Withdrawal from a CISG sales contract

If the parties do not contractually waive that the UN Convention on Contracts for the International Sale of Goods (“CISG”) applies, CISG is automatically applicable to many cross-border sales contracts. In the case of such a sales contract, the parties can only withdraw from the contract without setting a deadline in the event of non-delivery if one of the contracting parties has breached an essential contractual obligation. Compliance with delivery times is not per se an essential contractual obligation. This was decided by the Cologne Higher Regional Court (OLG).

Facts of the case

The ruling of the Higher Regional Court of Cologne was based on the following facts:

The defendant wanted to purchase a large quantity of FFP2 protective masks during the coronavirus pandemic. To this end, it published a contract notice, which included the following reference:

"The same conditions apply to all offers. Individual contract negotiations will not be conducted."

Clause 3.2 p. 3, 4 of the separate contract terms also contained the following provisions:

“The latest delivery date is April 30, 2020 within the business hours according to p. 1. If the latest delivery date is not met, the mutual obligations of the contracting parties shall lapse; late delivery shall not constitute performance of the contract by the Contractor (absolute firm deal).”

The applicable law was provided in the final clause 7.3:

“This contract shall be governed by the laws of the Federal Republic of Germany, excluding the conflict of laws rules of private international law.”

Subsequently, a contract was concluded between the defendant and the plaintiff, a company based in the Czech Republic. Due to various problems, including customs issues, the majority of the FFP2 masks could not be delivered on the date specified in the terms of the contract. For this reason, the defendant withdrew from the contract without setting a deadline for performance.

The plaintiff's claim for payment against delivery of the outstanding masks was dismissed by the district court, as the defendant had effectively withdrawn from the purchase contracts. The plaintiff appealed against this decision to the Higher Regional Court of Cologne.

The decision of the Higher Regional Court of Cologne, judgment of February 6, 2025 - 8 U 38/23

The appeal was successful. The Higher Regional Court of Cologne amended the judgment with reference to the following legal arguments:

The CISG was applicable to the present contract, as subject of the contract was the purchase of goods and the contracting parties were established in different states, each of which had ratified the CISG and thus made it part of their national legal system. As a result, the CISG would apply unless it was explicitly contractually excluded. Neither the clause on the applicable law used by the defendant nor the fact that the parties were not aware of the applicability of the CISG satisfied the requirements for an contractual exclusion.

A rescission of the contract (in German law: withdrawal) under the CISG is in the event of  a non-delivery only possible if one party has either set a deadline for performance without success or if the other party has breached an essential contractual obligation. Since the defendant had not set a deadline, the only question was whether the timely delivery was an “essential contractual obligation”:

The Higher Regional Court of Cologne denied it, as delivery times are generally not an essential contractual obligation. Only in the case of so-called fixed-date transactions the delivery time could be deemed “essential”. However, this was not the case here. Although the defendant had stipulated in its contractual terms and conditions that the delivery times are so-called absolute fixed-date transactions - i.e. if they were exceeded, the obligation to perform automatically ceased to apply - this provision was invalid under the German law on general terms and conditions which applies in addition to the CISG. In this respect, the “benchmark” for the GTC control is the CISG and the values and interest contained herein. Since the CISG only restrictively allows the termination of a contract, absolute fixed-date transactions are only to be recognized as an absolute exception. However, since the date contained in clause 3.2 sentence 3 of the contractual terms did not coincide with the end of the pandemic, there was an interest in receiving the masks even after this date, so that such an absolute fixed-date transaction could not be considered. The clause would therefore have unreasonably disadvantaged the plaintiff and was therefore invalid, so that the plaintiff could demand payment against delivery of the masks.

Practical tip

“The United Nations Convention on Contracts for the International Sale of Goods does not apply” or “... to the exclusion of the CISG” - these additions are well known from numerous contracts and general terms and conditions. The exclusion of the is still a common legal reflex. From both the seller's and the buyer's point of view, there are arguments in favor of CISG inclusion:

1. Buyer advantages

The CISG traditionally enjoys the reputation of being designed to be buyer-friendly. This is particularly true:

• In the event of defects, claim for damages require no fault. The seller is therefore liable similar to a guarantee. Under German law, intent or negligence is always required.
• The B2B buyer's obligations to inspect incoming goods are less strict: while under national law a complaint must be made immediately, the CISG grants the buyer a “reasonable period” for this, which can regularly be up to one month.

2. Seller advantages:

However, the CISG can also be of interest to the seller:

• In the event of a defective delivery, the buyer can only withdraw from the contract if the defect constitutes a breach of a material contractual obligation. If the breach of duty is below this threshold, the buyer must adhere to the contract and is referred to other legal remedies (compensation or reduction). The German Civil Code, on the other hand, allows withdrawal after an unsuccessful deadline has been set for subsequent performance.

• In addition, the seller is only liable for damages foreseeable at the time the contract was concluded. This is more advantageous than German law, which generally provides for unlimited liability.

Careful consideration should therefore be given to whether the agreement of the CISG makes sense in a specific individual case or, if applicable, in the case of a regular revision of general terms and conditions. This applies all the more if negotiations with foreign contractual partners on the applicable law prove difficult – in those events the CISG can be an acceptable compromise as a legal system valid in many countries. However, as the CISG is non-exhaustive and does not provide for some legal aspects (e.g. the question of the limitation period for claims), a subsidiary applicable legal system is always required - preferably the “own” one.