CISG-online 396

Jurisdiction Germany

Tribunal Bundesgerichtshof (German Supreme Court)

Date of the decision 24 March 1999

Case no./docket no. VIII ZR 121/98

Case name Vine wax case

Translation by Birgit Kurtz*

Facts of the case:

In a letter dated 18 January 1994, [Buyer] asked [Seller], as in previous years, to submit an 2
offer for «about 5,000 kg black vine wax.» With reference to this letter, [Seller] offered to
[Buyer], in a letter dated 21 January 1994, 5,000 kg of «black vine wax» at the price of
DM [Deutsche Mark] 5.43 per kilogram. On 31 January 1994, [Buyer] placed such an order.

The wax which was thereupon delivered to [Buyer] was a type of wax newly developed by 3
S[...] Werke, as requested by [Seller]. [Seller] had neither actually received nor inspected the
goods prior to delivery to [Buyer]. The delivery took place in the original packaging directly
from the manufacturer, S[...] Werke, as requested by [Seller] via the F[...] W[...] Company.

[Buyer] partially used the wax for the treatment of its own vines. In addition, [Buyer] also sold 4
the wax and vines which had been treated in its nursery with the wax to other nurseries which,
in turn, treated their vines with the wax and also delivered vines that had been treated with
the help of the wax to other customers.

In a letter dated 16 June 1994, [Buyer] gave notice of the defective wax to [Seller] and com- 5
plained of major damage to vines treated with the wax. In the lawsuit at issue, [Buyer] de-
mands the value of sA [Austrian Schillings] 14,146,348.40 in damages from [Seller]. [Seller]
refuses to compensate [Buyer]. [Seller] attributes the alleged damages to frost and argues
that it is exempt from any liability as an intermediary pursuant to Art. 79 CISG because the
reasons for the damages are out of its control. In addition, [Seller] argues that the asserted
damages are excluded by its general terms and conditions of sale.

*
Birgit Kurtz is an attorney in New York City (USA).
 CISG-online 396 (Translation)

The Landgericht [Court of First Instance] dismissed the complaint. Upon the appeal of [Buyer], 6
the Oberlandesgericht [Court of Appeal] held that the complaint presented a valid cause of
action and remanded the case to the Landgericht for further hearings on the amount of dam-
ages. The appeal of [Seller] argues against this and requests the reinstatement of the Land-
gericht judgment.

Reasons for the Decision:

[The Court held that] [Buyer] had a claim for damages against [Seller] pursuant to Art. 45(1)(b) 8
CISG in connection with Arts. 74–77 CISG, from which [Seller] could not be exempted by
Art. 79 CISG.

[The Court found that] the black vine wax delivered by [Seller] did not meet industry standards 9
and was therefore not in conformity with the contract pursuant to Art. 35(1) CISG. [The Court
stated that] on the basis of the expert’s opinion, the defectiveness of the wax was proven
without a doubt. [The Court pointed out that] insofar as [Seller] denied that the delivered vine
wax was the cause of the damage, this was unsubstantiated.

[The Court held that] [Seller]’s liability was not excluded by [Seller]’s terms and conditions of 10
sale. They did not become part of the contract. Moreover, they were invalid because they
violated § 9 AGBG [German Act on Standard Terms] by excluding damage claims completely.

[The Court held that] [Seller]’s liability was also not exempted by Art. 79 CISG. Because [Seller] 11
itself herself had commissioned the development of the new type of wax that was delivered
to [Buyer], an exemption was only possible if [Seller] could rely on the newly developed wax
having been exhaustively tested. This was not, however, the case. [The Court stated that] as
a result, the impediment pursuant to Art. 79(1) CISG was not beyond [Seller]’s control. [Seller]
could have avoided the defect. [Seller] should have had the new product tested for plant com-
patibility.

[The Court held that,] therefore, [Buyer] has a cause of action for compensation of its actual 12
financial damages because of the delivery of the defective wax in 1994.

[The Court held that,] with respect to the extent of the damages caused by the defect, the 13
matter was not yet ripe for decision. For this purpose, further determinations, especially an
evidentiary hearing, are necessary to determine the extent of the damages suffered by [Buyer]
in its own vine nursery with respect to the vines intended for sale as well as the extent of its
losses as a result of having to reimburse its customers for damages suffered due to the defec-
tive vines and its customers’ property loss caused by the use of the defective wax.

II. 14
These views do not withstand legal scrutiny on appeal in all points.

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1. 15
The appeal tries unsuccessfully to overturn the decision of the Lower Court with respect to
the defectiveness of the black vine wax delivered to [Buyer] by [Seller] in 1994.

The Court of Appeal correctly justifies its decision by the fact that the expert determined, 16
without any reservations, that pursuant to his experiments and analyses there is no doubt
that a causal connection existed between the vine wax used and the damages to the vine
nursery’s field.

The appeal unsuccessfully attacks the expert’s knowledge with the reproach that, while he 17
was only an expert in biology, he still conducted chemical and physical experiments and ana-
lyzed the results himself. The deciding determination that the use of the sold wax caused the
damage to [Buyer]’s plants, was found by the expert in a field test whereby 500 vines were
paraffined with the result that the plants that were treated with the wax in dispute were heav-
ily damaged. Contrary to the argument of the appeal, there is no need for an additional ex-
pert’s opinion based on chemistry and physics to determine which specific harmful substance
in the wax was responsible for the damages. The Court of Appeal correctly relies on the fact
that [Seller] was obligated, pursuant to Art. 35(2)(a) CISG, to deliver wax that is suitable for
the treatment of vines, but that the black vine wax delivered by [Seller] in 1994 did not meet
the industry standards – of which both parties were aware and which both parties applied –
and that therefore the wax was not in conformity with the contract within the meaning of
Art. 35 CISG.

2. 18
The appeal further asserts that [Seller] is, in any event, not liable for the damages caused by
the use of the vine wax because it was only the intermediary and, therefore, the vine wax’s
non-conformity with the contract was beyond its control (Art. 79 CISG). This attack is also un-
successful.

a) 19
It may remain undecided whether Art. 79 CISG encompasses all conceivable cases and forms
of non-performance of contractual obligations creating a liability and is not limited to certain
types of contractual violations and, therefore, includes the delivery of goods not in conformity
with the contract because of their defectiveness (compare Stoll, in: Schlechtriem (ed.), Kom-
mentar zum Einheitlichen UN-Kaufrecht, 2nd ed. 1995, Art. 79 paras. 45–47; Magnus, in: Stau-
dinger, [Kommentar zum BGB], Wiener UN-Kaufrecht, 1994, Art. 79 paras. 25–26; Piltz, Inter-
nationales Kaufrecht, Munich 1993, § 4 Rn. 217 et seq.; Herber/Czerwenka, Internationales
Kaufrecht, Munich 1991, Art. 79 para. 8; Schlechtriem, Internationales UN-Kaufrecht, Tü-
bingen 1996, p. 164 et seq.), or whether a seller who has delivered defective goods cannot
rely on Art. 79 CISG at all (compare Nicholas, ‘Impracticability and Impossibility in the UN Con-
vention on Contracts for the International Sale of Goods’, in: N.M. Galston/H. Smit (eds.), In-
ternational Sales, New York, Mathew Bender, 1984, Chapter 5 – 5.10 to 5.14; Tallon, in:
Bianca/Bonell (eds.), Commentary on the International Sales Law, Milan 1987, Art. 79
note 2.6.2.; J.O. Honnold, Uniform Law for International Sales under the United Nations Con-
vention, December 1982, Art. 79 para. 427; compare also Lautenbach, Die Haftungsbefreiung
im internationalen Warenkauf nach dem UN-Kaufrecht und dem schweizerischen Kaufrecht,

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Doctor’s Thesis at the University of Zurich, 1990, p. 33 et seq.; Keil, Die Haftungsbefreiung des
Schuldners im UN-Kaufrecht, Doctor’s Thesis at the Law Faculty of the Ruhr-University Bo-
chum, Frankfurt am Main 1993, p. 18 et seq.). An exemption pursuant to Art. 79 CISG, upon
which the Court of Appeal correctly based its decision, is not applicable because, in any case,
the defectiveness of the vine wax was not outside [Seller]’s control. It is, therefore, responsi-
ble for the consequences of a delivery of goods not in conformity with the contract.

The possibility of exemption under Art. 79 CISG does not change the allocation of the contrac- 20
tual risk. According to the [CISG], the reason for the seller’s liability is that he has agreed to
provide the purchaser with goods that are in conformity with the contract. If the supplier’s (or
suppliers’) breach of the contract is a general impediment within the meaning of Art. 79 CISG
at all, it is generally an impediment that the seller must avoid or overcome according to the
content of the contract of sale. This follows the typical meaning of such a contract (Magnus,
in: Honsell (ed.), Kommentar zum UN-Kaufrecht, 1997, Art. 79 para. 10; but see Stoll, supra,
Art. 79 paras. 47 et seq. with further citations). From the buyer’s point of view, it makes no
difference whether the seller produces the goods himself – with the consequence that the
non-performance is generally in his actual control so that, as a rule, an exemption pursuant to
Art. 79(1) CISG is generally excluded – or whether the seller obtains the goods from suppliers.
Just as in the case of unspecified obligations [Gattungsschulden], where the seller is liable for
the timely delivery by his supplier (compare, e.g., Magnus in Staudinger, supra, Art. 79
para. 22; Stoll, supra, Art. 79 paras. 30 et seq.), he is also responsible to see that his supplier
delivers defect-free goods. In this respect, the [CISG] does not distinguish between an un-
timely delivery and a delivery of goods not in conformity with the contract. For both breaches
of contract, the same standard of liability applies. The appeal does not indicate that the parties
agreed to a different allocation of risk at the formation of the contract, nor is this otherwise
apparent.

Pursuant to Art. 79 CISG, the seller’s exemption from consequences of goods not in conform- 21
ity with the contract can only be considered – if at all (see above) – when the non-conformity
cannot be deemed to be within the seller’s control. Because the seller has the risk of acquisi-
tion (as shown), he can only be exempted under Art. 79 (1) or (2) CISG (even when the reasons
for the defectiveness of the goods are – as here – within the control of his supplier or his sub-
supplier) if the defectiveness is due to circumstances out of his own control and out of each
of his suppliers’ control. The appeal cannot show this. Insofar as the appeal points out that
the manufacturer, in 1994, used an inappropriate raw material possibly imported from Hun-
gary during the production of the delivered vine wax, this is not relevant with respect to
Art. 79 CISG because the manufacturer would be liable – and thus also [Buyer] vis-à-vis [Seller]
– for those product defects within its control.

b) 22
For this reason, the basic responsibility of [Seller] for [Buyer]’s damages is not questioned by
the appeal’s argument that the damage would have occurred in the same way if [Seller] in
1994 had delivered the same vine wax to [Buyer] as it had delivered in prior years and that
was used by [Buyer] without any damages instead of the newly developed vine wax, because
all brands of vine wax produced by the manufacturer in that year had the same defect due to
the defective raw materials used only in this year. That is so because [Seller] would also have
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been liable for [Buyer]’s damages in this hypothetical case. The liability under the [CISG] is,
contrary to the Lower Court ‘s opinion, not based on the supplier’s obligation to inspect the
goods before delivery to its purchaser, which – according to the appeal – was not necessary
in this case because the vine wax previously purchased had always been free of defects. That
is so because the seller’s culpability is not important due to the statutory allocation of risk and
the lack of a different agreement between the parties concerning the allocation of risk, result-
ing in a guarantee [warranty] liability of the seller.

3. 23
We do not disagree with the Court of Appeal’s view (not questioned on this appeal) that
[Seller]’s liability was not excluded under its terms and conditions because they did not be-
come part of the contract and, moreover, violated § 9 ABGB by completely excluding damage
claims.

4. 24
The appeal, however, correctly argues that the Court of Appeal did not review the question
whether and to what extent [Buyer] carries a joint responsibility for the damages pursuant to
Art. 77 CISG.

a) 25
The question whether, during the litigation with respect to the legal basis of the claim, a deci-
sion must be made concerning the violation of an obligation to mitigate the damages pursuant
to Art. 77 CISG or whether it is reserved for separate proceedings concerning the amount of
the claim, must be decided according to the principles developed with respect to § 254 BGB
[German Civil Code]; the principle of autonomous interpretation of the [CISG] (Art. 7 CISG) is
not contradictory because this is a question of procedural law.

Art. 77 CISG establishes a defense that may exclude a claim and must be considered sua 26
sponte (Stoll, supra, Art. 77 CISG para. 12 with further citations). The failure to meet the duty
to mitigate damages can result in the complete exclusion of compensation insofar as damages
could have been avoided altogether (compare Stoll, supra). As a rule, the review of the failure
to observe the duty to mitigate damages pursuant to Art. 77 CISG must take place as part of
the decision as to the existence of a cause of action. Only when it is certain that the failure to
meet the duty to mitigate damages does not lead to the exclusion of liability and, thus, a claim
of the injured party remains, the decision about [the failure to mitigate damages] can be re-
served for separate proceedings concerning the amount of the claim. If, in the decision with
respect to the existence of a claim, some individual questions regarding the existence of a
claim are ignored and their clarification is left to a separate proceeding concerning the amount
of the claim, the main holding, or at least the grounds of the decision, must show which points
concerning the existence of the liability have not been decided in the decision on the existence
of a claim. This has long been accepted by the Courts in the review of contributory negligence
pursuant to § 254 BGB (compare BGH, 11 July 1974 – II ZR 31/73, VersR 1974, 1172 at 6; BGH,
31 January 1990 – VIII ZR 314/88, NJW 1990, 1106 at II 2 b aa; BGH, 31 January 1996 –
VIII ZR 243/94, NJW-RR 1996, 700 at II 1 d aa), and the same applies to Art. 77 CISG.

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b) 27
The Court of Appeal did not, as the appeal correctly argues, deal with the question of [Buyer]’s
joint responsibility for the damage, neither in the main holding nor in the grounds for the
decision. It thus passed over [Seller]’s argument that [Buyer] continued to use the vine wax in
dispute after it – when only a little more than half of the vines in the vine nursery had been
treated – had learned about its defectiveness. Because the Court of Appeal did not make an
appropriate reservation, it would be prevented by § 318 ZPO [German Code of Civil Proce-
dure] from considering [Buyer]’s alleged joint responsibility for the damages in the further
course of the lawsuit (compare BGH, 31 January 1990, supra).

5. 28
Finally, the appeal correctly argues that the Court of Appeal did not address [Seller]’s argu-
ment that [Buyer] had also applied the wax for a purpose not intended, namely the treatment
of young vines supposed to be planted into so-called «young fields,» even though it was only
offered by [Seller] and ordered by [Buyer] for the purpose of vine grafting.

If [Buyer] used the delivered vine wax for a purpose for which it was not meant to be used 29
under the contractual agreement, [Seller] is not liable for resulting damages. There would be
no causal connection between the violation of the statutory obligations set forth in Art. 35
CISG and the damages appearing in the young fields.

According to the reasons under Point 4, the [Court of Appeal] should have either made an 30
explicit decision about [Seller]’s liability for the damages caused by the use of the delivered
wax on «young fields,» or – if not – the Court at least should have made an appropriate res-
ervation in the decision. Both are missing.

III. 31
Because further determinations by the trial judge are necessary, the Court of Appeal’s deci-
sion must be reversed and remanded to the Court of Appeal for further trial and decision.