Austrian Supreme Court renders decision on the incorporation of standard terms under the CISG

On 26 November 2018, the Austrian Supreme Court rendered a decision in the Exclusive distribution contract case. The decision’s full text, originally written in German, has now been translated into English by Lukas Petschning, who is a law student at the University of Vienna and a former Vis Moot participant (29th Willem C. Vis Moot Court). We are very grateful for his translation that can now be accessed via the case presentation about CISG-online 3912 (see below). 

The dispute underlying the decision arose from an exclusive distribution contract under which the Swiss buyer entered into an obligation to purchase certain goods exclusively from the Austrian buyer. On basis of the exclusive distribution contract, the buyer ordered goods from the seller on multiple occasions. Each time the seller gave a confirmation order which contained a reference to its General Terms and Conditions (hereinafter: «GTC») and their availability on a website. The GTC inter alia excluded the buyer’s right to withhold payments in cases of non-conformity or any other claims by the buyer. In addition, the GTC excluded the buyer’s right to set-off any counterclaims with claims from the seller. After the seller allegedly delivered non-confirming goods, the buyer advocated that the GTC were not validly incorporated and that it was entitled to withhold payment of the purchase price as well as set-off damages caused by the seller. The seller, on the other hand, demanded payment of the purchase price.

The Courts of first and second Instance both granted the seller’s claim for payment of the purchase price. They essentially considered the GTC to have been validly incorporated. Thus, they rejected the buyer’s objections.

The Supreme Court held that the necessary standards for the incorporation of standard terms under the CISG must be developed on the basis of Arts. 14 et seq. CISG since the Convention exhaustively governs the existence of a consent during the contract conclusion. Based on these rules, the GTC must have been part of the offer according to the intention of the offeror and in a manner which is identifiable for the offeree pursuant to Art. 8 paragraphs (1) and (2) CISG, according to the Court. It further stated that the intended incorporation of the standard terms must be reasonably recognizable for the recipient. After all, the Court concluded that under the CISG the incorporation of a party’s standard terms into a contract requires that they are being transmitted or made available to the other party. As the Court of Appeal reasonably applied this test, the Supreme Court upheld its decision.

With regards to the buyer’s argument that an exclusion of the right to withhold performance in cases of non-conformity would violate public policy, the Supreme Court stated that there is indeed merit to this argument under certain circumstances. However, the buyer failed to sustain this argument in its final appeal which is why the Supreme Court ultimately rejected the buyer’s appeal and upheld the prior decision.