Austria 24 January 2002 Appellate Court Graz (Excavator case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020124a3.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 4 R 219/01k
CASE HISTORY: 1st instance LG Leoben (4 Cg 56/99p-23) 23 May 2001 [affirmed]
SELLER'S COUNTRY: Germany (plaintiff)
BUYER'S COUNTRY: Austria (defendant)
GOODS INVOLVED: Excavator
APPLICATION OF CISG: Yes [Article 1(1)(a)]
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
63A [Notice fixing additional final period for buyer's performance]; 64A21 [Seller's right to avoid contract (grounds for avoidance): buyer does not pay or take delivery within an additional period set by the seller under art. 63]; 74A [General rules for measuring damages: loss suffered as consequence of breach]; 75A1 [Damages established by substitute transaction (substitute transaction after avoidance): resale by aggrieved seller]; 76B [Damages based on current price]; 77A [Obligation to take reasonable measures to mitigate damages]
63A [Notice fixing additional final period for buyer's performance];
64A21 [Seller's right to avoid contract (grounds for avoidance): buyer does not pay or take delivery within an additional period set by the seller under art. 63];
74A [General rules for measuring damages: loss suffered as consequence of breach];
75A1 [Damages established by substitute transaction (substitute transaction after avoidance): resale by aggrieved seller];
76B [Damages based on current price];
77A [Obligation to take reasonable measures to mitigate damages]
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CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): Go to CISG-online.ch website <http://www.cisg-online.ch/cisg/overview.cfm?test=801> for link to pdf presentation of case text
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
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Queen Mary Case Translation Programme
24 January 2002 [4 R 219/01k]
Translation [*] by Veit Konrad [**]
Edited by Jan Henning Berg [***]
In 1998, Plaintiff [Seller], a German retailer, purchased a used excavator (Model O + K RH 30 HL) from an Austrian company, payable with an exchange bill for Deutsche Mark [DM] 80,000 due within three months. Defendant [Buyer], seated in Austria, entered into negotiations for the excavator with [Seller], planning to resell it to [Buyer]'s prospective customer.
In June 1998, [Buyer]'s manager inspected the excavator at [Seller]'s place of business in Germany. [Seller] offered the goods to [Buyer] for DM 120,000. The offer was meant to be valid for fourteen days, during which [Buyer] intended to enter into negations with its prospective customer, while [Seller] guaranteed not to sell the excavator to another party meanwhile. In a telecopy dated 9 September 1998, [Buyer] asked [Seller] for a pro forma bill documenting the planned purchase of the excavator and for an extension of [Seller]'s offer until 21 September 1998. Complying with that request, [Seller] sent a pro forma bill concerning [Buyer]'s purchase of the excavator for a price of DM 120,000. In a responding telecopy dated 21 September 1998, [Buyer] accepted [Seller]'s offer entering into a sales contract over the excavator for the amount of DM 120,000.
In September 1998, [Buyer]'s manager, together with a representative of its prospective customer, inspected the excavator at [Seller]'s place of business. The prospective customer expressed disinterest in the purchase of this excavator referring to the poor state of condition as a result of its age and usage and to a noticeable leaking of oil. During a second inspection, [Buyer]'s manager and the manager of its prospective customer discovered that it was the hydraulic pump leaking oil. After this damage had been repaired, [Buyer] informed [Seller] in a telephone call that it would pay the agreed purchase price by 7 October 1998. After this time limit had expired without payment, [Seller] declared that it was willing to prolong the deadline "for another four to six weeks" on the condition that [Buyer] provide [Seller] with a bank guarantee. [Buyer] did not comply, [Seller] then offered to accept payment by a bill of exchange. However, [Buyer] returned the bill to [Seller] unsigned.
In a letter dated 2 November 1998, [Seller] asked for payment by 18 November 1998. [Buyer] responded that, according to their agreement, payment should not be due before delivery of the excavator. [Buyer] further asked for an additional time extension assuring that its prospective customer would eventually buy the excavator. In a letter dated 31 November 1998, [Seller] demanded payment by 2 December 1998 and notified [Buyer] that, in case of noncompliance, [Seller] would refuse to accept payment and claim damages. On 3 December 1998, after the set deadline had unsuccessfully expired, [Seller] sold the excavator to another buyer, company F., for DM 80,000. In its letter of 9 December 1998, [Buyer] assured that it would make payment before the end of 1998.
RULING IN FIRST INSTANCE
On 1 April 1999, [Seller] brought a claim (see: Judgment of District Court [Landesgericht] Leoben; 23 May 2001, Docket no. 4 Cg 56/99p-23) for DM 40,000 plus 4% interest since 1 October 1998 as loss of profit which [Seller] suffered due to [Buyer]'s failure to pay for the excavator. The sum constitutes the remainder of the agreed purchase price of DM 120,000 minus the amount of DM 80,000 [Seller] gained from reselling the goods. In its claim, [Seller] alleged that as a consequence of [Buyer]'s failure to pay for the goods within a reasonable time, [Seller] was compelled to resell the goods to avoid the blocking of its bank account. Accordingly, [Buyer] had to come up with the difference between the contract price and the price in the substitute transaction.
[Buyer] responded that the sales agreement with [Seller] was subject to the condition that the goods had been found conforming with the contract. In its first inspection in September 1998, [Buyer] had discovered several substantial defects. In the second inspection, it had turned out the excavator still did not meet the standards of [Buyer]'s prospective customer. Although, after the second inspection, [Buyer]'s prospective customer had withdrawn its offer, [Buyer] had offered to maintain the contract. However, as the excavator had not been fit for delivery and as [Seller] had resold the good before the lack of conformity had been remedied, [Buyer]'s failure to comply with its duty to deliver payment and the loss of profit [Seller] suffered fell within [Seller]'s own responsibility.
[Buyer] further cast doubt on whether [Seller] itself had actually been the owner of the excavator meaning that it lacked the right to bring its claim before the court.
Furthermore, [Buyer] argued that [Seller] resold the excavator under its value; that this did not comply with [Seller]'s duty to mitigate the suffered loss of profit; and thus [Seller] could not rely on a claimed breach of contract on [Buyer]'s side.
The Court of First Instance (Judgment of District Court [Landesgericht] Leoben; 23 May 2001, Docket no. 4 Cg 56/99p-23) held that [Seller]'s claim for damages was justified.
The Court held that [Buyer] failed to comply with its contractual duty for payment. Therefore, [Seller] was entitled to declare the contract avoided under Art. 64(1) CISG. In that event, according to Art. 75 CISG, [Seller] was allowed to resell the goods and to recover an amount of DM 40,000 being the difference between the contract price and the price in the substitute transaction. According to the District Court, [Seller] had not breached its duty to mitigate the loss it suffered from [Buyer]'s breach of contract by reselling the excavator under value to another buyer.
In its appeal (Berufung), [Buyer] seeks to overturn that judgment and to have [Seller]'s claim for damages dismissed. In the alternative, [Buyer] seeks the quashing of the judgment and a retrial of the case before the District Court. [Buyer]'s appeal is based on a presumed misinterpretation of substantive law and on several claimed procedural errors within the proceedings before the District Court.
Correspondingly, [Seller] seeks the confirmation of the District Court's judgment by the Appellate Court.
REASONING OF THE COURT
[Buyer]'s appeal is dismissed.
The District Court refused to allow a report of an expert witness on construction machinery and ignored [Buyer]'s motion to summon a particular representative of the F. Company in order to prove that [Seller] resold the excavator considerably under value. However, this does not amount to a procedural error which would justify an appeal.
The District Court's failure to allow the report of [Buyer]'s expert witness would only justify an appeal if [Buyer] had been deprived of its right to have its case heard in court. Yet, it turns out that even on the assumption that the goods had actually been resold under the current price, this would have had no impact on [Seller]'s claim for damages. Hence, [Buyer]'s submission of evidence would have been irrelevant for the case. Consequently, the District Court's dismissal did not deprive [Seller] of its right to be heard in court.
Concerning the summoning of a particular representative of the F. Company who had been associated with the transaction but whose identity was unknown to [Buyer], the District Court correctly held that such a motion is not specific enough to be admissible under § 277 of the Austrian Code of Civil Procedure [Zivilprozeßordnung (ZPO)].
Therefore, [Buyer]'s appeal cannot be upheld as far as it is based on the assumption of procedural errors.
Nor can the appeal be justified based on a presupposed misinterpretation of substantive law.
The Court of First Instance correctly held that the parties had their places of business in Member States of the Convention (see: BGBl 96/1988; 303/90; 261/1989). According to Art 1, the contract is therefore governed by the CISG.
[Seller] had resold the excavator to the F. company for an amount of DM 80,000. As many facts indicate, [Seller] must be assumed to be the owner of the excavator. There is no evidence whatsoever which would put this assumption into doubt. Hence, [Seller] was entitled to dispose of the property of the goods and to resell the excavator to F.
[Buyer]'s failure to pay the agreed purchase price of DM 120,000 constituted a breach of contract under Art. 53 CISG. In this event, according to Art. 64(1)(b) CISG, [Seller] was entitled to declare the contract avoided. In its letter dated 30 November 1998, [Seller] declared that it would refuse to accept payment after the prolonged time limit had unsuccessfully expired and that it would in that case claim damages for breach of contract. This statement must be interpreted as an avoidance of the contract in the event that the buyer let the time limit for payment expire. As this was the case, [Seller] is entitled to damages under Arts. 75-76 CISG. [Seller] may choose between reselling the goods and recovering the difference between the contract price and the price in the substitute transaction following Art. 75, or, without reselling the goods, [Seller] may recover the difference between the contract price and the current price at the time of the avoidance, Art. 76(1). Within the scope of Art. 76(1), the current price is the price prevailing at the place where delivery of the goods should have been made, or if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods (Art. 76(2) CISG).
In reselling the excavator to the F. Company, [Seller] opted for recovery under Art. 74 CISG. Art. 74 CISG, following the principle of full compensation, provides that in case of a breach of contract the aggrieved party may claim damages consisting of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. The sum may not exceed the loss which the party in breach of contract 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 it then knew or ought to have known as a possible consequence of the breach of contract (Art. 74, sentence two). The loss of profit a seller suffers from reselling the goods to another customer is to be considered foreseeable damages in the sense that Art. 74, sentence two requires, and thus is to be remedied under Art. 74 CISG (See: Staudinger, Commentary to the Civil Code, Wiener Un-Kaufrecht Art. 74, note 43; EvBl. 2000/167).
The difference between the contract price and the current price recoverable under Art. 76 CISG is irrelevant if, as was the case here, [Seller] claims damages under Art. 75 (see Karollus, UN-Kaufrecht, pages 218 et seq.), going for the difference between contract price and price in the substitute transaction.
Responding to [Buyer]'s breach of contract, [Seller] resold the excavator to another customer, the F. Company. The loss of profit suffered, i.e., the difference between the price agreed with [Buyer] (DM 120,000) and its costs (DM 80,000), amounts to DM 40,000. This remainder is due under Art. 75.
Regarding [Buyer]'s claim that, in reselling the excavator, [Seller] failed to comply with its obligation under Art. 77 CISG to mitigate its loss of profit, it must be noted that Art. 77 does not constitute an actual duty against others but a mere obligation for oneself to mitigate damages if relying on a breach of contract. The obligation stated in Art. 77 CISG is to be interpreted taking into account the competing interests of the parties, as well as commercial customs and the principle of good faith (see Karollus, ibidem, page 225).
[Seller] resold the goods for the same amount that it had acquired the goods itself. There is no evidence that [Seller] passed over an opportunity to sell the excavator for a higher price. [Buyer]'s submission that, according to the report of an expert witness, [Seller] had sold the goods for less than the current price, even if it was true, cannot forfeit [Seller]'s claim for damages under Art. 77, and is thus irrelevant. It must be assumed that [Seller] complied with its obligation to mitigate losses under Art. 77 CISG (see Karollus, ibidem, page 224; EvBl. 200=/167; RdW 1996, 203).
Therefore [Buyer]'s appeal must be dismissed.
[Buyer] has to bear the costs to the extent §§ 41, 500 of the Austrian Code of Civil Procedure [Zivilprozeßordnung (ZPO)] require.
A second appeal (ordentliche Revision) under § 502(1) of the Austrian Code of Civil Procedure cannot be sustained. ...
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Germany is referred to as [Seller] and Defendant of Austria is referred to as [Buyer].
** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.
*** Jan Henning Berg is a law student at the University of Osnabrück, Germany, who participated in the 13th Willem C. Vis Moot with the Osnabrück team. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and the 4th Willem Vis (East) Moot.Go to Case Table of Contents