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CISG CASE PRESENTATION

Belgium 23 May 2001 Appellate Court Gent (H.T. GmbH & Co. KG v. NV R.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010523b1.html]

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

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Case identification

DATE OF DECISION: 20010523 (23 May 2001)

JURISDICTION: Belgium

TRIBUNAL: Hof van Beroep [Appellate Court] Gent

JUDGE(S): J. Delbeke, P. Vanherpe, J. Baudrez

CASE NUMBER/DOCKET NUMBER: 1999/A/2160

CASE NAME: H.T. GmbH & Co. KG v. NV R.

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Belgium (defendant)

GOODS INVOLVED: Thread


Case outline

Reproduced with permission from CISG-Belgium database of Katholieke Universiteit Leuven

Applicable law: Convention on the Law Applicable to Contracts for the International Sale of Goods (Hague Conference 15 June 1955). CISG applicable in Germany; CISG applicable

Lack of conformity notice: too late and not proved

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 39 ; 78

Classification of issues using UNCITRAL classification code numbers:

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

78B [Rate of interest]

Descriptors: Lack of conformity notice, timeliness ; Interest

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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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=778&step=Abstract>

CITATIONS TO TEXT OF DECISION

Original language (Dutch): CISG Belgium database of Katholieke Universiteit Leuven <http://www.law.kuleuven.ac.be/ipr/eng/cases/2001-05-23.html>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=778&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 172; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion); Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Hof van Beroep) of Gent

H.T. GmbH & Co KG v. N.V. R.

23 May 2001

Translation [*] by Benoit Samyn [**]

Translation edited by Sieg Eiselen [***]

PARTIES: COUNSEL. H.T. GmbH Rr Co KC [seller], a company under German law, seated in Germany […], registered in the commercial register of Frankfurt am Main, Germany, Appellant, having as counsel Mr. Marc Willemart, lawyer at 1060 Brussels, Belgium, versus N.V. R. [*] [buyer], a limited liability company under Belgian law, seated at 8940 Wervik, registered in the commercial register of Ieper, Belgium, Respondent, having as counsel Mr. Godfried Duchi, lawyer at 8500 Kortrijk, Belgium.

The Appellate Court passes the following judgment:

The parties were heard in their arguments and conclusions in an open court session and the case documents were considered.

[Seller] has in a timely and legally valid way appealed against the judgment rendered on 27 September 1999 by the Commercial Court of Ieper [Court of First Instance].

Procedural and factual proceedings background

[Seller's claim]

By writ of 17 April 1997, [seller]-Appellant, demanded that [buyer]-Respondent pay [Belgian francs] Bf 1,508,154 plus the contractual interest of 10% on the principal sum of Bf 1,208,775 from 1 April 1998 until the date of judgment and, subsequently, judicial interest, again at the contractual interest rate of 10%.

This principal claim is based on the delivery of thread, documented on invoice no. FC-6-36910 of 7 July 1995 for Bf 1,208,775 plus interest at 10% from the expiry date 8 October 1995 until 31 March 1998:

   

Bf 1,208,775

Bf + 299,379

Bf 1,508,154

[Buyer's position and counterclaim]

Before the Court of First Instance, [buyer] requested the dismissal of [seller]'s main claim as inadmissible and unfounded. Immediately a counterclaim was lodged against [seller] for payment of Bf 1,340,000 and Bf 278,499 in principal, plus the arrears interest from the date of default on 18 October 1996, plus legal interest.

The sum of Bf 278,499 is contained in a debit note of 31 August 1995 and the sum of Bf 1,340,000 in a debit note of 18 October 1996, respectively. [Buyer] claims that these debit notes are based on the damages it suffered as a consequence of defective goods.

[Seller's reply]

[Seller] rejected the counterclaims of [buyer] and demanded the granting of his principal claim.

The appealed judgment of First Instance

By judgment of 27 September 1999, the Court of First Instance determined first that there was no proof of a settlement. The Court of First Instance further considered whether there had been difficulties with the thread or the processing of it.

As a result, the Court of First Instance appointed an expert with the following mandate:

  1. "To describe the thread delivered by [seller] to [buyer] on 13 June 1994, 24 January 1995,
    19 June 1995 and 7 July 1995;
  2. To describe the processing that the thread underwent after delivery, as well as to investigate the data concerning the processing;
  3. To check what the [seller] did with the delivered thread that was taken back;
  4. To describe the result of this delivery and the processing;
  5. To render an opinion concerning the quality and/or the defects of the thread and/or the processing of it, to describe the cause of eventual defects and to render an opinion on whether the eventual defects made the thread unsuitable for the purpose for which it was bought;
  6. To answer all useful and meaningful questions of the parties and to arrange a possible reconciliation between the parties."

Complaints and position of the parties on Appeal

[Seller's position]

[Seller] states that the Court of First Instance should have upheld his principal claim anyway, as it was founded on a delivery that was accepted without protest, while the original counterclaim of [buyer] was contested.

Concerning the debit note of 31 August 1995 for Bf 278,499 in respect of thread delivered on 13 June 1994, [seller] claims that [buyer] has hardly taken into account the provisions of Art. 39(1) CISG requiring that buyer should make its objection within a "reasonable time."

On the other hand, [seller] points out that the short term that is imposed has also been imposed for evidentiary reasons.

The appealed judgment dates from a date five years subsequent to the processing and sale; therefore, according to [seller], it would no longer be possible for an expert to make any useful determination.

Concerning the debit note of 18 October 1996 for Bf 1,340,000 in respect of thread delivered on 24 January 1995, [seller] recognizes that [buyer] had given notice of the problems within a reasonable time.

However, [seller] points out that [buyer] has not given any proof of the non-conformity of the delivery. [Seller] also alleges that far too much time has elapsed, so that an expert can no longer make a useful determination.

Thus [seller] requests the annulment of the disputed judgment, the granting of [seller]'s principal claim and dismissal of the original counterclaim of [buyer] as "inadmissible and unfounded."

[Buyer's position]

[Buyer] requests the confirmation of the disputed judgment.

[Buyer] also relies upon Art. 1068 Ger.W.[*], from which it follows that even if there is only a partial confirmation of the investigation measures ordered by the Court of First Instance, the Appellate Court has to refer the case back to the Court of First Instance.

APPELLATE COURT JUDGMENT

I. Applicable law

The Vienna Sales Convention of 11 April 1980 (hereinafter CISG) is applicable to govern the contracts from which the disputes have arisen.

[Seller] has his seat in Germany, while [buyer] has its seat in Belgium.

The agreements concern international commercial sales contracts concluded in the period 1994-1995.

In the case of disputes relating to the international sale of movable physical goods in commercial context dated before 19 February 1999, the lex contractus is determined in accordance with the Hague Convention of 15 June 1955 [Convention on the Law Applicable to Contracts for the International Sale of Goods] (approved by law of 21 September 1962, published on 29 September 1964). The Hague Convention 1955 is valid in Belgium without treaty reciprocity towards any other country.

According to Article 2 of the Hague Convention, the sale "is governed by the domestic law of the country chosen by the parties."

In this case, it is not possible to determine what the agreement between the parties had been concerning the applicable law. The choice of law must take place by way of an explicit stipulation or result without doubt from the terms of the contract.

In the absence of such a choice of law, Article 3 of the Hague Convention determines that the sales contract shall be governed by the domestic law of the country where the seller has his usual place of residence at the time he received the order.

In this case, this results in the application of German law.

In view of the nature of the dispute and the finding that the agreement dates from after 1 January 1991, the CISG is applicable.

II. Merits of the case

     A. The three deliveries in dispute

Three deliveries of thread by [seller] to [buyer] are in dispute.

-  A first delivery of 13 June 1994, in respect of which [buyer] finally issued a debit note on 31 August 1995 against [seller] in an amount of Bf 278,499 - the subject of the original counterclaim of [buyer];

-  A second delivery of 24 January 1995, which also caused [buyer] to prepare a debit note on 18 October 1996 against [seller] for the amount of Bf 1,340,000 - also the subject of the original counterclaim of [buyer];

-  And, finally, a third delivery on 7 July 1995, the invoice of which is the subject of the original principal claim of [seller].

A delivery of 19 June 1995 has been taken back by the parties in mutual agreement and is not the subject of any legal dispute. The Court of First Instance was wrong to appoint an expert in relation to this delivery of 19 June 1995.

[Buyer] gave vague notice that a settlement had been reached. There is no proof of this. In a letter of 22 April 1997, [seller] refers to settlements by mutual agreement ("Kulanzregelungen"), which [seller] confirmed at the same time that they had not been accepted by [buyer]. No inferences can be drawn from attempts to settle a dispute by mutual agreement, neither for the party who formulated the proposals nor for the party who rejected the proposals.

     B. The first delivery

The first delivery of thread, dated 13 June 1994, has been spun by, or on behalf of, [buyer] in the period from 18 till 30 August 1994 (see item no. 2, [buyer]'s file, fax from "S. AVS" (apparently a sister company of [buyer]) to NV H.B., dated 22 February 1955, second page).

In a letter dated 3 February 1995, [buyer] reported that a customer had raised complaints in respect of "uneven dying of yarn", that had been spun from the above delivery. Yarn strings were sent to [seller] for checking.

In a letter dated 6 June 1995, NV H.B.I. refused any liability (item no. 7, [buyer]'s file).

NV S. AVS requested a "copy of the investigation report" (letter dated 9 June 1995 and fax dated 21 June 1995; items no. 8 and 9, [buyer]'s file).

[Seller] asserts that it had orally replied several times that no investigation report was available. It appears curious that although [seller] had twice been asked in writing for a report, [seller] never replied in writing.

[Buyer] communicated the following by fax dated 18 July 1995 to [buyer]'s own client, NV C., and with copy to NV H.B. (item no. 14, [buyer]'s file):

"Because the answer of [seller] regarding the defect is not forthcoming, it is agreed that the defective yarn be invoiced to [seller], namely […] Bf 278,499. This yarn is at the disposal of [seller]. A debit note will be sent forthwith."

On 31 August 1995, [buyer] drafted a debit note for Bf 278.499 including a note that the debit note concerned the return of bad yarn as agreed with Mr. H. [free translation of “Ruckabe schlechtes Garn wie abgesprochen mit Herrn H.”] It should be noted that, as [buyer] rightly points out, [seller] did not react to this.

It is correct that a debit note for damage is not an invoice to which article 25 of the Commercial Code can be applied.

Nevertheless, the fact cannot be ignored that in no way determinable was there any reaction by [seller] to the very clear information on the debit note that it had been drawn up "as agreed with Mr. W. Himpe." Furthermore, it should be noted that H. was the constant contact person at NV H.B. (C.Q. H.B.I.), clearly deputizing for [seller]. When such a clear confirmation coupled with an explicit claim is sent to the counter party, in the German language of the addressee, then, also according to international norms in the commercial world, the addressee is deemed to have agreed with it, when he does not show any reaction, let alone any motivated reaction. In these circumstances, the remark of [seller], that under Art. 39(1) CISG too much time has elapsed before [buyer] had protested, is irrelevant, in view of the above-mentioned approval by [seller] of the concrete claims of [buyer].

For the same reason it is not necessary to deal with the request of [buyer] for the appointment of an expert. Therefore, the original counterclaim of [buyer] is upheld to the amount of Bf 278,499 as principal sum.

     C. The second delivery

           a.  The delivery of 24 January was processed during February 1995 and on 22 February 1995 “S. AVS” formulated a complaint (item no. 2, [buyer]'s file).

In contrast to the allegations made by [buyer], it has been shown clearly that [seller] had reacted, namely with his fax dated 9 March 1995 to NV H.B., a document that now finds itself precisely in the [buyer]'s file, under item no. 3.

In this and from this it can be concluded that [seller] denied liability and made notes in respect of the "rotors" used for processing the thread. During a subsequent spinning of three tons of thread, a technical representative of [seller], Mr. F., was present. In a letter dated 6 June 1995, NV H.B.I. denied any liability (item no. 7, [buyer]'s file).

In a fax dated 21 June 1995, "S. AVS" proposed that "the damage in case C in the amount of Bf 1,300,000." be divided between the [seller] and the spinning-mill. Apparently, [seller] did not react to this.

While [buyer] prepared a credit note on 24 August 1995 in favor of [buyer]'s customer, NV C., for Bf 1.340.000 excluding V.A.T.[*], this time [buyer] did not issue any debit note against [seller]. This was only done on 18 October 1996; i.e., after the invoice for the third delivery dated 7 July 1995 (the subject of the original principal claim of seller) had been issued and after the seller's letters of demand in respect thereof dated 2 July and 31 July 1996 had been sent (items no. 34 and no. 35, [seller]'s file).

           b.  In this context, it should be noted that the fact that [seller] had already made deliveries to [buyer] before, in 1993, does not entail that [seller] was deemed to be acquainted with the production methods of [buyer] in respect of a delivery taking place two years later and that it should have to bear any liability in respect thereof . On the other hand, it is clear that where the [buyer] had formulated timely complaints, [seller] had also reacted in a diligent manner by denying liability.

On 21 June 1995 a proposal was formulated to divide the "damages in case C".

Whereas [seller] did not react to this proposal, he had already denied any liability before that and consequently there was no agreement available, neither implicit nor explicit; [buyer] should as soon as possible have taken the necessary steps to have the liability and the consequences determined by another expert.

This is so because it is up to the buyer to prove the possible non-conformity (see S. De Groot, Non-conformiteit volgens het Weens Koopverdrag [Non-conformity under the CISG], T.P.R., 1999, blz. 635 e.v., more precisely no. 2.4, pp. 650-651, and the case law mentioned therein).

[Seller]'s argument, that it is impossible to render an expert opinion some years after the processing had taken place is utterly convincing. Now, more than six years after the processing of the thread, this is even more true.

It is striking that [buyer], after [buyer]'s letter, dated 21 June 1995, with the proposal to divide "the damages in case C", has not come back to [seller] concerning this issue. Only after [buyer] had been placed in default by [seller]’s letters dated 2 and 31 July 1996 in not paying the invoice dated 7 July 1995, did [buyer] send a debit note on 18 October 1996. This is remarkably late.

Similarly, it is striking that [buyer] held on to its "non-action" for about three years: Summons was issued on the [buyer] on 17 April 1998 and only after the procedure in terms of Art. 751 Ger W.[*] had been instituted did [buyer] formulate a counterclaim together with conclusions, which was submitted on 15 September 1998.

If the damages of [buyer] had been so large as alleged in [buyer]'s original counterclaim, it is totally unreasonable that [buyer] had not taken the necessary initiatives to determine, on the one hand, the alleged defects and the liability of [seller] for those defects and, on the other hand, the extent of the damage [buyer] suffered as a consequence of the defects established.

Not only has [buyer], due to its continued inaction, eliminated the possibility of proving the damages by an expert, [buyer] has also, due to [buyer]'s attitude, eliminated any initial credibility in [buyer]’s statements regarding defects and damage as a consequence of the non-performance of [seller].

In these circumstances the conclusion that the original counterclaim of [buyer] concerning the principal sum of Bf 1,340,000 has to be dismissed entirely, becomes inevitable.

      D. The third delivery

In respect of the invoice for Bf 1,208,775 dated 7 July 1995, it is held that [buyer] has explicitly by fax dated 25 August 1995 confirmed that the delivery was very good (see item no. 32, [seller]'s file). Therefore, there is no ground not to award [seller] the amount of the invoice dated 7 July 1995.

From the evidence, and more specifically "the standard purchase and sales clauses" ("Algemeine Einkaufs- und Verkaufsbedingungen", item no. 33, [seller]'s file), it is not evident that a contractual interest rate of 10% had been agreed upon. No other piece of evidence that could provide the contractual basis for such an interest rate has been presented.

In these circumstances, interest is awarded equal to the legal Belgian interest rate from the date of the first proven default, being 2 July 1996. An interest award from an earlier date cannot be justified, because [buyer] has lawfully requested a deduction for a part of [seller]'s claim, being Bf 278,499.

III. Appellate Court ruling

The final account presents itself as follows:

original principal claim, principal sum

Bf 1,208,775

original counterclaim, principal sum

Bf - 278,499

Bf   930,276

plus the contractual interest from 2 July 1996.

On these grounds, the Appellate Court, doing justice in adversarial proceedings, applying Art. 24 of the law of 15 June 1935 concerning the use of language in court proceedings:

-  

Declares the appeal admissible and largely founded;

-  

Nullifies in all its parts the judgment of the Court of First Instance appealed against;

-  

Assumes the whole case and gives the following judgment:

-  

Declares the original principal claim of [seller] and counterclaim of [buyer] admissible and both partially justified;

-  

Awards compensation;

-  

Orders [buyer] to pay Bf 930,276 plus the contractual interest from 2 July 1996 until 17 April 1998 and, subsequently, legal interest, in each instance according to the legal interest rate.

-  

Gives judgment against [seller] for a fifth and [buyer] for four fifths of all costs.

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Appellant of Germany is referred to as [seller]; the Respondent of Belgium is referred to as [buyer]. Monetary amounts in Belgian francs are indicated as [Bf].

Translator's note on other abbreviations: Ger. W. = Judicial Code [Free translation of Art. 1068 of the Judicial Code: "Appeal against a final judgment (…) makes the dispute pending by the appellate judge. The appellate judge only refers the case back to the judge of first instance if he, even only partially, confirms and investigation measure ordered in the contested judgment. Art. 751 of the Judicial Code concerns the procedure to abating a judgment that is supposed to have been made by contradiction when some conditions are fulfilled but one party does not appear or submit conclusions.]; N.V. = Naamloze Vennootschap [equivalent to a corporate structure of limited liability company under Belgian law]; V.A.T. = Value Added Tax.

** Benoit Samyn practices law with the Arbitration Group of Coudert Brothers in Brussels. He graduated from Ghent University and has an LL.M. from Queen Mary, University of London and an MBA from Brussels. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

*** Sieg Eiselen is Professor in Private Law, University of South Africa, Advocate of the High Court of South Africa.

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Pace Law School Institute of International Commercial Law - Last updated February 17, 2005
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