## Facts

- An Italian shoe manufacturer (seller) and a German shoe dealer (buyer) entered an international sales contract for shoes, to be delivered in installments.
- The pricing arrangement required a down payment with the balance due later; the total contract price was stated as 10,107.19 DEM.
- During performance, the seller developed concerns about the buyer’s creditworthiness and suspended delivery of an installment, invoking CISG Article 71.
- The seller suspended delivery without notifying the buyer of the suspension or the grounds for it.
- To obtain delivery, the buyer paid the seller more than the contractually agreed down payment.
- The seller sued for payment of the purchase price.
- The buyer defended and counterclaimed for damages, including lost profits allegedly caused by the suspension, and sought to set off those damages against the price claim.

## Issues

1. Whether a seller may suspend performance under CISG Article 71 without providing notice and information to the buyer as required by Article 71(3).
2. Whether a seller’s failure to give the Article 71(3) notice makes the suspension nonconforming and renders the seller liable for the buyer’s damages, including lost profits, under CISG Articles 45 and 74.
3. Whether the buyer may set off CISG damages against the seller’s price claim, including any reliance on applicable domestic law for set-off mechanics.

## Decision

- The court applied the CISG to the dispute and treated Italian law as additionally relevant for matters not governed by the CISG (including aspects of set-off).
- The court held that the right to suspend performance under CISG Article 71 is coupled with an obligation to notify and inform the other party under Article 71(3).
- The seller failed to prove it gave the required notice and information; such notice was an indispensable precondition to a valid suspension.
- Because the suspension was executed without the required notice, the buyer was entitled to damages, including loss of profit.
- The buyer’s damages could be asserted by set-off against the seller’s claim for the purchase price, preventing recovery of the full amount claimed.

## Legal Principles

- A party invoking CISG Article 71 must comply with Article 71(3) by promptly notifying the other party of the suspension and providing information on the grounds for it.
- Even if grounds for suspension might exist under Article 71(1), failure to satisfy Article 71(3) renders the suspension nonconforming.
- A nonconforming suspension can constitute a breach giving rise to buyer remedies under CISG Article 45, including damages under Article 74 for losses caused by the breach, including lost profits.
- Damages recognized under the CISG may be used to reduce or defeat a price claim through set-off, with domestic law potentially governing technical set-off requirements.

## Conclusion

The court held that a seller’s CISG Article 71 suspension is lawful only if accompanied by the Article 71(3) notice and information; absent that notice, the buyer may recover lost-profit damages and set them off against the seller’s purchase-price claim.


Italian Shoe Manufacturer v. German Shoe Dealer, 32 C 1074/90-41 (AG Frankfurt am Main Jan. 31, 1991)