CISG CASE PRESENTATION

United States: U.S. District Court 8 August 2000

Case Law on UNCITRAL texts (CLOUT) abstract no. 414

Reproduced with permission from UNCITRAL

An Italian manufacturer of shoes, plaintiff, concluded an exclusive distribution agreement with a U.S. corporation (first U.S. corporation) for distribution of the plaintiff's shoes in the United States and Canada. The plaintiff also concluded an oral agreement with a second U.S. corporation (second U.S. corporation) affiliated to the first corporation under which agreement the affiliate would purchase shoes and resell them to retailers in the United States.

The first U.S. corporation negotiated a contract of sale with a U.S. retailer, defendant. The plaintiff manufactured the shoes, delivered them to the second U.S. corporation, and sent an invoice directly to the defendant. The only written sales contract, however, was entered into after delivery to the second U.S. corporation and showed the parties as the second U.S. corporation and defendant. (The second U.S. corporation subsequently assigned the contract to the first U.S. corporation.) The plaintiff sent instructions to the first U.S. corporation on how payment was to be made. Contrary to the instructions it had received from the plaintiff, the first U.S. corporation directed the defendant to make payment to the first corporation=s financier, which had purchased its receivables. The defendant paid this financier and the plaintiff received no payment for the shoes. The plaintiff sued the defendant for the price of the shoes and the defendant moved for summary judgment.

The issue before the court was whether the defendant was entitled to summary judgment.

The Court held that the plaintiff and the defendant had not entered into a contract of sale. The Court noted that the CISG did not require a written contract and that evidence of the parties' negotiations, if any, could be considered. If the first U.S. corporation acted as an agent within its authority, then it was authorized to direct how payment was to be made and to enter into the agreement amending the terms of the plaintiff's invoice. If, on the other hand, the first U.S. corporation was not acting within its authority then the only contract was between the second U.S. corporation and the defendant. The Court therefore granted the defendant summary judgment.

The court's opinion contains the following and only the following reference to the CISG:

"Oral Agreement Not Withstanding the Statue of Frauds

"Fercus argues that the Statute of Frauds is no obstacle to a jury's finding of a contract between itself and Shonac because any contract between Shonac and Fercus would be covered by the United Nations Convention on Contracts for the International Sale of Goods ('C.I.S.G.').

"The C.I.S.G. applies to any sale of goods when: (1) the contracting parties have places of business in different nations; (2) the nations are signatories to the Convention; and (3) the contract between the parties does not have a choice of law provision. C.I.S.G. Art. 1(1)(a); Delchi Carrier, SpA v. Rotorex Corp., 71 F.3d 1024, 1028, n.1 (2d Cir. 1995). Unlike the U.C.C., the Statute of Frauds does [page 12] not apply to the C.I.S.G. and parol evidence is permitted to prove that a contract has been agreed by the parties. C.I.S.G. Art. 11. See also, Claudia, 1998 WL 164824, at *5 (finding in a C.I.S.G. case, that parol evidence was admissible to determine the parties' final agreement where the only written document was a unilaterally prepared invoice signed only by the seller).

"The only scenario in which the C.I.S.G. would apply here is if a binding contract was created between Shonac and Fercus. Under the C.I.S.G., evidence of the oral conversations between Palazzo and Fercus, relating to the terms of the purchase by Shonac, could be admitted to establish that an agreement had been reached between Fercus and Shonac and that a contract was established when Fercus shipped the goods and sent the July 31 invoice directly to Shonac. However, since Fercus admits that it did not have any communication with Shonac pertaining to this order, then Palazzo must have been acting as Fercus' agent when he negotiated this order with Shonac. On the one hand, if Palazzo was Fercus' agent, then he had the actual or apparent authority to instruct Shonac as to the method of payment. Even [page 13] if the invoice had created a binding contract under the C.I.S.G., Palazzo, using his actual or apparent authority, modified the original agreement between Fercus and Shonac when he executed the binding purchase agreement with Shonac on August 28. The purchase order called for Shonac to pay Palazzo directly for the shoes and when Shonac paid MTB for the shoes on October 9, Shonac satisfied the terms of the modified contract.

"If, on the other hand, Palazzo was not acting as Fercus' agent, and he did not have the actual or apparent authority to negotiate an order for Fercus, then the only contract was that between Shonac and Palazzo himself, which would be governed by the U.C.C. Under either scenario, it is clear that Shonac fulfilled his obligation under any contract by paying for the shoes. Therefore, summary judgment is granted and these claims are dismissed." [page 14]