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CISG CASE PRESENTATION

Hungary 2000 Budapest Arbitration proceeding Vb 99144 (Grape sticks case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000000h1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20000000 (2000)

JURISDICTION: Arbitration ; Hungary

TRIBUNAL: Arbitration Court of the Chamber of Commerce and Industry of Budapest

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Vb 99144

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Hungary (claimant)

BUYER'S COUNTRY: Another Contracting State (respondent)

GOODS INVOLVED: Sticks used in the planting of grapes


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 39 ; 49 [Also cited: Articles 26 ; 38 ; 53 ; 62 ]

Classification of issues using UNCITRAL classification code numbers:

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time];

49B [Buyer's loss of right to declare avoidance after delivery: failure to avoid within period specified in art. 49(2)(b)]

Descriptors: Lack of conformity notice, timeliness ; Avoidance

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Hungarian): Unavailable

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Court of Arbitration
Attached to the Hungarian Chamber of Commerce & Industry
Decision No. Vb 99144

The published award is not dated. For reference purposes it is dated 2000]

Translation [*] by Andrea Vincze [**]

Edited by Tamás Szabados [***]

SUMMARY

   (1)    Pursuant to Art. 39 CISG, the buyer loses the right to object to quality defect of the goods if the buyer fails to notify the seller about that within a reasonable time after it discovered or should have discovered such defect. Under the contract, the buyer was obliged to notify seller about any eventual objections within 36 hours after receipt of the goods. As buyer failed to do so, neither its claim to reduce the purchase price, nor its intent to avoid the contract is founded.
 
   (2)    A request to supplier to take back defective goods more than a year after performance cannot be considered as a valid avoidance within reasonable time.

REASONING

The parties concluded a contract on 5 February 1999, in which Claimant [Seller] agreed to deliver to Respondent [Buyer] eight truckloads of grape sticks between February 1999 and April 1999. The number, sizes, individual purchase price and shipment date of each delivery were detailed in the contract. The parties agreed that the purchase price must be paid by [Buyer] to [Seller]'s bank account, against [Seller]'s invoice, within 30 days after the invoice date, by wire transfer.

Concerning receipt of the goods the parties agreed that:

"Receipt and qualification of the goods shall be performed by buyer immediately after the goods are loaded off. In case of any complaints, buyer must send a notification to seller within 36 hours. The goods subject to the complaint must be stored until an agreement is made concerning settlement of the complaint."

In the contract, parties agreed to submit eventual legal disputes to the "unbiased Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry."

On 2 March, 4 March and 14 March 1999, [Seller] dispatched three truckloads of grape sticks with 33,600 pieces of 800 x 30 x 30 mm in each truckload.

[Buyer] did not pay the invoices, and, according to the documents, nor did [Buyer] present any written quality complaints. [Buyer] did, however, note in general that, in its opinion, the three truckloads of delivery do not correspond with the contractual requirements, therefore, [Buyer] suggested a reduction of the item price, but did not pay even the reduced amount [Buyer] himself suggested. The exact complaint presented was that, due to the fact that certain lots collapsed, this made offloading more expensive. But, in spite of several requests, [Buyer] did not even pay the purchase price reduced by the extra offloading costs acknowledged by [Seller].

After these events, [Seller] submitted its claim to the arbitral tribunal. [Buyer] did not make any declaration after receipt of the [Seller]'s claim: no counterclaim was filed and [Buyer] failed to appoint an arbitrator. In addition, [Buyer] was not represented at the hearing. In its French letter sent after receipt of the minutes of the hearing, [Buyer] reiterated its complaint that the goods delivered did not conform to the contract, and offered to have [Seller] take the goods back.

[Seller]'s claim is mostly founded.

With regard to the fact that places of business of the two contracting parties are in different countries, namely in countries which are signatories of the UN Convention on Contracts for the International Sale of Goods concluded in Vienna on 11 April 1980 (hereinafter: CISG), enacted in Hungary by Legal Decree No. 20 of 1987; therefore, the CISG shall govern the contract as set out in Art. 1(1) CISG.

Pursuant to Art. 53, the buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. [Buyer] took delivery of the goods but failed to pay the contract price. In case of failure to pay the purchase price, the seller may require payment of the purchase price pursuant to Art. 62 CISG, unless the seller has resorted to a remedy which is inconsistent with this requirement.

As evidenced by the exchange of letters of the parties, [Buyer] raised two claims against the purchase price claim of the [Seller]:

      First, [Buyer] claimed that the goods were non-conforming, consequently, requested a price reduction, and, in its letter sent to the arbitral tribunal, indicated that it does not wish performance of the contract concerning the disputed goods, which may indicate an eventual intent of avoidance;

      Second, it was also mentioned that extra offloading costs were incurred due to the fact that some lots collapsed, which would entail a claim for damages on the part of the [Buyer]. During the proceedings, [Buyer] referred solely to its claim concerning defective performance, therefore, the arbitral tribunal examined this claim in particular and found that it is not substantiated.

Pursuant to Art. 38 CISG, the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances, and pursuant to Art. 39, the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. In accordance with these provisions, the contract stated that the buyer shall qualify the shipments immediately after offloading, and notify the seller about any complaint within 36 hours after delivery of the goods. According to the available data, [Buyer] failed to perform this obligation. Up to this date, [Buyer] failed to send a notification which could serve as a factual basis for a quality complaint. Therefore, [Buyer] may not enforce its complaints arising out of defective performance: neither the price reduction, nor the avoidance claim can be substantiated.

Concerning the avoidance claim, the arbitral tribunal refers to Art. 26 CISG which provides that a declaration of avoidance of the contract is effective only if made by notice to the other party, and Art. 49(2)(b) provides that the buyer loses the right to declare the contract avoided unless he does so in respect of any breach other than late delivery, within a reasonable time after he knew or ought to have known of the breach. The arbitral tribunal finds that the notification did not take place for more than a year after performance, therefore, it cannot be considered as a valid and timely avoidance.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. In this presentation, Claimant is referred to as [Seller] and Respondent is referred to as [Buyer].

** Andrea Vincze is a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, in 2002. Currently, she is a Ph.D. candidate at the same university, working on her research project on international commercial arbitration and ICSID arbitration.

*** Tamás Szabados is a Ph.D. candidate at Eötvös Lóránd University, Hungary. Currently, he is an LL.M. student at University College, London.

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Pace Law School Institute of International Commercial Law - Last updated June 17, 2008
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