## Facts

- An Italian company (seller/plaintiff) sold trekking (hiking) shoes to an Austrian dealer (buyer/defendant) under an international sales contract governed by the CISG.
- The buyer did not keep the shoes for its own use; it resold them directly to a Scandinavian company operating a large retail chain.
- The shoes were manufactured in Bulgaria and delivered in multiple partial deliveries during September and October 1995.
- Two partial invoices remained unpaid; the seller sued the buyer for payment of the outstanding price plus interest and costs.
- About three weeks after the last partial delivery, the buyer notified the seller of alleged defects, asserting the defects were not detectable on an initial visual inspection.
- The seller refused to take back the shoes and demanded payment, pointing to the buyer’s late and allegedly insufficient notice of non-conformity.
- The buyer defended on the basis of lack of conformity and asserted an offset based on lost profits.
- The trial court entered judgment for the seller, holding the buyer lost the right to rely on non-conformity because it failed to give timely notice under CISG Article 39(1).
- The appellate court reversed and remanded for further fact-finding, including findings on what examination was required by normal business practice in the relevant trade.
- The seller sought review in the Austrian Supreme Court (Oberster Gerichtshof).

## Issues

1. Under CISG Article 38(1), what time frame is required for examination of goods delivered in partial deliveries, and must each partial delivery be examined separately?
2. Under CISG Article 39(1), was a notice of defects given about three weeks after the last partial delivery within a reasonable time for seasonal trekking shoes, particularly where the buyer claimed the defects were not detectable on first inspection?
3. Where the trial court made insufficient findings on normal business practice for examining the goods, should the appellate court’s reversal and remand be left in place?

## Decision

- The Supreme Court dismissed the seller’s appeal and left standing the appellate court’s reversal and remand to the trial court.
- The Court agreed that the record lacked adequate findings to decide whether the buyer’s examination (including whether mere visual inspection was standard in the trade) met CISG Article 38(1) and, in turn, when the buyer “ought to have discovered” the defects for CISG Article 39(1).
- The Court stated that, as a general matter, CISG Article 38(1) requires examination within a short period, and the time frame depends on the circumstances (including the buyer’s organization and the nature and complexity of the goods), and that each partial delivery must be examined separately.
- The Court indicated that, given the seasonal character of the shoes and the seller’s interest in selling them during the season, there was generally no reason to extend the time allowed for examination and notice; a three-week delay after the last partial delivery was late in principle unless the defects were not discoverable through an examination consistent with normal business practice.

## Legal Principles

- Under CISG Article 38(1), the buyer must examine the goods (or have them examined) within as short a period as is practicable in the circumstances; the length of that period is relative and depends on the transaction and the parties’ commercial setting.
- Factors relevant to the Article 38(1) period include the buyer’s size and organization, the type of goods, and the goods’ complexity.
- Where goods are delivered in partial deliveries, each partial delivery must be examined separately for purposes of CISG Article 38(1).
- Under CISG Article 39(1), the buyer loses the right to rely on a lack of conformity unless it gives notice to the seller specifying the nature of the non-conformity within a reasonable time after it discovered or ought to have discovered it.
- For seasonal goods, the reasonable-time analysis is strict because delay can impair the seller’s ability to mitigate by reselling within the season; this weighs against extending time for examination and notice.
- A notice given about three weeks after the last partial delivery is generally late for seasonal goods, unless the buyer shows the alleged defects could not have been discovered earlier by an examination consistent with normal business practice.
- If the trial court’s findings are insufficient to evaluate what examination normal business practice required and when defects should have been discovered, remand for additional fact-finding is appropriate.

## Conclusion

UNCITRAL CLOUT Case 423, 10 Ob 223/99x (OGH Aug. 27, 1999) concerns an Italian seller’s claim for the unpaid price of seasonal trekking shoes delivered in partial shipments and resold by an Austrian dealer to a Scandinavian retail chain. The buyer complained of defects about three weeks after the last delivery and sought to rely on non-conformity and an offset, but the trial court barred that defense as untimely under CISG Article 39(1). The appellate court reversed and remanded for findings on required examination and trade practice, and the Supreme Court dismissed the seller’s appeal, confirming that Articles 38 and 39 demand prompt examination and notice—especially for seasonal goods—while requiring further factual findings on whether the defects were discoverable by an examination consistent with normal business practice.


UNCITRAL CLOUT Case 423, 10 Ob 223/99x (1999)