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CISG CASE PRESENTATION

Spain 28 January 2000 Supreme Court (Internationale Jute Maatschappij v. Marín Palomares) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000128s4.html]

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

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Case identification

DATE OF DECISIONS: 20000128 (28 January 2000)

JURISDICTION: Spain

TRIBUNAL: Tribunal Supremo [Supreme Court]

JUDGE(S): Pedro González Poveda

CASE NUMBER/DOCKET NUMBER: 454/2000

CASE NAME: Internationale Jute Maatschappij BV v. Marín Palomares S.L.

CASE HISTORY: 1st instance Juzgado de Primera Instancia No. 1 de Linares 2 November 1994; 2d instance Audiencia Provincial 31 March 1995

SELLER'S COUNTRY: Netherlands [plaintiff]

BUYER'S COUNTRY: Spain [defendant]

GOODS INVOLVED: Jute


Case abstract

Spain: Tribunal Supremo 28 January 2000

Case Law on UNCITRAL texts (CLOUT) abstract no. 395

Reproduced with permission from UNCITRAL

The matters at issue in this case are diverse and on all of them the ruling of the Supreme Court establishes case law.

In the first place, the ruling states that the contract of sale was completed by the exchange of faxes in early 1993 between the parties with regard to the subject matter of the contract -- 800,000 sacks of jute and the price payable for each of them (US $55.90 per 100 bags) -- and to the conformity of the goods with the subject matter: “the literal terms of the faxes unequivocally indicate the acceptance of the offer by the buyer, defendant, thus given rise to a contractual agreement binding on the parties."

Moreover, any subsequent proposal made by the buyer to the seller to renegotiate the contract terms at which the agreement had been made -- in the present case, the price -- cannot be regarded as altering the conclusion of the contract, which had already occurred. It is precisely because it was subsequent to the unconditional acceptance of the offer -- and to the delivery of a first consignment of the purchased sacks -- that the proposal has to be regarded as a proposal of novation amending the contract with regard to the price. That proposal was not accepted by the seller and the buyer refused to pay.

In such circumstances, the seller arranged a substitute sale of the sacks to a third party at terms far lower than those agreed with the Spanish buyer, namely US $0.30 per sack, pursuant to article 75 of the Convention. Furthermore, the amount of the substitute sale was far below the renegotiation price offered by that original buyer. Thereupon, the seller claimed from the Spanish buyer the difference between the original price agreed and the price of the substitute sale, in accordance with articles 74 and 75.

The Court held that the buyer was in breach of its obligation to mitigate the loss, as stipulated in article 77 of the Convention, and consequently made an appropriate reduction in the amount of damages claimed.

The decision of the Supreme Court is also based on the buyer’s requirement that payment be arranged through “a letter of credit from a Dutch bank of recognized standing covering the purchase price offered." That requirement was shown to be contrary to the practice established by the parties since 1988, whereby payment for previous purchases had been effected “after receipt of the invoice."

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Case abstract

SPAIN: Tribunal Supremo 28 January 2000

EDITOR: Patricia Rincón Martín

The seller (Internationale Jute Maatschappij, BV) sought to have the Spanish Tribunal declare that the buyer committed a breach of contract on the basis that it did not take delivery of 724,800 bags of jute (the agreed total amount was 800,000 bags). The Tribunal's decision was favorable to the seller, as it declared that a contract existed because the fax of 25 January 1993 sent by the buyer was an acceptance; a pure, unconditional and unequivocal acceptance, as it specified the amount of 800,000 bags of jute at the price of $55.90 per hundred. Moreover, the Tribunal understood that a subsequent fax sent to the seller was a confirmation of the acceptance and that the third fax buyer sent to the seller was an attempt to alter the terms of the contract, as it included a renegotiation of the price.

Regarding damages, the seller sought to receive the difference between the agreed contract price and the price it obtained when it sold the goods to a third company pursuant to Art. 75 CISG. The court held, however, that the amount had to be reduced on the basis that the seller did not comply with its obligation to mitigate damages under Art. 77 CISG.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 18(1) ; 19(1) ; 75 ; 77 [Also relevant: Article 23 ]

Classification of issues using UNCITRAL classification code numbers:

18A [Acceptance of offer: criteria for acceptance];

19A [Acceptance with modifications: reply purporting to accept but containing additions or modifications];

75A [Damages established by substitute transaction: resale by aggrieved seller];

77A [Mitigation of damages: obligation to take reasonable measures to mitigate damages]

Descriptors: Acceptance of offer ; Damages ; Cover transactions ; Mitigation of loss

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Editorial remarks

EDITOR: Patricia Rincón Martín

In analyzing the first fax sent by the buyer, the court concluded that it was indeed an acceptance and, therefore, rejected the buyer's claim that a contract did not exist. Furthermore, the Tribunal considered that although there was an attempt to modify the contract, it was never accepted by the seller, and thus, the terms remained: 800,000 bags of jute at $55.90.

Regarding damages, the court reduced the amount requested by the seller because it had rejected the subsequent offer of the buyer, contained in its third fax, to acquire the 724.800 bags at the price of 70 pesetas per unit. It was considered that such rejection did not comply with the obligation to mitigate losses under Art. 77 CISG. "Se reduce la indemnización solicitada por la vendedora porque ésta no cumplió con su obligación de mitigar daños, que aparece reconocida en el Art. 77 CISG ..."

Furthermore, the seller's claim that the buyer did not comply with seller's demand that buyer open a letter of credit was rejected by the court on the basis that this had never been a contract requirement between the parties.

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Citations to other case abstracts, texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

French: Recueil Dalloz (17 January 2002) No. 3, 322

Spanish: CISG-Spain and Latin American website "http://www.uc3m.es/cisg/respan7.htm"

CITATIONS TO TEXT OF DECISION

Original language (Spanish): Reportorio Aranzadi, 454/2000; CISG-Spain and Latin American website "http://www.uc3m.es/cisg/sespan7.htm"

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Saidov, Damages under the CISG (December 2001) n.229; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.318 (commenting on the reach of Article 19); [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 19 para. 7 Art. 77 para. 7; Helmut Koziol, Reduction in Damages According to Article 77 CISG, 25 Journal of Law and Commerce (2005-2006) 385-391

French: Rosch, Recueil Dalloz (17 January 2002) No. 3, 322-323

Spanish: Enrique Fernández Masiá, Cuadernos Civitas de Jurisprudencia Civil (abril-septiembre 2000) No. 1447, 673-689; [2000] Blazquez, Revista de Derecho Patrimonial 203

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Case text (English translation)

Queen Mary Case Translation Programme

Tribunal Supremo 28 January 2000

Translation by Alexandro Osuna González [*]

Translation edited by Patricia Rincón Martín
Garrigues & Andersen, Madrid, Spain

Repertorio Aranzadi, 454/ 2000.

Legal reasoning

      - First. The appeal in casación is against the judgment of the Court of First Instance of Linares, dismissing the claim by Internationale Jute Maatschappij, BV [seller] against Marín Palomares, SL [buyer]. The [seller] claimed US $122,491.20, whose equivalent in Spanish currency is 16,710,600 pesetas. The [seller] bases his claim on a sales contract entered into with the [buyer] concerning 800,000 sacks of jute. [Seller] alleges that this contract was breached by the buyer's refusal to accept delivery of 724,800 units. The judgment that is appealed declares that the existence of a contract concerning these 724,800 units was not proven.

     - Second. Based on paragraph 4 of art. 1692 of the Civil Procedures Code, the first issue raised in the appeal alleges a violation of art. 1281 of the Civil Code, citing its first paragraph; an error by the Court of First Instance in interpreting the documents on which the parties support their positions; an error whose breach is claimed to be imputed to the [buyer]. This first issue has a close relationship with [seller's] second reasoning in which an infraction of art. 1262 of the Civil Code is alleged. [Seller's] third reasoning alleges an erroneous application of art. 19 of the United Nations Convention on Contracts for the International Sale of Goods [CISG] of 11 April 1980 (RCL [**] 1991, 1229 and RCL, 1996, 2896), to which Spain adhered to by an instrument dated 17 July 1990.

Article 19 [CISG] provides that:

"A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer."

It is a doctrine reiterated by this Court that the existence or non-existence of a contract is a question of fact subject to resolution by the Court of First Instance whose results could only be upset in casación alleging an error in the legal interpretation of the evidence. Considering the norms that are said to be infringed, the appealed judgment arrived at the conclusion of the nonexistence of a contract based on what is said to be the [seller's] pretense through the rules of interpretation of contracts, as expressly discussed in the final paragraph of the third legal reasoning. In this sense, the doctrine contained in this Court's ruling of 20 May 1996 (RJ [**] 1996, 3793) result is applicable. It states in that case that:

"… what is precisely at issue is the existence of a contract by taking into account the intent as made evident by subsequent acts, and certainly, the analogous application of rules of contractual interpretation applicable to other legal acts previous or subsequent to the very contract could not be considered contrary to law; these rules should apply to the entire contractual context, including the preparatory acts, and also to acts of the execution of the contract or of its performance."

Similar criteria support this Court's ruling of 3 February 1994 (RJ 1994, 970) that deemed a contract nonexistent based on the interpretation of the sole document contributed to the docket and alleged in the appeal infraction of arts. 1281 and 1283 of the Civil Code. This Court's ruling of 26 March 1993 (RJ 1993, 2395) states that:

"Contracts are perfected by the mere consent, manifested by an offer and an acceptance that marks the end of the formative 'iter' of the contract, the culimination of the preliminary acts of formation, which requires that the offer contains all the decisive elements of the object and cause so that the subsequent acceptance determines the meeting of minds, without introducing a modification that would require further agreement."

"Thus the consent", as stated in this Court's ruling of 11 April 1992 (RJ 1992, 3093):

"must be free and consciously granted, manifested by conclusive, expressed or tacit acts; acts that are exteriorized after a deliberate decision. A contract exists only when two minds converge or agree on the object and cause that are to comprise it (art. 1262 of the Civil Code)."

In view of this jurisprudencial doctrine, we conclude in the case at hand that a contract existed between the parties that had as its purpose the sale by the [seller] to the [buyer] of 800,000 bags of jute for the price of US $55.90 per hundred bags; that the contract was perfected by the buyer's unconditional acceptance of the offer made by the seller, as is evidenced by the fax remitted by [buyer] to [seller] on the 25 January 1993 (document number 1 of the complaint), which has the following text:

"Reference: Order of sacks of jute. We confirm the order of 800,000 sacks, at the price offered of US $55.90 / 100 sacks. Please send the first shipment urgently and send the invoice by fax."

The transcribed terms evidence in an unequivocal fashion the acceptance of the offer by the buyer, thus creating the contractually binding consent of the parties.

The two faxes remitted by the [buyer] to the [seller] on that same 25th of January 1993, do not alter the conclusion that is arrived at through the literal interpretation (art. 1281 1 of the Civil Code) of the document attached to the claim. The fax submitted as document number 3 with the response to the claim reads:

"Reference: Order of sacks of jute. With regard to today's phone conversation with Mr. L.M., confirm by fax the confirmation of the order under the agreed conditions: First delivery (the habitual amount of sacks of jute) in a truck by this week. The second delivery of the same amount next week. Please, you are hereby informed that the estimated amount for subsequent shipments of sacks of jute is approximately 800,000 sacks."

The meaning of this fax, if it is to be given any meaning, is that it confirmed the acceptance previously given. The fax submitted as document number 4 with the response to the claim states:

"Reference: Order of sacks of jute. Thank you for today's fax. We confirm the order of a truck today and of a truck for next week with the conditions established in your fax. With regard to the bill of 730,000 sacks, in case you cannot adjust the price in pesetas, we will have to renegotiate the price of US $55.90 dollars per 100 sacks. Markings: The same as previously indicated, unless there is another instruction from us."

This second communication only evidences the buyer's intent to renegotiate the accepted price in connection with subsequent shipments. As this Court's award of 7 June 1986 (RJ 1986, 3296), reads, quoting several other judgments of this Chamber:

"An offer can be revoked provided the contract has not been perfected, unmistakably and clearly stating the coincidence of offer and acceptance, the first of which is insufficient until the [offeree] fully accepts it. It is not possible to appreciate the existence of an acceptance when a submission for modifications, alterations or conditions to the offer are made,"

In the instant case, there is no lack of acceptance; the offer to "renegotiate" the price of the 73,000 remaining bags was made subsequent to a pure and unconditional acceptance contained in the first of the cited faxes, and thus should be considered as a proposal for a modifying novation of the contract with regard to the price, which was not accepted by the seller. This is not consistent with the position maintained by the [buyer] concerning the non-existance of the sales contract regarding the 730,000 sacks of jute. The fact is that on 14 September 1993, [buyer] showed that she was willing to take the 724,800 sacks at the current market price, 70 pesetas, "with a view towards giving once and for all a solution to this regretable matter." It is stated in [buyer's] fax of 14 September, that is to say, that [buyer] was willing to acquire the merchandise for the price of 50,736,000 pesetas although, according to her, there was no existing contract that would bind her to make that acquisition. By applying the rule of contractual interpretation invoked in the first reasoning of the appeal, it must be concluded that there was a binding sales contract that had as its purpose the sale by the [seller] to the [buyer] of 800,000 sacks of jute at US $55.90 per hundred units. Because the appealed judgment failed to reach this conclusion, the legal provisions mentioned in the first, second and third legal reasonings, are infringed. In consequence, we find the appeal well grounded; we vacate and annul the appealed sentence.

     - Third. Having found the procedure of casación well grounded, this Chamber takes full jurisdiction, and now turns to the other issues raised in this dispute (art. 1715.3 of the Civil Procedures Code). It is claimed that there exists a difference between the contract price and the price at which the seller had to sell the goods to a third party, a difference valued at, according to [seller], US $122,491.20, whose value in pesetas is 16,070,600. This claim is based on [CISG] article 75, according to which:

"If the contract is avoided and if, in reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74."

There is evidence on file proving that the seller made the sale of the sacks of jute on 6 October 1993 which, according to article 75, gave [seller] the legitimate right to demand the difference between the price of the substitute transaction and the agreed price in the avoided contract.

However, under article 77 of the [CISG]:

"A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated."

It was proved that [buyer] offered to purchase the 724,800 sacks of jute at a price of 70 pesetas per unit, a price which included the stamping of the [buyer's] anagram. Upon being informed by the seller of the existence of a substitute buyer who would pay US $0.30 per new and printed unit, the rejection by the seller of [buyer's] offer to purchase the jute at 70 pesetas per unit is not justified based on [seller's] attempt to condition [buyer's] payment on the issuance of a letter of credit drawn on a prestigious Dutch bank to cover the purchase price that [buyer] offered. This is so considering the fact that the commercial relationship that had existed between the parties since 1988 was without incidents concerning the payment of the supplied merchandise. We further observe that in the substitute sale no special guarantees of the payment of the price were demanded; [seller] simply made payment conditional "after receipt of the invoice." Consequently, we cannot affirm that in rejecting [buyer's] offer to acquire the 724,800 sacks of jute at a price of 70 pesetas per unit, the [seller] had adopted "measures that are reasonable under the circumstances, in order to reduce the loss." Instead, the [seller] resold the sacks to a third party for a very inferior price after only a few days. The damages [seller] has requested should therefore be reduced to US $17,865.48 whose value in Spanish currency is 2,340,379 pesetas. We direct the [buyer] to pay this amount plus the legal interest under art. 921 of the Civil Procedures Code from the date of this award.

      - Fourth. As for the legal expenses, we see no merit to make a special judgment for expenses incurred in the Court of First Instance, because of the partial estimate of the claim, nor for the expenses incurred in the appeal and casación recourses. Pursuant to arts. 523.2, 710.2, 1715.3 of the Civil Procedures Code and, in accordance with this last precept, we return to the appellant the deposit made.


FOOTNOTE

* Alejandro Osuna Gonz ález, Licenciado en Derecho, Universidad Iberoamericana, Plantel Noroeste, Tijuana, Mexico, 1995; LL.M. University of Pittsburgh, 1998; Professor of Public International Law and International Sales Law at the Universidad Iberoamericana, Plantel Noroeste, in Tijuana, Baja California, Mexico, practices law in Tijuana, State of Baja California, Mexico.

** All translations should be verified by cross-checking against the original text. Translator's note on abbreviations: RCL =       ; RJ =      

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Pace Law School Institute of International Commercial Law - Last updated October 30, 2006
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