation will lead to forum shopping, an outcome the CISG drafters sought to avoid.

CISG Article 7(1) stresses the "need to promote uniformity in its application."[258] The Secretariat Commentary to Article 7 states that "[n]ational rules on sales of goods are subject to sharp divergences in approach and concept. Thus, it is especially important to avoid differing constructions of the provisions of this Convention by national courts, each dependent upon the concepts used in the legal system of the country of the forum."[259]

Some argue that "[p]roblems of proof and certainty of loss are procedural matters which remain within the province of national law."[260] Article 7(2) states that any gaps in the CISG are to be "settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."[261] Certainly, matters that are clearly procedural will not be subject to the CISG or any other rules besides those of the forum. In those U.S. jurisdictions where prospective lost profits and lost goodwill damages are not recoverable as a matter of law, however, such matters should be subject to the choice of law determinations in CISG Article 7(2).[262] Perhaps the Delchi court should have applied CISG Article 7(2) to determine whether under New York conflict rules the law of Italy was the controlling law of the contract and, if so, how Italian law applies the foreseeability test to prospective lost profits under the Italian Code.[263]

That a German court fared better than a U.S. court in referring to and following the guidelines of legal scholars is, in part, due to the fact that Germany is a civil law jurisdiction, where courts traditionally give such literature more weight.[264] The U.S. court, accustomed to referring more often to code annotations or prior decisions, was able to rely on neither. By giving terse mention to the CISG articles at issue, by ignoring the extensive literature on the CISG, and by interpreting the CISG articles according to New York law without analysis of the Convention, the U.S. district court created an unfortunate first decision on the subject of consequential damages under the CISG.

The Delchi decision fulfills a "gloomy prospect,"[265] of which one scholar cited by the Delchi court warned. There is a "danger . . . that these tribunals will apply the Convention within the limited context of their own legal traditions," he cautioned, "exposing in the process the lack of consensus and resulting ambiguity of certain provisions."[266]

FOOTNOTES

*Associate Dean & Professor of Law, University of Baltimore School of Law; B.A., University of Connecticut; LL.B., University of California, Hastings; LL.M., New York University. The author thanks Professors Peter Schlechtriem and Albert H. Kritzer for their suggestions and criticisms of prior drafts. The final draft of this Article is the author's sole responsibility.

1. See United Nations Convention on Contracts for the International Sale of Goods, U.N. Doc. A/CONF.97/18 (1980), S. TREATY DOC. NO. 9, 98th Cong., 1st Sess. 22 (1983), 19 I.L.M. 671 (1980) [hereinafter CISG].

2. See Convention Relating to a Uniform Law on the International Sale of Goods, July 1, 1964, 834 U.N.T.S. 107.

3. ULIS Article 82 is the source of and is substantively similar to CISG Article 74. See ALBERT H. KRITZER, GUIDE TO PRACTICAL APPLICATIONS OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 477 (1989). Germany and the United States are now signatories to the CISG. For commentary on the U.S. adoption of the CISG, see infra note 13. For commentary on the German adoption of the ULIS and later the CISG, see infra sections 3 and 4.

4. The problem of differing interpretive approaches to international sales disputes has been predicted. SeePatrick Thieffry, Sale of Goods Between French and U.S. Merchants: Choice of Law Considerations Under the U.N. Convention on Contracts for the International Sale of Goods, 22 INT'L LAW. 1017, 1021 (1988). For a discussion of damage terminology in civil and common law jurisdictions, see Ugo Draetta, The Notion of Consequential Damages in the International Trade Practice: A Merger of Common Law and Civil Law Concepts 4 INT'L BUS. L.J. 487 (1991).

5. See Delchi Carrier, SpA v. Rotorex Corp., No. 88-CV-1078, 1994 WL 495787 (N.D.N.Y. Sept. 9, 1994). The decision was appealed and cross-appealed. The court of appeals affirmed with little comment on the issues raised in this Article, but remanded on other grounds. See Delchi Carrier, SpA v. Rotorex Corp., Nos. 95-7182, 95-7186 (2d Cir. Dec. 6, 1995).

(. . .)

159. See Judgment of Oct. 24, 1980, BGH [Supreme Court], 1981 IPRax 96-98; MICHAEL R. WILL, CISG -- INTERNATIONAL BIBLIOGRAPHY 1980-1995 (4th ed. 1995).

160. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

161. The contract was for 28-day-old Gouda Cheese at 5.59 DM/kg. See id.

162. Seller claimed buyer owed 466,732.28 DM including interest. See id.

163. Buyer claimed Seller discounted the price to 5.50 DM/kg. Thus, the contract price was 12,244.50 DM less than Seller claims. See id.

164. The defective cheese lacked ripeness, had softened, and had salt deposits under their rinds. See id.

165. See id.

166. See id.

167. The trial court in Germany is known as Landgericht.

168. The trial court declared that Buyer owed Seller 453,812.28 DM plus interest. The intermediate court, in affirming the trial court, found that the contract price of the cheese was 5.59 DM/kg and that three percent of the delivered cheese was defective. Additionally, the court found that Buyer complained to Seller of the defective cheese in a timely manner each time a customer demanded damages. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

169. The intermediate court of appeals in Germany is known as Oberlandesgericht.

170. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

171. See id.

172. The German courts in this case applied Article 82 of the Unified Law of the International Sale of Movable Things as the controlling law of this contract for the sale of cheese between a German and Dutch merchant. This law is one of two German laws derived from the 1964 Hague Conventions on the Sale of Goods which were adopted in Germany on July 17, 1973. Article 82 of the Hague convention became part of German law as the "Einheitliches Gesetz über den Internationalen Kauf beweglicher Sachen," or "EKG" [ULIS]. It is but one of five different sets of laws which German courts continue to apply to international sales contracts formed prior to January 1, 1991.

The second body of law derived from the 1964 Hague Conventions is the Unified Law of the Formation of International Contracts for Movable Things, known as the "Einheitliches Gesetz über den Abschluss von Internationalen Kaufvertragen über begwegliche Sachen" or "EAG" [ULF]. This body of law has been applied by German courts to contract disputes when the parties have branch offices in different contracting states and the contract in question involves a cross-border sale.

If a German court found that [ULIS] or [ULF] did not apply to an international sales contract, it would use German conflict of law rules under Articles 27 and 28 of the Introductory Law to the German Civil Code ("BGB") to determine which law controlled the contract. These conflict of law rules could result in two other bodies of law controlling the contract. First, if the German court decided that German municipal law controlled, the court would look to the BGB and the German Commercial Code ("HGB"). However, if the German court decided that the law of a foreign country applied, it would apply the national law of that country. Of course, if that foreign country were a signatory to an international convention on the international sale of goods, such as the Hague Conventions or the CISG, then that convention as applied by the signatory country would control the contract in the German court. See Gerhard Manz & Susan Padman-Reich, Germany Standardises Law on International Sale of Goods, INT'L FIN. L. REV., Oct. 1990, at 14 (detailing the adoption of the CISG in Germany).

173. The complex formula governing the applicability of law as discussed in the previous note was changed when the CISG came into force in Germany on January 1, 1991. Because the CISG was self-executing, it automatically repealed the confusing array of law governing all contracts for the international sale of goods formed after January 1, 1991. Although [ULIS] and [ULF] do not apply to contracts formed after 1990, the decisions of the German courts interpreting them are instructive as to the probable application of the CISG. These pre-CISG cases are particularly instructive because Germany has adopted the complete text of the CISG, which is quite similar to [ULIS] and [ULF]. Indeed, some of the problems the German courts encountered with the Hague Conventions may continue under the German adoption of the CISG. As discussed supra note 172, Germany accepted some major changes to its traditional law of obligations in adopting the Hague conventions and the CISG. See Manz & Padman-Reich, supra note 172, at 14.

174. See KRITZER, supra note 3, at 477 ("Because these ULIS articles are so similar [ULIS Article 82 and CISG Article 74], [A]rticle 82 precedents may be regarded as relevant to interpretations of CISG [A]rticle 74.").

175. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

176. See id.

177. The survey focused on the German-Dutch Trade Association and the Industrial and Trade Association of Düsseldorf. See id. at 98.

178. See id.

179. The German Supreme Court is known as Bundesgerichtshof.

180. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

181. Id. at 97. Under German laws based on the Hague Conventions [ULIS and ULF], the parties to the contract were allowed to choose which law controlled their contract, thereby avoiding application of the [ULIS] or [ULF]. In the cheese case, the German Supreme Court noted that the parties did not affirmatively choose [ULIS] as the controlling law of their contract. However, because the parties did not impliedly or expressly make a choice of law decision, [ULIS] would apply, specifically Article 3 of [ULIS]. After the cheese case, in 1986, the German Supreme Court went even further in applying Article 3 of [ULIS] when deciding that a German court, in hearing a dispute between United Kingdom and German partners, should apply [ULIS] even if the contract expressly provides that the German municipal law should apply. Although this 1986 decision allowed the contracting parties to exclude, either expressly or impliedly, [ULIS] under Article 3, the decision clarified that an implied exclusion will not readily be found. The fact that the parties did not mention [ULIS] in the contract was not held as an exclusion, presumably on the ground that [ULIS] was also a part of German municipal law. To be certain that [ULIS] will not apply to an international sales contract, the parties must expressly exclude [ULIS]. The German Supreme Court's affirmative exclusion was an interesting development because the United Kingdom, in adopting the Hague Conventions as its Uniform Law for the International Sales of Goods Act in 1967, provided in § 1(3) that the Uniform Law would control a contract of sale only if it was affirmatively selected by the contract parties. In almost twenty years, no case arose in the UK where the Uniform Law governed a contract. See F.A. Mann & Herbert Smith, International Briefings: West Germany; When Uniform Sales Law Applies, INT'L FIN. L. REV. , June 1986, at 37.

182. See Judgment of Oct. 24, 1980, 1981 IPRax at 98.

183. See id.

184. See id.

185. See id. at 97.

186. See id.

187. Id.

188. See id. at 97-98.

189. See id. at 98.

190. See id. (citing Judgment of Dec. 1, 1965, 1966 NJW 502).

191. See id.

192. See id.

193. See id.

194. The German Supreme Court based its determination on the finding that lost profits were unforeseeable as informed by a written inquiry to the trade associations regarding the state of mind of merchants in the field on April 4, 1978. The survey inquired as to whether a Dutch importer in January 1977, who delivers cheese to a German importer, should have foreseen that customers of the German importer would discontinue business if three percent of the goods delivered by the Dutch importer were defective, as was the cheese in this case. Based on this survey, the court of appeals found the damages claimed by Buyer were unforeseeable. See id.

195. See id.

196. Most importantly, the court of appeals failed to disclose the survey questions. It was not clear to the German Supreme Court whether the court of appeals' survey asked about the foreseeability of the buyer's customers discontinuing business or about the foreseeable behavior of the customer's customers discontinuing business as a result of the defects. See id.

197. See id.

198. A "berufung" is an appeal on points of fact and law. See DANNEMANN, supra note 27, at 111-13; David S. Clark, The Selection and Accountability of Judges in West Germany: Implementation of a Rechtsstaat, 61 S. CAL. L. REV. 1795, 1808-14 (1988).

199. See Judgment of Oct. 24, 1980, 1981 IPRax at 98. "Revision" is an appeal on points of law. See DANNEMANN, supra note 27, at 111. In the cheese case, the German Supreme Court cited a prior decision in which the BGH discussed the difference between unreviewable factual findings of trade usage and unsubstantiated official declarations which are subject to review. See Judgment of Dec. 1, 1965, 19 NEUE JURISTICHE WOCHENSCHEIFT [sic] [NJW] 502, 503. Although not referred to by the Court, the German Code of Civil Procedure § 139(1) states "[t]he presiding judge shall ensure that the parties completely disclose all relevant facts and make the pertinent motions, and especially also supplement insufficient particulars concerning asserted facts and describe the evidence . . . ." ZIVILPROZEßORDNUNG [ZPO] § 139, translated in THE CODE OF CIVIL PROCEDURE RULES OF THE REPUBLIC OF GERMANY OF JANUARY 30, 1877 AND THE INTRODUCTORY ACT FOR THE CODE OF CIVIL PROCEDURE RULES OF JANUARY 30, 1877 37 (Simon L. Goren trans., 1990); see also Hein Kötz, Civil Litigation and the Public Interest, 1 CIV. JUST. Q. 237, 242 (1982) ("[A] judge's failure to discharge his duties under section 139 constitutes a procedural error.").

200. "The drafters of the German Civil Code approached the general problem of the relief available to an aggrieved party from three different perspectives: (1) a distinction between one-sided and two-sided contracts; (2) separate treatment of cases of delay (Verzug) and of impossibility; and (3) individualized handling of, and special rules for, various typical contractual regimes (e.g., sale, contract to make an object (Werkvertrag), contract to furnish services, (Dienstvertrag)). This approach results in an intricate and complex system which renders generalization difficult." ARTHUR T. VON MEHREN & JAMES R. GORDLEY, THE CIVIL LAW SYSTEM 1108 (2d ed. 1977) (footnotes omitted).

201. Id. at 1109 n.27 (citing ERWIN DITTMAR , Das Problem der Schadenersatzleistung 218 (1946)).

202. The BGB classifies breach as being of two possible types: delay in performance, "Verzug," or impossibility, "Unmöglichkeit." After the enactment of the BGB in 1902, the courts developed a concept of positive breach, "positive Vertragsverletzung," for defective performance. See NORBERT HORN ET AL., GERMAN PRIVATE AND COMMERCIAL LAW: AN INTRODUCTION 105 (1982). The discovery of the necessity for positive breach occurred in 1904; see E.J. COHN, MANUAL OF GERMAN LAW 117 (2d ed. 1968). But cf. Eyal Zamir, Toward a General Concept of Conformity in the Performance of Contracts , 52 LA. L. REV. 1, 9 n.12 (1991) (standing alone in dating the development of the doctrine to the 1920s). The most likely date is 1902, with the delivery of an influential paper by Staub on a German Juristentag. See infra note 209 and accompanying text.

203. See BÜRGERLICHES GESETZBUCH [BGB] § 459.

204. See HORN ET AL., supra note 202, at 125-26.

205. See BGB § 463.

206. See HORN ET AL., supra note 202, at 127-28. Whether a warranty will be implied may depend on the type of trade involved. German courts may readily find implied warranties when used car dealers state that a car is road-worthy or overhauled. Id.

207. See COHN , supra note 202, at 134.

208. See BGB § 480.

209. See HORN ET AL., supra note 202, at 126.

210. See COHN, supra note 202, at 133; HORN ET AL. , supra note 202, at 112-14.

211. See VON MEHREN & GORDLEY , supra note , at 1114 n.49 (arguing also that certainty is a greater burden of proof in U.S. law than the normal burden of a preponderance of the evidence).

212. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

213. BGB § 252.

214. See id. § 252.

215. See GUENTER H. TREITEL, REMEDIES FOR BREACH OF CONTRACT 164 (1988).

216. Id. at 107.

217. See BGB § § 241-304.

218. See id. § 254(2).

219. See id. § 254(1). BGB § § 251 and 254(2) provide that if the buyer knows of the potential of high damages, he must warn the seller or have his damages reduced on the basis of comparative fault. BGB § 242, which requires good faith, has been cited as precluding disproportionate damages, but this argument has been disputed. See infra note 233. The "expectation ceiling" concept is traced to German law. See LOOKOFSKY, supra note 95, at 183-87.

220. See TREITEL, supra note 215, at 164 (stating that the legislative history of the BGB shows a deliberate rejection of the foreseeability test).

221. See VON MEHREN & GORDLEY , supra note 200, at 1115 n.53 (citing II/1 PLANCK (-STROHAL), KOMMENTAR ZUM BÜRGERLICHEN GESETZBUCH 252 (4th ed. 1914)).

222. Id. at 1115 n.57 (citing Judgment of Feb. 15, 1913, in 81 ENTSCHEIDUNGEN DES REICHSGERICHTS, ZIVILSACHEN [RGZ] 359).

223. See Peter Schlechtriem, Voraussehbarkeit und Schutzzweck einer verletzen Pflicht als Kriterium der Eingrenzung des ersatzfähigen schadens im deutschen Recht , in LAW IN EAST AND WEST 505, 512 (Institute of Comparative Law ed., 1988).

224. See id. at 514-15.

225. See id. at 514 (noting that [ULIS] foreseeability limitation influenced the development of German case law for domestic sales).

226. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

227. LUDWIG ENNECCERUS & HEINRICH LEHMAN, RECHT DER SCHULDVERHAELTNISSE 73 (15th ed. 1958).

228. Id.

229. See Schlechtriem, supra note 223, at 507-08.

230. TREITEL, supra note 215, at 163.

231. Id. at 163.

232. Id.

233. See Judgment of Oct. 24, 1980, 1981 IPRax at 97.

234. Id. at 97.

235. See id.

236. Id. at 97-98.

237. HANS DÖLLE, KOMMENTAR ZUM EINHEITLICHEN KAUFRECHT 63 (1976).

238. See TREITEL, supra note 215, at 164-65 (arguing that there is "a considerable degree of similarity between the two theories).

239. Id. at 164 (citations omitted).

240. Hadley v. Baxendale, 156 Eng. Rep. 145, 151 (1854).

241. Id. (stating the loss as one "reasonably . . . supposed to have been in the contemplation of both parties, at the time they made the contract").

242. See TREITEL, supra note 215, at 164-65.

243. See id.

244. See id. at 165. The example given is a contract to sell a house to a purchaser who could have made an unusually high profit out of a resale of the house. It is argued that under the Anglo-American foreseeability test, the buyer could not collect for more than ordinary lost profit, while in Germany, "so long as the `kind' of loss suffered satisfies the `adequate causation' test the defendant is liable to the full `extent' of the loss." Id. This state of affairs has led to reform movements in Germany to limit damages. See id. at 166. One suggestion, that BGB § 242 requiring good faith be used to limit damages, has been criticized as being too uncertain. See id. The criticism that German law does not recognize a principle requiring liability to be proportionate to the degree of fault led to a proposal for an amendment of the BGB that would make the degree of fault a relevant factor for reducing damages, which otherwise would be exceptionally high. An additional factor in German law that favors plaintiffs is that the expected consequences of a breach are determined at the time of the breach rather than at the time of formation. See id.

245. Judgment of Oct. 24, 1980, 1981 IPRax at 97.

246. See König, supra note 87, at 130.

247. See Schlechtriem, supra note 223, at 514-15.

248. See supra notes 177-78 and accompanying text.

249. See supra note 190.

250. See NIGEL FOSTER, GERMAN LAW & LEGAL SYSTEM 156 (1993); supra note 198 and accompanying text.

251. See generally Note, Public Opinion Surveys as Evidence: The Pollsters Go to Court , 66 HARV. L. REV. 498, 501-06 (1953) (identifying the hearsay rule and probative value as two major evidentiary problems surrounding the use of public opinion surveys in a court of law) [hereinafter Public Opinion]. In the United States, this type of polling evidence has been admitted in intellectual property cases to determine the similarity of products. See, e.g., Tomy Corp. v. P.G. Continental, Inc., 534 F. Supp. 595 (S.D.N.Y. 1982) (allowing survey which showed confusion between similar products admitted in unfair competition case); Miles Labs, Inc. v. Frolich, 195 F. Supp. 256 (S.D. Cal. 1961) (allowing a survey which demonstrated confusion between trademark owner's name and that of an alleged infringer). The results of surveys have also been admitted in support of motions for change of venue. See, e.g., United States v. Tokars, 839 F. Supp. 1578 (N.D. Ga. 1993) (admitting a survey into evidence to show that a substantial portion of potential jurors had already formed an opinion regarding a criminal defendant's guilt or innocence).

Although defendants in many cases, especially obscenity cases, often try to have surveys admitted to show that the materials at issue were not offensive when judged by contemporary community standards, such polls are infrequently admitted into evidence because it is difficult to fashion questions that will produce relevant responses. See, e.g., United States v. Pryba, 678 F. Supp. 1225 (E.D. Va. 1988) (excluding a public opinion poll because questions were not designed to elicit information about whether there was community acceptance of materials in question); State v. Cooley, 766 S.W.2d 133 (Mo. Ct. App. 1989) (excluding survey offered to show that other neighborhood stores sold similar materials and that defendant's publications therefore did not offend community standards).

In administrative hearings, however, where there are less formal rules of evidence, such polls often have been admitted into evidence. See, e.g., Arrow Metal Prods. Corp. v. FTC, 249 F.2d 83 (3rd Cir. 1957) (upholding FTC's admission of survey offered to show whether a term was capable of deceiving the public).

252. Public Opinion, supra note 251, at 507.

253. See id., supra note 251, at 507.

254. See Judgment of Oct. 24, 1980, 1981 IPRax at 98; supra note 196 and accompanying text.

255. See Delchi, 1994 WL 495787, at *5. The district court first cited JOHN HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES § 415 (2d ed. 1991) for the proposition that the "CISG permits recovery of lost profit resulting from a diminished volume of sales." Delchi, at *6. Second, the district court cited a Comment for the proposition that CISG Article 74 "seeks to provide an injured party with the benefit of the bargain." Id. at *4 (citing Sutton, supra note 19, at 742-43).

256. For a recently published bibliography giving a detailed list of this literature, see WILL, supra note 159.

257. Kritzer, supra note 3, at 109.

258. CISG art. 7(1), supra note 1, S. TREATY DOC. NO. 9 at 23, 19 I.L.M. at 673.

259. Commentary, art. 6, supra note 26, at 17.

260. LOOKOFSKY, supra note 95, at 283 n.158.

261. CISG art. 7(2), supra note 1, S. TREATY DOC. NO. 9 at 23-24, 19 I.L.M. at 673.

262. Articles 27 and 28 of the Einführungsgesetz zum Bürgerliches Gesetzbuch ("EGBGB") state that if no choice of law is indicated in the contract, courts should apply the law to which the contract has the most significant relationship. EGBGB art. 28(1). For another view, see DANNEMANN, supra note 27, at 54 (stating that German scholars are debating whether issues left to domestic law should be addressed by "applying the law that has the closest link with the particular question, or whether one should assume a hypothetical `proper law of the contract'").

263. See Codice Civile § 1225 (Italy).

264. See DANNEMANN, supra note 27, at 5 (noting that "the influence of scholars on the interpretation and development of law is much greater in Germany than in most common law countries").

265. Sutton, supra note 19, at 741.

266.

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