Court of Appeals (Oberlandesgericht) Kln

8 January 1997 [27 U 58/96]

Translation [*] by Ruth M. Janal [**]
Translation edited by Camilla Baasch Andersen [***]
REASONING OF THE COURT

The [buyer]'s appeal is admissible and partially successful.

I. The Court of First Instance, LG [*] Aachen, also possessed the international
jurisdiction to decide upon the counterclaim. The matter of jurisdiction needs to be
examined by the Appellate Court, as 512a ZPO [*] (which provides that the
affirmation of the local jurisdiction by the Court of First Instance cannot be reviewed
by the Court of Appeals), does not apply to the question of international jurisdiction
(cf. BGH [*] GSZ 44, 46). However, the Court of First Instance was correct in
assuming its jurisdiction.
[The Appellate Court rejects the application of Art. 18 Brussels Convention]
The jurisdiction of the Court of First Instance does not result from Art. 18, sent. 1,
Brussels Convention [*], which was ratified by both the Federal Republic of Germany
and The Netherlands (cf. Zller/Geimer, ZPO, 20th ed., Art. 1 Brussels Convention n.
1), and which therefore principally applies to the present dispute. According to this
provision, a court of a Contracting State before whom a defendant enters an
appearance shall have jurisdiction. Under Art. 18, sent. 2, Brussels Convention, this
rule does not apply where appearance was entered solely to contest the jurisdiction. If
the defendant appears and contests the jurisdiction, it may at the same time make
alternative pleadings regarding the substantive law without losing its objection to the
jurisdiction (cf. ECJ [*] NJW [*] 1984, 2760). The party objected to the international
jurisdiction of the Court of First Instance during the first instance proceedings and
therefore did not lose its right to contest the jurisdiction by making alternative
pleadings regarding the substantive law.
The international jurisdiction of German courts over the [buyer]'s counterclaim was
not validly excluded by the [seller]'s standard terms and conditions. Clause 17 of the
German version of these standard terms provides:

"Exclusive forum for all disputes arising out of the legal relationship between the
parties is for both parties the court to which the district Tilburg [Netherlands] belongs
at the time of the delivery. We do, however, reserve the right to bring an action before
the court of the other party's domicile or place of business."
[The Appellate Court interprets the prorogation clause]
This clause also excludes the international jurisdiction of German courts over
counterclaims against the [seller]. Whether the prorogation of a foreign jurisdiction
also encompasses the derogation of the German jurisdiction over a counterclaim needs
to be determined through an interpretation of the forum selection agreement (cf.
Schumann in Stein/Jonas, ZPO, 20th ed., 33 n. 41; Zller/Geimer, Art. 17 Brussels
Convention n. 16, 17). The interpretation of a forum selection clause in the present
form is controversial.
Following one scholarly opinion, it does not correspond to the typical intention of the
parties to exclude the possibility of a counterclaim action at the derogated forum, even
in the case that the party bringing the counterclaim is being sued at that place. Thus,
the possibility of bringing a counterclaim at the derogated forum can only be excluded
by explicit stipulation (see Zller/Geimer, Art. 17 Brussels Convention n. 17).
The Appellate Court does not side with this opinion, instead it follows the opposing
view held by the Federal Supreme Court of Germany (BGH) [*]. The starting point of
the BGH's view is the principle that a derogation may occur by ways of a positive
forum selection agreement, if the interpretation of the clause leads to the conclusion
that all other jurisdictions - including the one for the counterclaim - are intended to be
excluded by the agreement (BGH NJW-RR [*]). The derogation of the counterclaim
forum is also not precluded by the fact that the plaintiff [seller] brought its action
originally before a court without jurisdictional competence (BGH NJW [*] 1981,
2645; NJW-RR 1987, 229). Thus, even if the plaintiff [seller] had brought its action
before a court that did not possess jurisdiction, [seller] would still be entitled to object
to the jurisdiction of that very court regarding the [buyer]'s counterclaim.
The prorogation of a foreign jurisdiction by way of a contract clause such as no. 17 of
the [seller]'s conditions includes the derogation of the German jurisdiction for the
counterclaim. If, under the forum selection clause, the [seller]'s customer is only able
to bring an action before a foreign court, this includes the counterclaim. A restrictive
interpretation of the contract, to the extent that the counterclaim does not fall under
that clause, is excluded by a comparison of the parties' interests. A forum selection
clause contained in the general conditions of one party is supposed to favor the party
who incorporated the standard terms into the contract. An interpretation of the clause
which deviates from its wording to that party's disadvantage needs to be justified with

important considerations. Such reasons are nonexistent in the present case. The
customer is under no circumstances being treated unfairly if [buyer] is precluded from
suing the [seller] in the court in which the original claim is pending. The party who
relies on the general conditions is acting in its customer's interest by suing [seller] at
the customer's place of business. The customer may not benefit further from this
concession in the way that the party relying on the general conditions would now also
be obliged to have [seller] sued at the customer's place of business (BGH NJW 1969,
1537; see also BGH NJW 1972, 1671; NJW 1981, 2645). Therefore, clause 17 of the
[seller]'s standard terms precludes the [buyer]'s possibility to sue the [seller] on a
counterclaim before a German court.
[However, the Appellate Court finds that the forum selection clause was not
validly agreed upon]
Nevertheless, the [seller] cannot successfully rely on its general terms and conditions
for the matter of international jurisdiction, as the forum selection clause in its standard
terms was not validly incorporated into the contract.
The requirements for the inclusion of a forum selection clause under Art. 17 para. 1,
sent. 2, Brussels Convention are not met in the present case. There is no indication
that the parties have established between themselves a form [of practice] for an
agreement conferring jurisdiction (Art. 17 para. 1, sent. 2(b), Brussels Convention).
Furthermore, it is neither apparent nor submitted by the [seller] that an international
trade usage exists which could lead to the validity of the forum selection clause (Art.
17 para.1, sent. 2(c), Brussels Convention).
The requirements of Art. 17 para. 1, sent. 2(a), according to which an agreement
conferring jurisdiction shall be either in writing or evidenced in writing, are also not
met. Admittedly, the two pieces in writing of 10 December 1993, that are described as
"confirmation of order" and are signed by both parties, are evidenced in writing.
However, the further "confirmation of order" of the same day regarding the delivery
of a hide stripping device and a used leather tacking machine was signed solely by the
[seller] and constitutes a written confirmation of an oral contractual agreement in the
meaning of a document "partially in writing" (cf. BGH [*] NJW [*] 1994, 2700).
The requirements of Art. 17 Brussels Convention are met by these order confirmations
insofar as the wording of the contract itself explicitly refers to the forum selection
clause in the [seller]'s standard terms (cf. ECJ [*] NJW 1977, 494; BGH NJW 1994,
2700). However, this fact alone is not sufficient for an incorporation of the forum
selection clause into the contract. It rather needs to be established that the standard
terms were in fact available to the other party at the time of the conclusion of the
contract (ECJ, op. cit.; BGH op. cit.). The [seller] did not explicitly deny the [buyer]'s

objection that the [seller]'s standard terms were not made available to [buyer] with
respect to the contracts at issue, and the [seller] offered no proof to that effect. [Seller]
relies solely on the contention that the [buyer] had received [seller]'s general terms in
the process of an earlier transaction in the year 1990. This, however, would not be
sufficient to validly incorporate the forum selection clause into the contracts at issue.
An agreement regarding a forum selection clause contained in general conditions is with regard to the principle of good faith - also assumed to be formed, if the contract
was concluded orally in the framework of continuous business relations between the
parties and if it is clear that these relations in their entirety underlie certain standard
terms which contain a clause conferring jurisdiction (ECJ NJW 1977, 495; BGH NW
1994, 2700). These prerequisites are not met in the case at hand. A "continuous
business relationship" can certainly not be assumed if there was only one previous
order [OLG [*] Kln, RIW [*] 1988, 557; Zller/Geimer, Art. 17 Brussels Convention
no. 11). The [seller] solely submits one previous order by the [buyer] on 11 June 1990.
Admittedly, the [buyer]'s submission that "there have been previous business dealings
between the parties, such as in June 1990" leads one to conclude that the earlier
relations between the parties were not restricted to a single order. However, the
[seller] did not communicate any further details. Furthermore and above all, the
Appellate Court cannot assume a "continuous relationship" between the parties with
respect to the intervals of time concerned. At the time of the conclusion of the
contracts at issue, the previous contract formation in June 1990 - as submitted by the
[seller] - would already have been 3 years ago. It needs to be taken into account that
the prerequisites stated in Art. 17 Brussels Convention for the validity of forum
selection clauses must be interpreted restrictively (EuGH NJW 1977, 494; BGH NJW
1994, 2699), due to the possible consequences of an agreement conferring jurisdiction
over the parties' position during the legal proceedings.
It has, moreover, not been established that the [buyer] did indeed receive the [seller]'s
standard terms and conditions in connection with the contract concluded in June 1990.
The [seller]'s letter of 11 June 1990 contains the remark: "All transactions are subject
to our attached General Conditions". However, the onus of proof is on the [seller] to
contradict the [buyer]'s objection that [buyer] did not receive the [seller]'s standard
terms. It is not sufficient that the [seller]'s letter was made ready for mailing - as the
witness S. testified. Admittedly, the [seller] is correct in raising the question whether
the [buyer] was not obliged to have informed the [seller] that - contrary to the remark
in [seller]'s letter of 11 June 1990 - [seller]'s general conditions had not been attached
to the letter, and whether [buyer] is not barred by the principle of good faith from
relying on its lack of knowledge of the content of the terms. Then again, the principle
of restrictive interpretation of Art. 17 Brussels Convention might make it necessary to
deny that question. In the end, this matter does not need to be decided, as there is
definitely no continuous relationship between the parties.

[The Appellate Court affirms the German courts' jurisdiction over the
counterclaim, under Art. 6(3) Brussels Convention]
The international jurisdiction therefore results from the provisions of the Brussels
Convention, according to which the Court of First Instance correctly affirmed its
competence. Under Art. 6(3) Brussels Convention, a party domiciled in a Contracting
State may also be sued on a counterclaim arising "from the same contract or facts on
which the original claim was based," in the court in which the original claim is
pending.
The Appellate Court need not decide the controversy in this context, whether the
jurisdiction under Art. 6(3) Brussels Convention only exists if the jurisdiction over the
original claim was given under the Brussels Convention (cf. Gottwald, in: Mnchener
Kommentar zur ZPO, Art. 6 IZPR no. 11), or whether the action on the counterclaim
may also be brought if the Brussels Convention was not relevant for the original claim
(see for this opinion Schumann in Stein/Joans, 33 n. 43). The jurisdiction of the
Court of First Instance regarding the original claim results from the fact that the
[buyer] entered an appearance before the Court of First Instance (Art. 18 Brussels
Convention).
However, there is also a controversy regarding the question how the requirement
"from the same contract or facts on which the original claim was based" is to be
interpreted. Some voice the opinion that the preconditions for the counterclaim are
intentionally worded restrictively (Schumann, op. cit., n. 42), and that the
counterclaim is not admissible to the same extent as it would be under 33 ZPO [*].
The opposing view interprets the coherence requirement in Art. 6(3) Brussels
Convention extensively (cf. Zller/Geimer, Art. 6 Brussels Convention, n. 4), and
argues that the possibility to bring a coherent counterclaim serves the aim of a
procedural equality in force (Geimer, NJW [*] 1986, 2993). If one applies the
principles of 33 ZPO, the Court of First Instance without doubt possessed
jurisdiction, as a "connection" between the [seller]'s claim and the [buyer]'s
counterclaim clearly exists. Such a connection already exists if the different claims
result from the same legal relationship; the legal basis for the claims need not be
completely identical (Zller/Vollkommer, 33 n. 15). The [seller]'s claim is for
payment of the remaining purchase price and the [buyer]'s counterclaim is for
damages resulting from the same delivery contracts. It is irrelevant that the [seller]
bases its claim for the outstanding purchase price on an intermediate settlement
reached in the beginning of December 1994; a settlement generally does not modify
the initial relation between the obligations in the way that the original debt is
extinguished and replaced by a new claim (cf. BGH [*] NJW-RR [*] 1987, 1427).
Furthermore, the [buyer]'s counterclaim before the Court of First Instance was also
admissible under the more restrictive interpretation of Art. 6(3) Brussels Convention

discussed above. This applies independently of the fact that the claim was not really
based on the contractual relationship between the parties, but on the intermediate
settlement closely connected with that relationship. At least the counterclaim is based
on "the same ... facts". All claims raised in the present proceedings are based on the
delivery of the machinery in dispute and the unwinding of the underlying sales
contracts. These uniform facts of life meet the requirements of Art. 6(3) Brussels
Convention and thus lead to the jurisdiction of the Court of First Instance.
[The Appellate Court also affirms its jurisdiction based on Art. 5(1) Brussels
Convention]
Apart from the jurisdiction under Art. 6(3) Brussels Convention, the competence of
the Court of First Instance results from the legal aspect that a counterclaim is also
admissible if the Court of First Instance possessed jurisdiction over the counterclaim
under the Brussels Convention in case the action was brought independently
(Gottwald, op. cit., Art. 6 IZPR n. 12). In the present case, Art. 5(1) Brussels
Convention applies, according to which a person domiciled in a Contracting State
may be sued in another Contracting State on matters relating to a contract in the courts
for the place of performance of the obligation in question. Decisive for the
determination of the international jurisdiction of the court for the place of
performance is the performance that is at the issue of the claim If the plaintiff requests
damages for breach of contract, the relevant obligation is the one which allegedly has
not been correctly performed (cf. ECJ [*], NJW [*] 1977, 491; ECJ NJW 1987, 1132;
BGH NJW 1994, 2700). As the defendant-counterclaiming [buyer] basically claims
damages for a non-performance or mal-performance of the plaintiff [seller]'s
obligation to deliver the goods, the jurisdiction follows the place of performance for
the delivery obligation. The place of performance is to be determined following the
substantive law. The substantive law, in turn, needs to be determined according to the
rules of private international law of the place where the action was brought, that is,
according to the German rules of private international law (ECJ NJW 1977, 491; ECJ
NJW 1995, 183; BGH NJW 1988, 1467; BGH NJW 1994, 2700; OLG [*] Kln,
RIW [*] 1988, 557).
Under Art. 27(1) sent. 1 EGBGB [*], the contract is governed by the law chosen by
the parties. Clause 17 of the [seller]'s standard terms provides that the legal
relationship between the parties is governed by the standard terms and conditions and
furthermore by Dutch law. The formation and validity of a choice of law agreement
underlie the law chosen by the parties - Art. 27(4), 31(1) EGBGB, which also applies
to choice of law clauses in standard terms (cf. BGH NJW 1994, 262; BGH NJW 1994,
2700; Palandt/Heldrich, BGB [*], 55th ed., Art. 27 EGBGB n. 8). The Appellate Court
can leave open the question whether the [seller]'s standard terms were validly
incorporated into the contract under Dutch law. If the [seller]'s standard terms apply,

regard is to be had to the special clause no. 5, according to which the delivery is to be
effected at the contractually agreed place of performance. Details regarding the place
of performance are specified in the [seller]'s "confirmations of orders." How those
specifications are to be interpreted must in any case be assessed under the United
Nations Convention on Contracts for the International Sale of Goods of 11 April 1980
(CISG), which both the Federal Republic of Germany and The Netherlands have
ratified (Palandt/Heldrich, Art. 28 EGBGB [*] n. 7). The application of the CISG was
not generally excluded by the [seller]'s standard terms.
The [buyer]'s place of business is the place of performance for the [seller]'s delivery
obligation. The place of delivery under Art. 31 CISG corresponds to the place of
performance under 269 BGB [*], and therefore may be referred to for the
determination of the jurisdiction under Art. 5(1) Brussels Convention
(Herber/Czerwenka, Internationales Kaufrecht, Art. 31 n. 2).
It must be noted that in the cases cited by Art. 31 CISG, the place of performance is
not identical with the [buyer]'s place of business. This is also true for Art. 31(a) CISG,
which constitutes an obligation to dispatch the goods (Huber in:
v.Caemmerer/Schlechtriem, Kommentar zum einheitlichen UN-Kaufrecht, Art. 31 n.
26). However, the legal consequences of Art. 31 CISG only come into play if the
seller is "not bound to deliver the goods at any other particular place." A different
"particular place" is specified, i.e., if the parties have agreed on a delivery "free
domicile." In such a case, the buyer's place of business is stipulated as the place of
delivery and the delivery obligation consists in handing over the goods to the buyer
(Huber, op. cit., Art. 31 n. 4, 91, 92). This applies to the [seller]'s confirmations of
orders from 10 December 1993 regarding the sale of tanning barrels as well as a
hydraulic stretching, smoothing and ironing machine, which specify a delivery "free
domicile Selfkant Tddern, loaded on lorry."
The [seller] was also obliged to hand over to the [buyer] at the [buyer]'s place of
business the automatic hide skinning device as well as the used leather tacking
machine referred to in the further confirmation of order of 10 December 1993.
Admittedly, the term "ex works" used in the confirmation generally does not
constitute a variation of the delivery place under Art. 31 CISG (Huber, op. cit., Art. 31
n. 4). However, the delivery specifications contain the remark "loaded onto lorry". In
the absence of any different indicators, it can be assumed that the [seller] itself
conducted the deliveries. This assumption is supported by the fact that the [seller]
transported goods on its own lorries in connection with the later complaints of lack of
conformity, i.e., the [seller] declared in its fax of 6 December 1994 that its employee
would collect the queried leather tacking machine. Under these circumstances, the
[buyer]'s place of business is also the place of delivery for the hide skinning device
and the used leather tacking machine.

In this context, the Appellate Court may leave open the question whether the
application of Art. 31 CISG is already excluded because the seller's "own people" are
not "carriers" in the meaning of Art. 31 CISG (as is the opinion of Herber/Czerwenka,
Art. 31 n. 6) or whether it is irrelevant for the question of carriage of the goods
whether the seller undertakes the transport itself or commissions an independent
carrier (for this opinion cf. Huber, op. cit., Art. 31 n. 27). Even if one follows the latter
opinion, the place where the seller is to deliver the goods is considered "any other
particular place" in the meaning of Art. 31 CISG, if it has been contractually
stipulated that the seller is to deliver the goods to the buyer's place by its own means
(Huber, op. cit., Art. 31 n. 50). Therefore, for all of the [seller]'s delivery obligations,
the place of performance in the meaning of Art. 5(1) Brussels Convention is the
[buyer]'s place of business. Consequently, the Court of First Instance also possessed
jurisdiction under the aspect that the jurisdiction over a counterclaim may result from
the jurisdiction given if the counterclaim were raised independently.
II. [Buyer's counterclaim for damages granted partially]
The [buyer]'s counterclaim is partially justified. The [buyer] is entitled to claim
damages from the [seller] in the amount of DM [Deutsche Mark] 16,948 under Arts.
45, 74 CISG.
1. [Buyer's damages granted]
The [seller] must reimburse the [buyer] for the costs incurred by commissioning
company S. with the tanning of the hides in the period from 7 November till 2
December 1994. It had become necessary to let the hides be treated by a third party
because the [seller] had retained the three tanning barrels originally delivered by it
after [seller] had taken them back to convert them. It is disputed between the parties
whether the [seller] was obliged to deliver barrels equipped with beams instead of
barrels with taps, and whether the [seller] was therefore contractually required to reequip the tanning barrels accordingly. In the end, the question does not influence the
[buyer]'s right to claim damages. Following the parties' concurring submissions, the
[seller] at least gave the [buyer] a binding assurance that the taps of the tanning
barrels delivered would be exchanged for beams and that the barrels would be
returned to the [buyer] after the conversion. The [seller] accordingly undertook - and
breached - a contractual obligation. It is irrelevant whether the parties - as the [buyer]
alleges - reached an oral agreement regarding the length of time required for the
conversion and fixed a period of time for the return of the barrels. A corresponding
agreement at least results from the correspondence between the parties before
litigation; in the end, the [seller] itself does not deny that it promised the [buyer] to
return the barrels that had been collected for conversion.

After the [seller] had announced by fax of 18 October 1994 that it would collect the
tanning barrels on 24 October, the [buyer] told the [seller] by fax of 21 October 1994
that [seller]'s manager had informed [seller] that the conversion of the tanning barrels
would take one and a half days per barrel. The [buyer] further noted that the barrels,
which were urgently needed by the [buyer], had to be returned by the end of the 43rd
calendar week. Without objecting to that letter, the [seller], picked up the tanning
barrels on 24 October 1994 at the [buyer]'s place of business, in accordance with its
earlier announcement. [Seller] thus undertook an obligation to return the barrels to the
[buyer] by the end of the 43rd calendar week, i.e., by Saturday 29 October 1994.
The [seller] did not live up to this contractual agreement. The [seller] is liable for this
breach of contract, even if one considers the [seller]'s submissions regarding the
further correspondence with the [buyer], which are contained in the [seller]'s brief of
22 November 1996 and were not admitted by the Appellate Court due to delay. This is
also true for the [seller]'s contention that the [buyer] demanded an impossible task
from the [seller], because the re-equipment of the barrels including the dismantling
and reconstruction took at least six and a half days. Apart from the fact that the [seller]
did not object to the [buyer]'s confirmation of 21 October 1994, [seller]'s submission
could only lead to a prolongation of the fixed period of time regarding the return of
the barrels for a couple of days until the beginning of the following 44th calendar
week. At least at this point in time, the [seller] was obliged to return to the [buyer] the
tanning barrels that had been converted in the meantime. However, it is undisputed
that this did not happen.
The [seller] unsuccessfully tries to rely on a right of retention. This is quite
independent of the question whether the [buyer] was obliged to pay the [seller] for the
remainder of the purchase price. It is also irrelevant whether the [seller]'s standard
conditions were incorporated into the contract and whether [seller]'s clause 13 applied,
according to which the [seller] is entitled to take back the goods as long as its
customer has not completely paid the contractually agreed amounts.
Neither this clause nor Art. 71 CISG entitled the [seller] to retain the goods. Under
Art. 71 CISG, a party may suspend the performance of [seller]'s obligations if, after
the conclusion of the contract, it becomes apparent that the other party will not
perform a substantial part of its obligations. Regarding the return of the tanning
barrels, the parties - at least implicitly - excluded the [seller]'s right of retention by
individual agreement. The [seller] committed itself to return the barrels after their
conversion within a short period of time, without reserving the right to retain the
goods if the purchase price is still outstanding. As the parties had previously already
argued about the [buyer]'s remaining obligation to pay the purchase price, the [buyer]
was entitled under good faith to trust that the [seller], who had promised the return of

the barrels unconditionally, would not refuse the return of the goods by relying on a
right of retention.
The Appellate Court does not follow the [seller]'s point of view regarding the right of
retention under Art. 71(1)(b) CISG, which the [seller] submits in the brief that was not
admitted by the Appellate Court due to delay. Contrary to the [seller]'s opinion, the
parties' correspondence after the [buyer]'s fax of 21 October 1994 does not allow the
conclusion that the [seller] merely announced its right of retention, connected with its
willingness to negotiate the matter, and that the [buyer] was unjustified in declaring
the avoidance of contract without any further cause before the return of the goods was
due. The [seller]'s letter of 27 October 1994 contained [seller]'s unequivocal refusal to
return the tanning barrels before payment of the outstanding purchase price had been
effected; the last paragraph of that letter clearly expresses this intention. Therefore, the
[seller] breached the contract by relying on an unjustified right of retention prior to the
[buyer]'s reaction by fax on 29 October 1994. The subsequent settlement negotiations,
on which the [seller] relies in its inadmissible brief, could not change the earlier
breach of contract and its legal consequences.
The examination of whether the requirements of Art. 71 CISG are met fall in the
sphere of risk of the party relying on the right of retention. In the absence of those
preconditions, the retaining party commits a breach of contract (Leser in
v.Caemmerer/Schlechtriem, Art. 71 n. 25). The [seller]'s standard conditions do not
provide for the legal consequence of such a breach of contract and do not exclude the
provisions of the CISG. Under Art. 45 CISG, the buyer may claim damages as
provided in Arts. 74 to 77 if the seller fails to perform any of its obligations under the
contract or under the Convention.
Inter alia, Art. 45(1) CISG applies if the seller fails to perform any other obligation
under the contract or the Convention (Huber in: v.Caemmerer/Schlechtriem, Art. 45 n.
10). Whether the obligation breached is a primary or a secondary obligation is only of
importance regarding the question of the existence of a fundamental breach of
contract (Herber/Czerwenka, Art. 45 n. 2). Without doubt, the [seller]'s contractual
obligation to return the tanning barrels to the [buyer] is fundamental.
Under Art. 74 CISG, damages for breach of contract by one party consist of a sum
equal to the loss, including loss of profit, suffered by the other party as a consequence
of the breach. Costs incurred by reasonable efforts to mitigate the loss resulting from
the breach may also be compensated (Leser, op. cit., Art. 74 n. 14). The sum paid by
the [buyer] to the company S. constitute such reasonable expenses. According to the
invoice of 31 December 1994, company S. tanned 240 hides a day during the period
from 7 November till 2 December 1994 at an overall amount of DM 16,946. The
[seller] does not expressly dispute that the [buyer] did in fact commission company S.

with the tanning of hides to the extent submitted. The [seller]'s defense consists solely
of the objection that the [buyer] had claimed in their correspondence before litigation
that [buyer] tanned 480 hides daily, whereas the [seller] only estimated half of that
amount - and even that estimation was allegedly too high. The [seller] furthermore
disputes with ignorance that the prices in the invoice were appropriate and usual. The
Appellate Court does not regard these submissions as a clear challenge to the [buyer]'s
contention that [buyer] commissioned company S. with the tanning of the hides.
Insofar as the [seller] tried to make up for its omission in the brief that was not
admitted by the Appellate Court, the Appellate Court does not see sufficient cause to
follow this - possibly - new submission by re-opening the oral proceedings.
The [seller] does not succeed with its objection that the prices demanded by company
S. were neither appropriate nor usual. It is sufficient for the compensation claim under
Art. 74 CISG if the breach of contract forces the damaged party to incur expenses, and
if these expenses are reasonable (Leser, op. cit., Art. 74 n. 13, 14). Under German law,
it is sufficient if a reasonable person in the position of the damaged party was entitled
to assume that the expenses were reasonable (BGH [*] NJW [*] 1976, 1198; BGH
NJW 1990, 2062). The same is true in the application of Art. 74 CISG. Art. 74 para. 1,
sent. 2, CISG only restricts the compensation in the way 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 [seller] then
knew or ought to have known, as a possible consequence of the breach of contract. It
was evident to the [seller] that the [buyer] would have to have the hides tanned by a
third company if the [seller] did not return the barrels. This already results from the
[buyer]'s explicit request in its fax of 21 October 1994 to keep to the return schedule
at any rate, as the [buyer] urgently required the tanning barrels.
The losses incurred in the amount of DM 16,948 are not reduced under the aspect that
the [buyer] possibly saved its own expenses during the relevant time period. Specific
grounds for such savings have neither been submitted by the [seller], who does not
rely on this aspect, nor are they self-evident.
The statute of limitations invoked by the [seller] during the proceedings before the
Court of First Instance does not apply to the [buyer]'s claim for damages for the
retention of the tanning barrels. The short period of limitations, which applies to
remedies for non-conformity of the goods, does not apply to the damages claim for
losses incurred by the retention of the barrels, because the [seller]'s obligation to
return the goods is based on a contractual agreement with the [buyer], which, while
connected with the sales contract, is separate from that agreement.
2. [Buyer's further damages not granted]

The [buyer] is not entitled to any further damages.

The [buyer] does not conclusively submit compensation claims for non-conformities
of the leather tacking machines delivered by the [seller]. The [seller] correctly noted
that the [buyer]'s initial submissions regarding the tacking machines were confusing
and not comprehensible. Only in [buyer]'s last brief before the oral proceedings did
[buyer] clarify which tacking machines its explanations referred to. According to that
submission, the [seller] delivered one tacking machine for trial purposes, which was to
be connected to a dust removal fan and a die-casting machine. [Seller] sold to the
[buyer] a further tacking machine, which was installed behind an ironing machine and
was taken back by the [seller] following the [buyer]'s complaints. However, the
[buyer] still fails to substantiate its submissions regarding the defects those tacking
machines were supposed to have had. The [buyer]'s allegation that the tacking
machines were incorrectly adjusted to the extent that they tore the hides does not
sufficiently specify the queried lack of conformity in order to form the basis for the
taking of evidence.
The [buyer]'s claim for damages regarding the leather tacking machines is
inconclusive also for other reasons. The [buyer] pleads that it incurred losses in the
amount of DM 6,600 because the tacking machine installed behind the die-casting
machine did not function properly and that the [buyer]'s production came to a
standstill for a period of two days. However, the [buyer] is not entitled to claim
damages for defects of the tacking machine connected to the dust removal fan and the
die-casting machine.
It is undisputed that the [seller] delivered this tacking machine to the [buyer] for trial
purposes. Since the [buyer] returned the machine to the [seller], the parties ultimately
did not conclude a sales contract regarding this machine. This results from 495(1)
BGB [*], if German substantive law is applied. The matter does not need to be
assessed differently with respect to the CISG, as the provisions of the CISG
presuppose the formation of a sales contract and do not contain specific rules for a test
sale. The [seller] was not obliged to remedy non-conformities of machinery that did
not become the subject of a valid sales contract. This is also true if one applies the
[seller]'s standard terms and conditions. As the Court of First Instance correctly held,
the [seller] also would not be liable for damages incurred under the German rules for
lending contracts. A person who hires out goods at no charge is only liable for defects
if [seller] maliciously conceals the defect ( 600 BGB [*]. There are no indications of
such a willful deceit on the part of the [seller]. It has neither been submitted by the
[buyer], nor is it in any way evident that the application of Dutch law would lead to a
different result.

Regarding the [buyer]'s further claim for damages in the amount of DM 3,190-, it is
problematic that - according to the [buyer]'s submissions - those losses were incurred
by both tacking machines. In its brief arguing the appeal, the [buyer] explicitly noted
that the two tacking machines delivered by the [seller] had torn hides and had made it
necessary to repair overall 100 hides at a cost of DM 3,190. For the reasons explained
above, the [seller] is not liable for defects of the tacking machine that had been
delivered for trial purposes. Therefore, the [buyer] would have had to make more
substantiated submissions as to the kind of damage the (used) tacking machine
connected to the ironing machine had caused. The [buyer]'s contention, in its brief of
11 December 1996, that only the tacking machine connected to the die-casting
machine was defective cannot be considered, because it contains an inexplicable
contradiction to [buyer]'s earlier submissions.
The [buyer] is also not entitled to damages for the incorrect construction of the
Dynavac-machine. The [buyer] claims expenses in the amount of DM 2,170.30 as well
as DM 823.60. [Buyer] argues that the [seller] incorrectly welded on the telescope, so
that the guide rails broke off. [Buyer] further submits that it had to commission a third
party with the repair of the machine after the [seller] had refused to remedy the nonconformity.
Again, the Appellate Court can leave open the question whether the [seller]'s standard
terms and conditions were validly incorporated into the contract, or whether solely the
provisions of the CISG apply. Under clause 8(a) of the [seller]'s standard terms, the
[seller] is only liable for a non-conformity of the goods if the confirmation of order
expressly provides for a guarantee, which is not the case for the (used) Dynavacmachine. Apart from that, the [seller]'s liability under clause 8(e) of its standard
conditions is restricted to the delivery of spare parts free of charge.
The [buyer]'s claim for damages is also unfounded if one applies the provisions of the
CISG. Under Art. 39(1) CISG, the buyer loses the right to rely on the lack of
conformity of the goods if it does not give notice to the seller specifying the nature of
the lack of conformity within a reasonable time after buyer has discovered it or ought
to have discovered it. Therefore, the [buyer] should have notified the [seller] that the
guide rails of the Dynavac-machine had broken off before [buyer] commissioned a
third company with the repair. The [seller] denies that the [buyer] gave a timely notice
specifying the non-conformity. Despite this submission, the [buyer] solely maintained
until the final oral hearing before the Court of First Instance that [buyer] had to have
the ironing machine repaired twice during the course of the year 1995, after the
[seller] had unequivocally refused to remedy the defect. Regarding the alleged lack of
conformity of the guide rails, this submission is not specific enough and no proof has
been offered.

[...]
Therefore, the [buyer] is left with a claim for damages in the amount of DM 16,948.
Contrary to the [seller]'s view expressed in its brief not admitted by the Appellate
Court, the [buyer]'s claim was not extinguished by [buyer]'s declaration of a set-off in
the amount of DM 3,750 during the first instance proceedings. In its brief of 13
December 1995 which, inter alia, contained the declaration of a set-off, the [buyer]
claimed damages in an amount that exceeded the sum in dispute during the appellate
proceedings by far more than DM 3,750. Furthermore, the [buyer] has by now moved
away from the set-off and claims the amounts in question by way of a counterclaim.
The [seller] itself has also not declared a set-off against the counterclaim with a claim
for an outstanding purchase price, which the [seller] is possibly still entitled to.
The [buyer] is entitled to interest granted at a rate of 5% since the time the
counterclaim was served, independent of the question whether the interest rate is to be
determined under German law ( 352 HGB[*]) or under Dutch law - which provides a
higher rate of interest following the [seller]'s own submissions.
The decision on costs is based on 92(1) ZPO [*]; the decision on the provisional
enforceability is based on 708 no. 10 ZPO.