International Sale of Goods

• Author: International Law Group

Rockland Industries, Inc., is a Maryland corporation that makes lining fabric for drapery. In the early 1990s, it was turning out a type of opaque fabric called "Trevira Blackout FR" (Trevira). Rockland made Trevira to qualify under European flame resistance standards and aimed the fabric at European Markets.

Schmitz-Werke GmbH & Co. (Schmitz) is a German company that makes, prints and markets finished decorative fabrics in Germany and elsewhere. In negotiations between them, Rockland told Schmitz that Trevira was an especially good base for transfer printing. For transfer printing, Schmitz uses P.D., another German company.

After a small initial shipment of Trevira seemed to work out satisfactorily, Schmitz received a shipment of 15,000 meters of Trevira by ocean freight in mid-August 1994. Problems arose with printing the fabric but Rockland persuaded Schmitz to go on printing on the theory that the lower quality portions of the Trevira could successfully take patterns better than solid colors.

In November 1994, Schmitz ordered 60,000 meters of Trevira. In March 1995, a testing company reported that it had run into problems with the Trevira fabric. By the following month, the percentage of printed Trevira categorized as "seconds" (lower-grade material) lay between 15% and 20%. During the second half of 1995, Schmitz returned about 8,000 meters of Trevira. After negotiations between Schmitz and Rockland fell apart, Schmitz sued Rockland in the Maryland federal court in December 1997. It alleged that Rockland had breached a warranty under the United Nations Convention on the International Sale of Goods (CISG), 15 U.S.C.App., by supplying defective drapery fabric. Both sides agreed that the CISG applies to the dispute.

After a bench trial, the district court ruled that Rockland had breached an express warranty of fitness for a particular purpose (transfer printing) under Article 35(2)(b) of the CISG. 15 U.S.C. App. Art. 35(2)(b). The court awarded damages in dollars and converted those dollars to Deutsche Marks using the exchange rate as of the time Schmitz had discovered the defects. Rockland appealed. In a per curiam opinion, the U.S. Court of Appeals for the Fourth Circuit affirms.

The Court first outlines the general function of the CISG. "When two nations are signatories to the CISG, the treaty governs contracts for the sale of goods between parties whose places of business are in those two nations, unless the contract contains a choice...