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CISG CASE PRESENTATION

Switzerland 11 April 2002 Canton Appellate Court Vaud (Clothing case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020411s1.html]

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

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Case identification

DATE OF DECISION: 20020411 (11 April 2002)

JURISDICTION: Switzerland

TRIBUNAL: Tribunal Cantonal [Appellate Court] Vaud

JUDGE(S): M. Creux (president), MM. Cottier et Bosshard (juges), M. Tatti (greffière)

CASE NUMBER/DOCKET NUMBER: CO97.002109; 100/2002

CASE NAME: P... SA v. H... SA

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (plaintiff)

BUYER'S COUNTRY: Switzerland (defendant)

GOODS INVOLVED: Clothing


UNCITRAL case abstract

SWITZERLAND: Commercial Court of the Canton of Vaud (Clothing case) 11 April 2002 [100/2002]

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/87],
CLOUT abstract no. 880

Reproduced with permission of UNCITRAL

Abstract prepared by Thomas M. Mayer

Following the previous year's satisfactory experience, the defendant, a Swiss clothing company, placed new orders for garments with the plaintiff, a French manufacturer. There were three orders in all. On receipt of the deliveries, the defendant made a number of complaints and at a certain point stopped one of its cheques, stating that the business relationship was terminated. Some days later it returned the goods, with the exception of the articles already sold, to the plaintiff. The plaintiff took back part of the goods for sale to other customers. It continued to demand payment of the price of the remainder of the orders and finally initiated legal proceedings to obtain payment. As part of its claim it also sought damages for loss of profit on the resold goods and for its additional efforts. In a counterclaim the defendant also sought damages.

The court observed that the mistakes in delivery and invoicing errors experienced by the defendant were sufficiently important to destroy a recently established but positive business relationship, but that such mistakes in delivery were common among suppliers and that an experienced customer should develop the means to protect itself against setbacks of that kind. The court thus concluded, pursuant to article 73(1) CISG, that the defendant was not entitled to rescind the contract and that consequently it still owed the sale price.

On the basis of article 78 CISG, the court awarded the plaintiff interest on arrears. The amount of such interest was to be determined in line with the law applicable in accordance with Swiss private international law.

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Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 73 ; 74 ; 78 [Also cited: Articles 2 ; 3 ; 6 ; 14(1) ; 18(1) ; 30 ; 35(3) ; 36(1) ; 38 ; 39 ; 53 ]

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

73A ; 73B ; 73C [Avoidance in installment contracts: fundamental breach with respect to installment; Refusal of future installments; Defect in one delivery prevents use of other deliveries];

74A [General rules for measuring damages: loss suffered as consequence of breach];

78B [Rate of interest]

Descriptors: Fundamental breach ; Avoidance ; Intallment contracts ; Damages ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

German: Schweizerische Zeitschrift für Internationales und Europäisches Recht / Revue suisse de droit international et de droit européen (1/2004) 107

CITATIONS TO TEXT OF DECISION

Original language (French): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/899.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Cantonal Court of Vaud, Civil Section

P... SA v. H... SA

11 April 2002

Translation [*] by Leandro Tripodi [**]

Making a conclusive judgment, the Court decides in camera:

[FACTS]

1. The Plaintiff, P... SA [hereinafter, Seller] is a Paris-headquartered clothing-producing French company.

The Defendant, H... SA [hereinafter, Buyer] is a Lausanne-based Swiss company.

2. In the summer of 1995, [Buyer], a merchant -- the same as [Seller] -- purchased from the latter a number of apparel items belonging to its brand new "autumn-winter 1995" collection, for the approximated price of 180,000 French francs. On that occasion, [Buyer] started a marketing campaign for its customers, highlighting the collection's "couture" quality. [Seller] was described as "a young creator, with strong personality, refined elegance and a perfect touch." The articles were of irreproachable quality and reached great success with [Buyer]'s customers. The goods were delivered in excellent condition, entirely satisfying the [Buyer]. Payment of the invoices raised no difficulties, with [Buyer] respecting a delay of ten days, of about one month thereafter, and afterwards a slightly longer delay, given that the invoices issued on 23 October and 20 November were paid as late as 5 January 1996. Taking into account the prices charged by [Seller], it is plain to see that the products are of upscale quality.

[Buyer] alleges that the parties started their business relationship back in 1994, which [Seller] contests. To this regard, the testimony of witness C... is not probative. Mrs. M... is in fact an employee of the [Buyer], and moreover a long-date friend of its director. Her testimony will therefore be dismissed where it is not supported by other evidence.

3. After becoming confident with this excellent experience, [Buyer] decided in October 1995 to place a new order of 306 pieces for its "spring-summer 1996" collection, at an amount of 386,870 French francs, conducting again a strong advertising campaing. It was also [Buyer]'s aim to endow its Lausanne and Geneva stores with "P... corners", in other words, an exclusive spot for a particular brand allowing the creator's style to be shown in the context of a decoration - an ambience that fits accordingly. In light of this, [Buyer] concluded two sales orders via standard forms provided by the [Seller], whose conditions of sale (on the back of the forms) read:

"No return of the goods will be accepted without our previous agreement. Cancellation should be done eight days in advance and in writing. After such time, it will be impossible to halt the fabrication.

[...]

In any circumstance, shipment is made at the risk and hazard of the recipient.

[...]

PAYMENT CONDITIONS: either in accordance with this form or determined by our administrative services at your enquiry."

These order forms, numbered 092582, 092583 and 092584, were signed by [Buyer]. A confirmation of order was issued by [Seller] on 25 October 1995. According to this confirmation, the goods should be delivered between 25 December 1995 and 1 April 1996. Down payment could be made by check with a 5% discount. The goods were delivered by the carrier G... SA on 30 January 1996 and on 5 and 20 March 1996. The delivery notes, signed by [Buyer], expressly refer to the conditions of sale written in the order forms.

4. Following each dispatch, [Seller] issued an invoice to [Buyer]. The first invoice (#940952), dated 29 January 1996, amounted to 137,341 French francs, corresponding to Ff 144,570 less a discount of Ff 7,228.50. Since the down payment was not made, [Seller] cancelled the discount and issued a second invoice (#941019) of Ff 7,228.50. On 4 March 1996, a third invoice was issued (#941030) of Ff 180,990, and a fourth one on 19 March 1996 (#941056) of Ff 33,630, corresponding to the amount of Ff 35,400 less a discount of Ff 1,770. However, since [Buyer] did not pay on time, [Seller] cancelled the discount and issued a fifth invoice (#941171) amounting to Ff 1,770. Thus, the total invoiced value was Ff 360,960.

5. On 11 March 1996, [Buyer] signed a check for Ff 144,570 with the purpose of paying the first two invoices. [Buyer]'s director asked [Seller] to avoid depositing the check prior to 30 March 1996. This check was presented for payment on 4 April 1996, but was refused because on 29 March 1996 the director of [Buyer] had requested the bank to stop it. In view of that, [Seller] was required to pay a Ff 351.20 bank fee.

6. Besides ten pants and seven dresses, all in plain red, [Buyer] also ordered ten jackets in "pied de coq". According to the delivery note, the latter's sleeves all presented a defect. [Buyer]'s director complained about this to [Seller]. On 27 February, [Seller] sent [Buyer] the following fax:

"I hereby confirm our discussions of today.

We agree to repair the jackets (17105 pied de coq) at our expenses. We apologize for the defect, which was not detected by our controls.

We hope that this development brings no harm to our relationship and offer your Mr. Z... our kindest regards."

The ten jackets were handed back to [Seller] on 28 February 1996.

At the end of March 1996, [Seller] returned the ten jackets, purportedly repaired, to [Buyer]. The [Buyer] thereupon declared to be stunned at the fact that the articles were returned in the same state as before and presented the very same defects.

According to the forensic expert, G... T... of company C... S.A. "European Superior Institute of Fashion Arts and Techniques" at Lausanne, the "pied de coq" jackets all presented a defect due to the creasing of their sleeves. This was because of the type of fabric employed. Nevertheless, again according to the expert, the defects could not be eliminated without re-conceptualizing the way the jacket was produced. In her words, the conception of a costume by its creator cannot be taken as a substantive defect.

In this manner, each article is created so as to match other articles, according to the customers' taste, but the red dresses and pants were not supposed to be necessarily sold along with a "pied de coq" red jacket. Moreover, in [Seller]'s product catalog for its spring-summer 1996 collection, the red pied de coq jacket is depicted in combination with striped navy blue pants.

7. Other articles considered defective by [Buyer] were returned to [Seller]. The latter accepted to take them back and, on 31 May 1996, issued a credit note of Ff 10,840 in exchange for those articles.

8. On 4 April 1996, [Buyer] sent a letter to the [Seller] with the following contents:

"On 28 February 1996, we had to return to you ten jackets (model 17105 at Ff 1,640) all of which presented the same defect; this is particularly upsetting given the price of the goods. However, to our complete astonishment, the jackets we received in place of the former had exactly the same flaw!

Furthermore, on 19 March 1996 (invoice #941056) we received loosely packaged goods that arrived in deplorable conditions (scratched hangers, dresses sagging to the bottom of a box, etc. ...).

Afterwards, on 27 March 1996 we had to return to you eight defective articles, at a total amount of Ff 10,840.

In light of that, we were compelled to stop our check of 11 March 1996 for Ff 144,570. You will easily understand that we cannot go on with a business relationship with you under such unacceptable conditions."

9. The [Buyer] had ordered fifteen navy blue dresses of model 15212 from [Seller]. According to the delivery notes, they were delivered on 5 and 20 March 1996. On 10 April 1996, [Buyer] complained that the waistband, voile and bulk of the dresses were in different tones of blue. In 1995, [Buyer] had ordered articles of the same model, but in black, which sold very well. According to the [Seller], since they are of different materials, the coloring may be not completely identical. Furthermore, [Seller] alleges that no other client has ever complained of such fact, which the witness C...M... confirms.

Pursuant to the expert's report, the ink used for the coloring of the three different materials is not the same. Nonetheless, there is no reason to conclude that this amounts to a substantive defect, since the taste of the creator and his [or her] conception of the garment cannot be taken as a defect. The expert also maintains that, even in the case of the black-colored products, the three materials are of three distinct tones of black, in such a way that the blue and black dresses are all in all subject to the same variations.

10. At the same time, [Buyer] complained of bad packaging conditions. It purports to have received some articles in a deplorable state, as the hangers were scratched and a number of dresses were sagging to the bottom of a box. [Seller] alleges that the merchandise at issue was dispatched in perfect condition, plus that it had disclaimed any liability regarding damages occurring during transportation.

In her supplementary report, the expert explains that it was not feasible to check possible packaging problems, because the products stored at Vallorbe, where she had inspected them, were no longer in the original packages, but in return ones. After comparing the weight of the boxes from 1995 to 1996, the nature of the pieces contained in those boxes and the weight and volume of one piece, the expert added that the number of pieces per box has increased from 1995 to 1996, which is justified considering the change of season, summer apparel being less large and heavy because of the light and soft material employed. She points out also that the history of the Maison P... allows one to conclude that the company made a professional option regarding their delivery scheme in order to achieve an optimal replenishment of the boxes, that the chosen packages are absolutely suitable considering the nature of the goods and match the widespread usage in the industry of packaging and freight of clothes. According to her, the damage suffered by the apparel was not owing to a bad choice of packages and they had left Paris in uncluttered and appropriate boxes.

12. On 10 April 1996, the [Buyer] informed [Seller] that the whole collection had been sent back, through the carrier G... SA, with the exception of pieces already sold for an amount of Ff 53,670. On 11 April 1996, [Buyer] made a list of the 246 pieces, at Ff 296,450, which were returned to [Seller].

On 15 April 1996, [Seller] refused to take redelivery of the goods. By letter of 16 April 1996, [Seller] expressed to [Buyer] that it would not accept any merchandise back and that the goods had been sent out to [Buyer] once again. [Seller] requested [Buyer] to pay its debt of Ff 348,350. By registered letter of 23 April 1996, it called for immediate payment by check.

On 25 April 1996, counsel for [Buyer] addressed counsel for [Seller] by fax, conveying support for [Buyer]'s viewpoint. The merchandise remained stored at the storehouse of carrier G... SA in Vallorbe.

13. On 17 April 1996, the director of [Buyer] held a telephone conversation with the director of [Seller], following upon a series of other telephone calls. During this telephone conversation, he explained his position and summed up the occasions when he expressed his discontent.

14. On 9 May 1996, the [Buyer] asked the Justice of the Peace of Vallorbe to issue an extrajudicial report. On 23 May 1996, the magistrate handed down the following urgent official account:

"The account is meant to provide the following:

-    Inventory of the relevant merchandise;
-    Description of the defects in certain articles;
-    Description of the defects concerning the way the goods were contained;
-    Description of the discrepancies between the order placed by [Buyer] and the goods delivered by [Seller].

ACCOUNT

There are thirteen boxes.

The contents of each box have been inventoried prior to the merchandises being taken out.

[...]

There is a total of 246 pieces.

This inventory is in exact correspondence with the list drawn up by [Buyer] on 11 April 1996.

QUESTION NO. 2

All the "pied de coq" jackets' sleeves do crease.

The long dresses in two tones of navy blue all have their waistbands in a different color.

The same dresses in black were delivered in two colors (including the waistband), which meets perfectly the order.

QUESTION NO. 3

Within one of the boxes (box no. 13):

Scratched hangers; too much flimsy for fitting the clothes they are intended to hold up.

Clothes packaged too tightly and wrinkled.

Merchandise sagging to the bottom of the box, behind the scratched hangers.

QUESTION NO. 4

Delivery note of 4 March 1996 of [Seller]:

15212 118/203 101 ecru long dresses six pieces
Five of those are short dresses."

The expert's fees amount to Ff 170.

15. On 15 May 1996, the [Seller] was non-suited by the Commercial Court of Paris which declared itself incompetent.

16. On 10 July 1996, [Seller] addressed [Buyer] with a notice to complete, informing that it was the creditor of [Buyer] for an outstanding balance of Ff 350,120, which stood for Ff 348,350 plus Ff 1,770 referring to the invoice of 31 May 1996.

17. The parties have not reached an agreement. However, in order to mitigate losses, they have accepted that the non-contentious goods stored at Vallorbe should be sold. The [Seller] thus took back 174 pieces for an amount of Ff 174,020, which is confirmed by an oral account of 18 April 1997 by Mr. Raphaëlle Dieÿ, bailiff for the Tribunal de Grande Instance of Paris.

With the efforts of [Seller], the goods have been sold to two purchasers for Ff 60,043 excluding taxes.

18. The [Seller] alleges that it suffered damages and seeks compensation. It claims that [Buyer] should pay the price of the goods stocked and sold, amounting to Ff 53,670, the difference between the price of the merchandise unduly refused and the money actually recovered, that is, Ff 113,977, as well as the price of the articles still stored with the carrier G... SA, i.e., Ff 122,430. [Seller] also claims reimbursement of the transportation costs paid to the carrier G... SA, which amount to Ff 2,304, the bank fees charged in virtue of the stopped check, i.e., Ff 351.20, and the bailiff's fees of Ff 1,508.79.

19. The [Buyer] claims set-off and alleges "exceptio non adimpleti contractus" [default of the co-contracting party].

20. [Seller] also alleges (which is uncontroversial) that it was never been made aware by [Buyer] of [Buyer]'s intention of building "P... corners". [Seller] stresses that, despite its interest in introducing the "P..." brand in Switzerland, a "corner" has to meet the requirements of the brand's owner, so that [Buyer] could not establish "P... corners" without [Seller]'s consent. This has been confirmed by witnesses C.M. and F.P.

21. In her report of 29 February 2000 and supplementary report of 19 December 2000, the expert asserted that the number of flawed pieces (about thirty) was comparatively low in relation to the total number of pieces ordered, although the fact that their absolute values are high should be regarded as a true adversity. According to her, the problems concerning the delivery were annoying enough to tear down a fresh business relationship. In contrast, they are no more than routine and an experienced purchaser is supposed to know how to outwit this kind of development. As to the defects discovered (both technical and manufacturing-wise), they are attributable to specific features of the clothes and are not expected to give rise to a break of trust.

For the expert, the idea of a collection (i.e., an ensemble of costumes) of apparel put together so as to depict the visible style of a coherent unity, is designed to encourage the customer to buy a greater number of articles, thus improving sales. However, this concept is not crucial, since a collection becomes more accessible once the pieces are sold separately.

22. In its statement of claim of 11 November 1997, the [Seller] asks the Court to the order the [Buyer] to pay Ff 290,077, plus interest at 6.5% per year as of 24 April 1996; Ff 2,304 plus interest at 6.5% per year as of 23 April 1997; Ff 351.20 and Ff 1,508.79 plus interest at 6.5% per year as of 6 May 1997.

In [Buyer]'s answer of 12 February 1998, the [Buyer] contests the [Seller]'s claim and offers a counterclaim for the ordering of [Seller] to pay the sum of Ff 97,170 plus interest at 5% per year as of 1 May 1996.

In [Seller]'s reply of 22 January 1999, the [Seller] reiterates its allegations of 11 November 1997 and contests [Buyer]'s counterclaims.

[LEGAL GROUNDS]

I. The parties have their places of business in different States; hence, it is necessary to establish the applicable law.

      a) Until the entry into force in Switzerland (on 1 March 1991) of the Vienna Convention on the International Sale of Goods [hereinafter, CISG], an international sale subject to Swiss law (either because of rules of private international law, or of international conventions such as the Hague Convention of 15 June 1995 on the Law Applicable to Contracts for the International Sale of Goods, or of the will of the parties) was governed by the Code of Obligations of 1911, which also governed domestic (i.e., non-international) sales. Nevertheless, due to the adoption of the CISG, the outlook of the Swiss rules on international sales was deeply modified: the CISG has become the real cornerstone; the Code of Obligations retaining no more than a secondary role, yet it remains the sole legal text applicable to domestic sales [citations of Vuilléty, Tercier and Engel].

      b) Therefore, once a party established in Switzerland enters into a contract of sale with a party of another Contracting State, the CISG is applicable given its status as an international convention (Art. 1(1)(a) of the CISG; RS [systematic restatement of Swiss Law] 0.221.211.1; [citation of Neumayer/Ming]). As to the case at issue, the CISG has been in force in France since 1 January 1988 and in Switzerland since 1 March 1991 -- in both cases, without reservations [citations of Stoffel and Tercier].

II.  a) Article 6 of the CISG states that the parties are entitled to exclude its application or, subject to a reservation which applies neither to France nor to Switzerland, derogate from or vary the effect of any of its provisions [citation of Neumayer/Ming]. Hence, the provisions of the CISG are not mandatory in nature; the parties may exclude, expressly or impliedly, the application of the CISG in whole or in part as well as modify the effect of its stipulations [citation of Tercier].

      b) It is plain to see that the parties validly concluded a contract for an international sale through the exchange of mutual and like-minded declarations of will [citations of Tercier and Dessemontet]. In fact, even though Article 14(1) of CISG is particularly strict as to the definition of offer [citation of Neumayer/Ming], the [Buyer] has validly completed an offer by filling three order forms for over 300 items of apparel at Ff 386,870. This offer was validly accepted by [Seller] through its confirmation of order dated 25 October 1995 (Article 18(1) of the CISG).

      c) Once the contract was validly concluded, both the seller and the buyer assume a number of obligations.

      -    The seller is obliged to deliver the goods, to transfer the property in them and, if applicable, to hand over any documents relating to the merchandise (Article 30 of the CISG). Legal scholars recognize three obligations of the selle3r: the obligation to deliver the goods; the obligation of handing the documents over to the buyer; and the obligation of delivering goods that are, both formally and substantively, in conformity with the contract [citations of Tercier and Dessemontet].
 
      -    The buyer, in turn, is obliged to pay the price and to take delivery of the goods (Article 53 of the CISG; [citations of Tercier and Dessemontet]).

      d) The CISG gives importance to the seller's obligation to deliver goods that substantively conform to that which was agreed between the parties. Depending upon certain legal as well as factual conditions, the seller owes the buyer a guarantee for any lack of conformity [citations of Tercier and Chaudet]. Moreover, the buyer should examine the goods within as short a period as is practicable in the circumstances (Article 38 of the CISG) and notify the seller accurately and within a reasonable time after he has discovered or ought to have discovered any defect (Article 39 of the CISG; [citations to Tercier and Chaudet]), under penalty of preclusion. Hence, pursuant to Article 38 of the CISG the buyer must examine the goods in as short a time as allowed by the circumstances, but this examination is not always required to be performed immediately. The buyer may avail itself of a reasonable time, consistent with the circumstances. According to most scholars, the notification must be placed immediately after the defect is discovered, since the buyer is not ordinarily justified to push it back [citations to Neumayer/Ming and Wyler].

      e) Article 73 of the CISG provides that, in the case of an installment contract:

      -    If the failure of one party to perform an obligation in respect of a given installment constitutes a fundamental breach as regards that installment, the other party may declare the contract avoided with respect to that installment (paragraph (1));
 
      -    If one party's failure to perform an obligation regarding a particular installment gives the other party good grounds to conclude that a fundamental breach will occur with respect to future installments, he may declare the contract avoided for the future, provided that he does so within a reasonable time (paragraph (2));
 
      -    Furthermore, a buyer who declares the contract avoided as to any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, because of their interdependence, those deliveries could not be used for the purpose envisaged by the parties at the time when the contract was concluded (paragraph (3)).

The application of Article 73(3) of the CISG entails one of two scenarios: that both parties are clearly aware of the range of the operation, or that the seller can right away recognize the buyer's intent to regard the sale as a whole. Where only the purchaser is mindful of such interdependence, which is not objectively supported by other circumstances, there is no room for the application of Article 73(3) of the CISG. For instance, there exists such an interconnection if the goods are separate components destined to be assembled by the buyer; if the goods are interdependent machines designed for the manufacture of the same product; or in the case of marble cuts of the same quarry or of similar swirls intended for a specified project. In such hypotheses, the non-conformity of past or future deliveries is not the cause of the avoidance, but rather their interdependence with the defective one and the fact that the aim pursued by the buyer cannot be achieved given the fundamental breach affecting one particular installment [citation of Neumayer/Ming]. However, in the case at hand, the items of apparel might be sold separately, even the ones that, apparently, formed an "ensemble" with the defective pieces. Therefore, the [Buyer] was not entitled to return to [Seller] the totality of the goods ordered on the grounds that a certain number of them were hit by defects.

      f) To declare the avoidance of an international contract of sale (albeit as to a single installment) requires also that the failure to perform amounts to a fundamental breach of the contract (Article 73(1) of the CISG). This concept is set forth in Article 25 of the CISG, which states that a breach is fundamental if it causes the other party such a detriment as to deprive that party of what it is entitled to expect under the contract, unless the co-contractor did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen the undesired result.

Many legal systems do not recognize the possibility of avoiding a contract by unilateral declaration of the aggrieved party, since the avoidance (as well as the request for replacement of any goods which are not in conformity with the contract) brings about the problem of the restitution of the paid price and of redelivery costs or, otherwise, the difficulty that arises for the seller of giving the merchandise an alternative destination. Likewise, the authors of the CISG had the intention of restricting the right of cancelling the sale as well as asking for the replacement of goods, giving preference to other rights such as the right to claim damages. In this way, according to legal scholars, the notion of fundamental breach should be construed strictly. In case of doubt, it is recommended to assume that the conditions for a fundamental breach were not fulfilled [citations of SJ 2001 and Neumayer/Ming]. Given the similarity existing between the words "fundamental" and "substantial" one sees that the breach must strike the essential matter of the contract, i.e., either the products or the payment of the price, introducing a critical harm to the economic intent pursued by the parties. Importance should be given to the consequences for the party in damage more than to the breach itself. A reduction in the value of the goods at a "relevant amount" (such as said by Article 197(1) of the Code of Obligations) does not fit into the applicable requirements of a fundamental breach [citation of Neumayer/Ming].

In the case at hand, the expert maintains that the problems concerning the delivery and the invoicing are annoying enough to tear down a fresh business relationship but, on the other hand, explains that they are routine and that an experienced purchaser is supposed to know how to outwit this kind of development. Furthermore, according to her, the number of defective pieces is relatively low considering the total number of pieces. Therefore, the defects do not allow concluding that a fundamental breach of the contract took place.

In addition to that, given the uncertainty around the concept of fundamental breach whose evaluation depends largely on the judge's account, legal scholars recommend that the conditions for avoidance be clearly set forth in the contract itself, as well as those concerning the right for a replacement of non-conforming goods or even the exclusion of any such rights [citation of Neumayer/Ming] -- this is perfectly possible since the rules of the CISG are not mandatory (Article 6 of the CISG). Now, this was exactly what the parties have done by agreeing that no replacement of merchandise would be accepted without previous agreement.

      g) Since [Seller] gave no authorization to [Buyer] for a redelivery of the entirety of the goods sold, the [Buyer] was not entitled to avoid the contract. Accordingly, payment of the price is due.

      h) The [Seller] is therefore entitled to ask for payment of the purchase price of Ff 290,077 for the goods delivered, that is, the price of the goods it stored and sold (Ff 53,670), plus the price of the contentious articles stocked with G... SA (Ff 122,430) and the difference of prices of the non-contentious articles it accepted to take back and resell to third persons (Ff 113,977). To this, one should add the compensation for damages accruing from the violation of the contract, constituting freight expenses for the return of the merchandise, bank fees due to stopping of the check, and bailiff's fees.

III. a) [Seller] seeks interest at a rate of 6.5% per year on the sums claimed, with the interest running from a different date for each one of the sums.

      b) Article 78 of the CISG compels the party that failed to pay the price or any other amount owed to the other party to pay interest on the amounts due, without prejudice to its liability for damages under Article 74 of the CISG. Article 78 does not specify the rate or the interest starting date. According to the common opinion of the doctrinal scholars, it falls upon the competent domestic law (in this case, French law) to rule the details of the obligation to pay interest, particularly in regard to the rate of interest [citation of Stoffe]. Neumayer and Ming do not agree on that and propose the application in any event of the rate charged in the place of business of the debtor [citation]. Absent any other reference to this subject-matter in the CISG, it is convenient to follow the latter opinion and to apply Article 104 of the Swiss Code of Obligations.

      c) [Seller] asks for interest at a 6.5% rate per year, given that both parties are merchants. It is true that Article 104 of the Code of Obligations entitles the creditor to an interest rate equivalent to the discount rate charged in the place of payment; yet such rate is subject to evidence by the creditor and is not considered to be a well-known fact [so as to allow judicial notice] [citation of Sphar]. Now, the [Seller] did not lay down any allegation as to the relevant rate. Therefore, it is fair to apply the legal rate of 5% per year (Article 104(1) of the Code of Obligations).

      d) As to the interest starting date, the [Seller]'s Parisian counsel's letter of notice to complete served on [Buyer] did not inform the total sum requested, and moreover an additional invoice of cancellation of discount has been afterwards issued to [Buyer]. On the other hand, the calculations appearing in the 10 July 1996 letter do not convey that the debtor is in default, and the parties have been discussing matters related to the sale during the foregoing months. Consequently, in the absence of a previous formal notice, the starting date of the interest runs from 27 November 1997, one day after the [Buyer] has been given notice of the claim.

      e) The [Seller] made its estimations in French francs as envisaged in the contract concluded between the parties. According to both legal scholars and case law, the claim and the judgment must be expressed in the currency of the contract, even if eventually the debtor acquires the right to discharge itself of the obligation in the Swiss currency [citation of Engel]. Nevertheless, pursuant to Article 14 of the EC Directive no. 974/98 of 3 May 1998 on the introduction of the euro, the references to national currencies made by contracts pending at the end of the transitory period (i.e., 31 December 2001) should be taken as if they were made in euro under the applicable conversion rates. According to Article 1 of the EC Directive no. 2866/98 of 31 December 1998 on the conversion rates between the euro and the currencies of the Member States adopting the euro, the conversion rate is one euro for 6,55957 French francs.

In conclusion, this decision will indicate not only the sum due in French francs as well as in euros.

IV. Since [Seller] wins the claim in its essential matter, it has also the right to an award of costs (Article 92(1) of the CPC [Code of Civil Procedure]), whose convenient estimate reads:

a) Ff 8,000 for attorneys' fees;
b) Ff 400 for attorneys' expenses;
c) FFf 3,500 for judicial costs.

IN LIGHT OF THAT, the Court finds:


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of France is referred to as [Seller] and the Defendant of Switzerland is referred to as [Buyer].

** Leandro Tripodi is a law student at the University of São Paulo and was a member of its team in the 16th Willem C. Vis International Commercial Arbitration Moot. He is an associate of the Brazilian Arbitration Committee (CBar) and an employee at Brazil's Ministry of Finance.

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Pace Law School Institute of International Commercial Law - Last updated December 9, 2009
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