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CISG CASE PRESENTATION

Belgium 15 May 2002 Appellate Court Gent (NV A.R. v. NV I.) (Design of radio phone case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020515b1.html]

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

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Case identification

DATE OF DECISION: 20020515 (15 May 2002)

JURISDICTION: Belgium

TRIBUNAL: Hof van Beroep [Appellate Court] Gent

JUDGE(S): B. Schoonjans, A. Deene, L. Thabert

CASE NUMBER/DOCKET NUMBER: 2001/AR/0180

CASE NAME: NV A.R. v. NV I.

CASE HISTORY: 1st instance Court of Commerce Ieper 27 November 2000

SELLER'S COUNTRY: Belgium (plaintiff)

BUYER'S COUNTRY: France (defendant)

GOODS INVOLVED: Design of radio phone


UNCITRAL case abstract

BELGIUM: Hof van Beroep Gent (NV A.R. v. NV I.) (Design of radio phone case) 15 May 2002

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/103],
CLOUT abstract no. 1017

Reproduced with permission of UNCITRAL

Abstract prepared by Andrey A. Panov

The Belgian seller and the French buyer entered into negotiations regarding the production and supply of pagers. The parties executed a letter of intent, which expressly stipulated that the final agreement was still to be reached after subsequent negotiations. The document however, specified the anticipated order of 30,000 pagers to be made by the buyer, the time frame for delivery, and the price to be paid for each unit. Moreover, it stipulated that the mutual relationships of the parties both before and after execution of the final agreement was to be governed by French law. The parties did not execute the final contract by the date specified; however they went on negotiating specific terms of it. After some time, the feasibility of the project became doubtful due to disappointing levels of pager sales in France over the Christmas period. At their meeting the parties discussed the possible options for an amicable solution, which were described in the minutes of the meeting drafted by the buyer and sent to the seller. The seller responded two months later, declaring the buyer to be in default because of the cancellation of the order. The buyer then claimed that such an order had never been made. The seller issued a law suit claiming payment of the price and seeking an order that the buyer must pick up the 30,000 pagers.

The Belgian Court of First Instance found itself lacking international competence to hear the dispute, for the main obligation was to be performed in France.

The seller appealed. Allowing the seller's appeal, the Court found that French law referred to in the letter of intent, contrary to the buyer's allegation, also included the CISG, ratified by France. The contracts for the supply of goods to be manufactured or produced were considered contracts of sale according to Article 3 (1) CISG. The primary obligation of the buyer was to pay for the goods. The letter of intent specified the place of performance of the obligation to deliver, but was silent as to the place of performance of the obligation to pay. In this case, according to Article 57 (1) CISG, the payment was to be made at the place of business of the seller (i.e. in Belgium). Hence, the Belgian courts were internationally competent to hear the dispute pursuant to Article 5 (1) of the Brussels Convention.

The Court noted that the formation of sales contracts is dealt with in Part II of the CISG, requiring an offer and acceptance to be found, but also noted that the parties can reach an agreement gradually as a result of negotiations (with no clearly distinguishable offer and acceptance) on the basis of the principle of party autonomy set forth in Article 6 CISG. In their letter of intent the parties stipulated a number of important elements of the anticipated contract. The letter of intent was regarded as an agreement on principle, which prevented the parties from stepping back on the points on which agreement had already been reached. The formal agreement had never been executed; however, the parties kept negotiating and there was an agreement between them on certain points. Hence, the buyer's argument that the order had never been made was not followed.

When the feasibility of the whole project became doubtful and the parties had negotiated possible solutions, the options had included calling off the order. The seller did not react within a reasonable time after receiving the minutes of the relevant meeting and did not question their contents. According to Articles 29 (1) and 11 CISG an agreement can be modified or terminated by mere agreement of the parties, which may be proved by any means, including the parties' own behaviour. The needs of international trade obliged the parties to protest within a reasonable time after receiving a communication they could not agree with, for in trade, a positive meaning is attached to silence when receiving all kinds of documentation. The order had been annulled by the agreement of the parties and the seller's claim that the buyer must still buy the 30,000 pagers was unfounded and irreconcilable with the rule of good faith, which must be observed in application and interpretation of CISG (Article 7 (1) CISG). Therefore, the Court dismissed the seller's claim.

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Case outline

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

Applicable law: parties chose French law; CISG applicable in France

Jurisdiction (Art. 5(1) Brussels Convention): place of performance (payment at residence of seller); Belgian court has jurisdiction

"Letter of intent": no definite juridical meaning; content is important: not a contract, but may gradually become a contract

Contractual obligations: may be altered by consent of parties

Notion of good faith under CISG

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 7 ; 8 ; 11 ; 18(1) ; 29 ; 57 ; 84(1) [Also cited: Article ; 3(1) ]

Classification of issues using UNCITRAL classification code numbers:

6A [Exclusion or modification of Convention by contract];

7A3 [Principles of interpretation: observance of good faith];

8C [Interpretation of party’s statements or other conduct: interpretation in light of surrounding circumstances];

11A [Writing or other formality for conclusion of contract];

18A [Criteria for acceptance: conduct indicating assent];

29A [Parties by agreement may modify or terminate contract];

57A [Place for payment: in absence of agreement, payment at seller's place of business];

84A [Restitution of benefits received: seller bound to refund price must pay interest]

Descriptors: Autonomy of parties ; Good faith ; Intent ; Formal requirements ; Acceptance of offer ; Modification of contract ; Payment, place of ; Jurisdiction ; 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

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=940&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/2002-05-15.html>; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=940&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Dutch: [2003] E. Bodson & Thalia Kruger, Tijdschrift voor Belgisch Handelsrecht (TBH) 155

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Case text (English translation)

Queen Mary Case Translation Programme

Appellate Court (Hof van Beroep) of Gent

15 May 2002 [2001/AR/0180]

Translation [*] by Benoit Samyn [**]

Translation edited by Thalia Kruger [***]

PARTIES: Appellant N.V. A.R. [Seller], with registered office in Ieper 8900 [...], Belgium, registered in the commercial register of Ieper [...], having as counsel Mr. Marc De Vlieghere, lawyer at 8501 Kortrijk, [...] versus Respondent N.V I. [Buyer], a company under the law of France , with seat at 78280 Guyancourt (France) [...], registered in the commercial register of Versailles, having chosen as domicile the office of the bailiff [...] at 9900 Ieper, having as counsel Mr. K. Linsmeau and Mr. G.B. Van Parys, lawyers at 1050 Brussel [...].

The Appellate Court makes the following decision.

The parties were heard in their arguments and conclusions in an open court session.

The court has taken notice of the records required by law which were transmitted in appropriate form, among which the decision of 27 November 2000 of the Court of Commerce at Ieper, decision which was in a timely and legally valid way appealed on 23 January 2001, considering notification on 15 January 2000 to [Seller] at the request of [Buyer].

1. Relevant facts of the dispute

[Buyer] owns and operates a technical network of pagers and had in that capacity obtained the rights for France to produce and bring on the market a pager. [Seller] was requested by [Buyer] to develop a design for the pager [reference no. AE32200] according to certain standards and to enable the correct integration of the electronic equipment (meeting the Ermes ETSI 300 133 and CE requirements) of [Buyer] in a plastic cover to be designed, so that, after the necessary approvals, the apparatus could be introduced into the "Kobby" pager-network of [Buyer] in France.

The negotiations between the parties found their reflection finally in a letter of intent of 27 July 1997 signed by both parties which stipulated that [Buyer], after approval of ten prototypes to be submitted by [Seller], would place an order in the months November 1997 through January 1998 for 30,000 pagers at a unit price of 425 Ffr [French francs]. The parties emphasized in the letter of intent that this document was not the final agreement itself, because that still had to be drafted after negotiations and set 31 August 1997 as an ultimate deadline for that. [Seller] was nevertheless allowed to commence with the design and integration of the pagers to be ordered as contemplated by the signed letter of intent. In article 10 of the "letter of intent" it was stated that the letter of intent and the final agreement contemplated by the parties were to be governed by French law.

In a fax message to [Seller] of 1 September 1997, [Buyer] insisted on receiving the prototypes and asked for the state of development of the pagers. [Buyer] also sent a draft of agreement, with request to communicate possible remarks on it. The report on the state of development and delivery of pagers that [Buyer] requested was communicated by [Seller] only on 30 September, together with one prototype.

[Seller] promised delivery from 30 November 1997 at a rate of 5,000 units per week.

On 14 October 1997, [Buyer] insisted on receiving more information, namely a clear production and delivery plan, as the delivery of 15,000 pagers was desired during the month of December 1997 and another 15,000 pagers during the month of January 1998. During a meeting of the parties on 28 October 1997, [Seller] reported that a delay of at least four weeks had to be taken into consideration, as the original delivery period promised by [Seller] did not seem to be technically feasible. Delivery of the first 5,000 pagers was now announced by [Seller] for 12 January 1998 (see point 5 p. 4 and 5 of evidence 25 of [Buyer]). Moreover, a whole set of correspondence started between the parties concerning the color formation of the top and the borders of and the buttons of the plastic cover and the logo "Kobby" of the pagers to be produced. [Buyer] again insisted that [Seller] send color samples and, once the colors were approved, a complete prototype of pagers in these colors (evidence items 30 and 4 – point 1 of [Buyer]). The color samples [Seller] originally sent to [Buyer] did not correspond to what was requested (see point 2 of the meeting of the parties on 24 November 1997 evidence item 33 of [Buyer]).

Also, the new color samples that were sent did not seem to satisfy (evidence item 37). Moreover, [Seller] delayed sending the necessary information to allow [Buyer] to draft a manual for the pagers (evidence items 32, 5 and 37 of [Buyer]). [Buyer] started to seriously doubt the effect of all these on the preset general schedule.

In her letter of 12 December 1997 (evidence item 40 of [Buyer]), [Buyer] communicated to [Seller] that, in the given circumstances, she had decided to postpone bringing the pagers on the market, from the originally foreseen date of February 1998, to the month of May 1998, and above that she insisted that [Seller] draft an accordingly adapted delivery schedule (evidence items 40 to 43, 41 of [Buyer]). On 24 December 1997, [Seller] indeed provided a new delivery schedule, namely, the delivery of 3,000 pagers per week from 4 February 1998. But for [Buyer], this was not adapted to the desired period for introducing the pagers into the market (evidence item 44 of [Buyer]).

The parties met on 13 January 1998, and seemed to agree that the disappointing sale of pagers on the French market over the 1997 Christmas period, which had as a consequence that distributors remained with a large stock of such items, would threaten the successful launching of a new type of pagers. However, at that moment [Seller] had already bought the complete set of parts for the production of the 30,000 pagers involved in this litigation.

The parties discussed on that meeting three possible options:

-   [Seller] could use the parts for the production of pagers destined for its own network and foreign networks. In that case, the advance of 1,912,500 Ffr paid by the [Buyer] would be repaid, while [Seller] would have the right to compensation for the financing costs (for eight weeks?) for keeping the parts in stock. The cost price to make the mould of the pager would be recuperated by [Seller] from other clients.
- Or, to the extent that [Seller] could not use the mould of the pagers somewhere else, [Buyer] would take them over. In that case, the cost price of it would be deducted from the aforementioned amount of 1,912,500 Ffr to be paid to [Buyer].
- Or the pagers would be produced by the end of 1998 and distributed on the French market by [Seller], but with support of [Buyer] (evidence item 47 of [Buyer]).

By registered mail of 23 March 1998, [Seller] declared [Buyer] in default because of the cancellation of the order of 30,000 pagers which [Seller] alleges that [Seller] already has in stock. [Seller] wishes the execution of the contract (evidence item 49 bis of [Buyer] and 43 of [Seller] 6 – of [Buyer]).

By registered mail of 9 April 1998, [Buyer] reacted to this declaration of default in a very surprised manner, because the meeting of 13 January 1998 and the later contacts between the parties had given her the impression that [Seller] also desired to look for an amicable solution satisfactory to all within the borders of the possible options mentioned in the minutes of the meeting of 13 January 1998. [Buyer] also expressed her surprise over the fact that [Seller] had started with the production of the pagers. Finally, [Buyer] urged a meeting after 12 May 1998, in order to reach an amicable settlement (evidence item 50 of [Buyer]).

Although [Seller] in a subsequent registered letter of 6 May 1998 limited himself to repeating his position, he indicated that he was willing to reach a reasonable solution for the dispute during a meeting of the parties, which he wanted to take place as soon as possible (evidence item 7 of [Buyer]).

Although a meeting between the parties was foreseen on 20 May 1998, [Seller] did not show up. The positions hardened. [Buyer] formally denied ever having given [Seller] the order to produce 30,000 pagers for the "Kobby" network. [Buyer] pointed out that no definitive agreement could be reached between the parties, because of the incompetence of [Seller] to realize the project, more in particular because of [Seller]’s delays in delivery due to [Seller]'s own fault (evidence item 58 of [Buyer]).

From the finding on 4 November 1998, done by bailiff Raphaelle Diey of Paris (France), it appears that [Seller] offered a pager "Acyclon AE2200" for sale on the Internet which, according to [Buyer], looks "point by point" like the prototype which she intended to have produced by [Seller], a pager which, according to [Buyer], [Seller] was not allowed to bring on the market, because the form is protected and for which the reproduction rights belong to her designer Desdoigts (evidence item 53 of [Buyer]).

2. In the disposition of his last conclusion before the Court of First Instance, [Seller] asked for confirmation of his unilateral dissolution of the agreed order for 30,000 pagers, asked for at least the judicial dissolution, and sought to have [Buyer] directed to pay an indemnity of Euro 1,950,547.57 (78,684,894 Bfr [Belgian francs]), with the right to augment this amount during the trial, to accommodate judicial interest equal to the legal interest rate, from 1 April 2000 on an amount of Euro 781,608.28 (31,530,000 Bfr) till the day of full payment. Strictly in subsidiary order, [Seller] claims payment of Euro 2,032,678.97 (13,333,500 Ffr) and Euro 13,720.41 (90,000 Ffr) [each time to be increased with 21% VAT], to be increased with judicial interest equal to the legal rate from 14 July 1998 till the day of complete payment.

[Seller] also sought to have [Buyer] directed to come and collect 30,000 Ermes Alpha Numeric pagers and 2,000 dummies of this pager at [Seller]’s registered office, after payment of above mentioned amount, within twenty days after notification of the judgment, and to have it determined that, in case of default [Seller] can freely dispose of the goods, without this diminishing the obligation of [Buyer] to pay;

In main order, [Buyer] challenged the (international) competence of the Court of First Instance. In subsidiary order, [Buyer] claims advoidance and repayment of the advance payment of Euro 291,558.75 (1,912,500 Ffr), to be increased with interest at the legal rate effective from 15 January 1998 and judicial interest.

3. The Court of First Instance, in principle accepted the position of the [Buyer] by declaring itself (internationally) incompetent, because according to the court, it appeared from the evidence that, on the one hand, it seemed that the parties agreed to apply French law (and so excluded the CISG), while, on the other hand, the main obligation between the parties would be the payment of the price, which has to happen according to French law in France, and it has moreover not been shown that the delivery had to take place in Belgium.

4. [Seller]’s appeal seeks to overturn this decision and to have the court declare [Seller]’s claim well founded. [Seller] claims now according to the synthesis of his written pleadings:

-   In main order, confirmation of [Seller]’s unilateral dissolution at charge of [Buyer] of the agreed order for 30,000 pagers, at least the judicial dissolution of it, and that [Buyer] be directed to pay a compensation of Euro 1,548,698.81 (62,474,355 Bfr), under reservation of augmentation during the procedure, to be increased with judicial interest, equal to the legal interest rate as from 1 April 2000 on an amount of Euro 1418,596.20 (57,226,029 Bfr) till the day of complete payment.
- Subsidiarily, the confirmation of the dissolution by the [Buyer] of the order of 30,000 pagers and to direct [Buyer] to pay a provisional compensation of Euro 743,680.57 (30,000,000 Bfr) and the appointment of an expert to determine the totality of the loss and lost profit suffered by [Seller].
- That [Buyer] be directed to pay Euro 2,032,678.97 (13,333,500 Ffr) and Euro 13,720.41 (90,000 Ffr) [to be increased with 21% VAT] to be increased with judicial interest, equal to the legal interest rate, effective from 14 July 1998 till the day of complete payment.
- That [Buyer] be directed to collect 30,000 Ermes Alpha Numeric pagers and 2,000 dummies of this pager at [Seller]'s registered office, after payment of aforementioned amount, within a period of twenty days after service of the judgment, at default of which [Seller] will be able to dispose freely over the goods without this limiting [Buyer]’s payment obligation.

[Buyer] concludes asking for confirmation of the first judgment. In subsidiary order, [Buyer] enters incidental appeal and restates her original counterclaim.

[RULING OF THE APPELLATE COURT]

5. The Court of First Instance wrongly declared itself incompetent to acknowledge the international dispute between the parties.

     5.1 To determine its international competence, the court in principle only has to start from the facts and the subject of the claim(s) as described in the procedural act by claimant. It is not at all necessary to track beforehand the correct factual circumstances and/or the real legal relationship between the parties.

The original claim of [Seller] concerns, on the one hand, a claim for payment of 1,629,298.87 Euros (10,687,500 Ffr) in principal, being the sum of [Seller]’s invoices no. 8.315 and 9085, and on the other hand, a claim to pick up the aforementioned 30,000 "Ermes Alphanumeric Pagers".

     5.2 There can also be no dispute about the circumstances in article 9 of the letter of intent of 29 July 1998. The parties agreed to have their mutual relations as from the signing of the act, governed by French law both before and after the future agreement.

The United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG) entered into force for France on 1 January 1988. A national law, into which the CISG has been incorporated by ratification, takes those convention stipulations concerning the international sales of goods into "national law". This follows from the rules of international law and from the confirmation act of the member States in relation to article 1 CISG itself.

Therefore, the Vienna Sales Convention (CISG) is in casu applicable, since the parties in their letter of intent of 29 July 1997 have appointed French law as the law to govern their mutual relationship from then on (see in the same context: Hans Van Houtte, Johan Erauw and Patrick Wautelet (eds) "Het Weens Koopverdrag", page 25) while according to article 3(1) CISG, agreements for the supply of goods to be manufactured or produced are considered contracts of sale.

The fact that the Vienna Sales Convention only became Belgian law from 1 November 1997 is irrelevant. [Buyer] cannot be followed in her argument, based on nothing, that the parties in fact would have referred to French law, but with exclusion of the Vienna Sales Convention.

     5.3 Moreover, on the basis of article 5.1 the Brussels Convention, regarding international sales agreements, the buyer can be summoned before the court of the place where the agreement, which is at the base of the claim, has to be performed.

Article 6 of the letter of intent of 29 July 1997 foresaw that, for each pager developed and integrated by [Seller], the purchase price would be "... 425 French Francs DDP unloaded at Guyancourt or another address in France".

The use of the so-called Incoterm 1990 DDP (= "delivered duty paid") provides the circumstances that all costs or transport, insurance, customs, taxes and so forth are at the charge of the seller, and that the delivery has to be done in France (by which has to be understood that the acceptance duty of the buyer as far as time and place is concerned, by the delivery duty of the seller, of which she is the counter image; see Hans Van Houtte, Johan Erauw and Partick Wautelet (eds), "Het Weens Koopverdrag," page 165), but this term does not give any indication concerning the place where payment has to be made.

When there are more agreements at stake which together form the subject of the same claim, the place where the principal agreement or more characteristic agreement has to be performed, will be relevant (see in this sense: H.V.J., 15 January 1987, Shenavai v. Kreisher, case no. 366/85, ECR., 1987, 239; case note at Court of Commerce Brussels, 29 March 1998 by Petillion F., in RDCB, 1190, 800).

According to article 57(1) CISG, without any contrary stipulation the payment of the price – which undoubtedly is the principal obligation of the buyer – has to be made at the place of business of the seller. On the basis of article 5.1 of the Brussels Convention, [Buyer] could be summoned before the court of the place where, according to the legislation which governs the contract, the payment obligation has to be performed.

From this, it has to be concluded that the Court of First Instance definitely had international competence to hear the case.

     6.1 The formation of a sales contract is dealt with in a simplified and quite abstract way in Part II of the CISG, namely, as the sequence of a clear distinctive offer and acceptance. Nevertheless, this does not mean that the parties cannot form the sales contract in a different way.

On the basis of the principle of party autonomy laid out in article 6 CISG, parties can reach an agreement gradually as a consequence of a negotiation process in which offer and acceptance are not clearly distinguishable (see in this sense: Magnus, U., Wiener UN Kaufrecht, in J. von Staudingers Kommentar zum Bürgerlichen Gezetsbuch mit Einfürhungsgesetz und Nebengestezen, Berlin, De Gruyter, 1994, p. 204).

     6.2 In this case, the parties, have as a result of preceding negotiations, and in preparation of the realization of the complete agreement, on 29 July 1997 drafted and signed a so-called letter of intent.

The expression "letter of intent" has no precise judicial meaning: more important is the content of the act.

The court finds that the parties on 31 July 1997 were very far in the negotiation between them concerning the production and the integration of electronic components in Ermes pagers by [Seller]. Particularly, the parties had already reached agreement about:

-   A future order by [Buyer] for 30,000 pagers over the period from 30 November 1997 till 15 January 1998 at a unit price of 425 Ffr per unit;
- The determination of the time of payments and of the balance;
- A fine to be charged [Seller] for each week of delay in the delivery following on determined dates, mentioning that [Buyer] is released from any contractual obligation by a delay in the delivery of more than five weeks;
-   That the so-called letter of intent, as well as the contract to be concluded will be governed by French law; that the letter of intent is not designed to take the place of the future contract; that the parties will negotiate to conclude that contract in any case before 31 August 1997;
- The necessity of having the final agreement include the general and particular conditions prescribed by the [Buyer] which the Ermes pager would have to meet, and in particular, the conditions concerning the approval tests, quality targets, marking and labelling, packing and dispatching, patents and other protected rights (inclusive of patents and rights concerning the design and the use);
- The mutual rights and obligations of the parties in the event the parties did not sign a contract ultimately by 31 August 1997.

Although the parties, on page 2 of the letter of intent, declared expressly and unambiguously that the aforementioned document would not take the place of a future contract which still had to be negotiated, they clearly wanted to give it some legal consequences, as, on the one hand, on the basis of this letter of intent, [Seller] could start with the production and integration of the pagers and, on the other hand, already an advance of 1,912,500 Ffr was paid by [Buyer] to [Seller].

Taking into consideration the contents of the letter of intent of 29 July 1997, this act between the parties has the judicial consequences and meaning of an agreement on principles ("accord de principe"), in which the parties, on the one hand, stipulate the elements on which they already agree, and, on the other hand, commit themselves to continue the negotiations between them.

An agreement on principles engages the parties not only to continue the negotiations in good faith, but also prevents them from coming back on certain points for which mutual agreement was already reached. The agreement on principles can also stipulate extra commitments concerning negotiations that still have to be done (among others, damages, choice of forum ...).

However, an agreement on principles should be distinguished from the definitive contract. In the agreement on principles, parties do not commit themselves to enter into an agreement, only to continue the negotiations. The agreement on principles will, however, influence an eventual judgment of the lawfulness of the ending of the negotiations (see in that sense Kruithof. R. (+), bocken H. De Ly F. and de Temmerman B., "Overzicht van rechtspraak [1982-1992] – "Verbintenissen", RDCB., 1995, p. 293 no. 84).

     6.3 Because of elements which are not immediately clear, the contract, on which the parties seemed to agree for the greater part in the draft (exhibits 15 to 18 of the [Buyer]), has never been signed, and certainly not before the ultimate date of 31 August 1997.

Nevertheless, the parties kept negotiating. During the meeting between the parties, the [Buyer] even agreed that the delivery of the pagers should be delayed, but demanded that each week in any case 5,000 pagers per week should be delivered as from 12 January 1997 to 9 February 1997 on pain of delay damages amounting to 5% for every week of delay.

The report of the following meeting of 24 November 1997 (exhibit 33 of [Buyer]), more in particular the use of language used therein, leaves little doubt about the fact that parties already left the territory of the proposals and counter-proposals free of obligations and so to speak, exceeded the border of contractual binding (see hereon: G. Schrans, "De progressieve totstandkoming der contracten", T.P.R., 1984, p. 16 and following; A. Van Oevelen, "Juridische verhoudingen en aansprakelijkheid bij onderhandelingen over [commerciële] contracten"; DAOR 1990, 43, n° 16-20). The circumstance that there was no agreement about a number of realization modalities, which still had to be specified, does not devalue that.

In the aforementioned report, for example, under the heading "contractual modifications", a number of "contractual" stipulations were changed, the contractual unit price for the pagers was decreased to 420 Ffr... and so on.

[Buyer] therefore cannot be serious when disputing afterwards, in a letter of 29 May 1998 (exhibit 58 of the [Buyer]), to have ever placed the order of 30,000 pagers with the [Seller].

     6.4 However, over the following weeks, the parties started wondering about the feasibility of the delivery planning as it was set forth, as among others, there was not only lack of agreement on certain colors in which the pagers should be produced although the [Buyer] demanded, to receive upfront a prototype in the approved colors, but also the fact that a manual could not be drawn up due to the lack of the provision of information by the [Seller] (exhibits 5, 29, 30, 31, 37, 43, 43 bis, 46 of the [Buyer]). Furthermore, the sale of pagers during the end of the year 1997 appeared to disappoint; the [Buyer] therefore did not want to launch the new pagers in the course of the month of February 1998, as the distributors would then still dispose of a large stock of these apparatus. That is why the [Buyer] judged it advisable to delay the launching period of the pagers to be produced by [Seller] to the month of May (exhibits 40 to 42 of the [Buyer]).

[Seller] did not really oppose that intention of the [Buyer], but on the contrary, drafted a new scheme, as asked by the latter, in which it was planned that during ten weeks (4 February 1998 to 8 April 1998) 3,000 pagers would be delivered each week; deliveries which were too early according to the [Buyer] in the light of the launching of the produced pagers in question in the course of the month of May 1998 (exhibits 44 and 45 of the [Buyer]).

     6.5 Finally, the parties met again on 13 January 1998 to discuss the future of the pagers that were to be produced. [Buyer] drafted minutes of this meeting which she sent to [Seller] on 10 January 1998. Following this report, the parties discussed three possible solutions:

-   Call off the production, in which event the [Seller] could use the parts which were already bought to sell pagers in his own network and in other markets (the [Buyer] should only compensate for the financing costs for the purchase thereof). In that case, the advance paid by the [Buyer] would be paid back and the prototype could be used by the [Seller] for other clients.
- Or the same scenario as above, except that the [Buyer] would pay to the [Seller] the cost price of the prototype (provided that it should be handed over), on condition that it could not be used elsewhere.
- Or maintain the agreed production with the launch on the French market at the end of 1998, but commercial distribution (with logistic support of the [Buyer]) by the [Seller] himself.

[Seller] did not give any reaction within a reasonable time after receipt of this report. Specifically, [Seller] did not dispute that aforementioned report, in particular the three possible options to call off the order in question of 30,000 pagers, corresponded with respect to the matters actually discussed and/or agreed by the parties on 13 January 1998.

It is only after the [Buyer] insisted to the [Seller] on 2 March 1998 to communicate the choice of solution (exhibit 49 of the [Buyer]), that [Seller] reacted three weeks later (on 23 March 1996); a reaction in two registered letters which, however, consisted, on the one hand, of denying the annulment of the order placed by [Buyer] (exhibit 49 bis of the [Buyer]), and, on the other hand, sought to know the moment on which delivery of the 30,000 pagers could take place (exhibit 43 of the [Seller]).

     6.6 In the opinion of the Court, in the given circumstances, the point of view of [Buyer] in her registered letter of 9 April 1998, can be followed where it said that the aforementioned letters of 23 March 1996, coming from the [Seller], ignored the preceding discussions between the parties and their willingness to come to an acceptable and reasonable solution for everyone; possible solutions which were worded in the report of the meeting of 13 January 1998 (exhibit 47 of the [Buyer]).

Following arts. 29(1) and 11 CISG, any agreement, regardless of the form in which it came about, can in principal be changed or ended by the mere agreement of the parties, which may be proved by any means, including the behavior of the parties themselves (Van Houtte H., Erauw J., Wautelet P. (eds.), o.c., p. 69, n° 6).

In order to make a smooth (international) trade possible, a trader is undoubtedly obliged to protest immediately, or within a reasonable period of time, if he receives a letter/communication to which he cannot agree. This obligation simply is the consequence of the positive meaning attached in trade to silence when receiving all kinds of documents, correspondence and so on.

In the given circumstances, the Court comes to the conclusion that, on 13 January 1998, the parties indeed agreed to annul the order of 30,000 pagers by the [Buyer], and that there should only be made a choice on the modalities by which the parties could finalize the case in a reasonable and mutually acceptable manner. The circumstance that the three possible solutions in the report of the meeting of 13 January 1998 were possibly only "ways of thinking", and that there could have been another form of termination in case of further negotiations, does not devalue this.

Therefore, it was wrong for [Seller] to claim in the registered letter of 23 March 1998 that the [Buyer] must still buy the 30,000 pagers. Such a way of proceeding is clearly irreconcilable with the rule of good faith which, in international trade, should always be observed according to art. 7(1) CISG with the application and interpretation of the Vienna Sales Convention.

In any event, [Seller] showed a very strange and unsteady behavior which was of the kind to outwit the justified faith of the [Buyer]. This appears first of all out of the circumstance that, where out of the report on the meeting of 13 January 1998, it appears that the [Seller] only disposed of the necessary loose components to produce the 30,000 pagers in question; he proceeded afterwards to such production; ([Seller] claimed indeed in the aforementioned letter of 23 March 1998 to have 30,000 finished pagers in stock), despite the fact that the order of the [Buyer] had been annulled. The capricious way of proceeding by [Seller] also manifests itself when, after claiming the execution of the original order of 30,000 pagers in [Seller]’s registered letter of 23 March 1998, [Seller] was nevertheless prepared to meet, as proposed by the [Buyer] in his letter of 6 May 1998 (exhibit 7 of the [Buyer]), in order to negotiate a reasonable amicable arrangement, and finalize the case without loss for any party, and then suddenly communicates that he breaks off all contact between parties, on the eve of such meeting, planned on 20 May 1998, by a fax sent on 19 May 1998 and that he will pass the case on to his law department ... (exhibits 57 and 58 of the [Buyer]).

7. As the parties decided amicably on 13 January 1998 to annul the order formerly placed by [Buyer] with [Seller] for the production and integration of 30,000 "Ermes Alpha-Numeric Pagers", there cannot be talked of a breach of contract by [Buyer], and the dissolution thereof, with payment of damages, cannot be claimed anymore to [Buyer]’s disadvantage.

Therefore, neither the original, nor the afterwards modified claim has any ground.

The same amicable dissolution does, however, have the consequence that the [Buyer] can claim the reimbursement of the payment that was already paid, more specifically the amount of Euro 291,558.75 (1,912,500 Ffr), to be increased with judicial interest equal to the legal interest as of 6 December 1999 (date of the introduction of the counterclaim of the [Buyer] in first additional submissions before the first judge).

The answer to the question whether [Seller] after 13 January 1998 marketed the pager in question under the name Acyclon AE2200 on his own account, whether or not infringing whatever rights of the [Buyer] or of a third party, is not relevant, as the [Buyer] does not have any specific claim.

8. The expenses made for translation of the exhibits to which the parties proceeded, are not a part of the costs, as meant in art. 1018 of the Judicial Code. Every party should bear the translation costs of its own exhibits.

RULING OF THE COURT

For these reasons, the Court, on counterclaim, considering article 24 of the Law of 15 June 1935 on the use of languages in court cases:

-   Rejects all more detailed and/or different conclusions and/or grievances as not relevant.
-   Declares the higher appeal and the incidental appeal admissible and partly founded.
- Nullifies the disputed judgment.
- Applying art. 1068 of the Judicial Code, judged again, and finds that the first judge was internationally and nationally competent to hear the case.
-   Declares the original main claim and counterclaim to be both admissible, the main claim unfounded and the counterclaim partly founded.
- Directs the [Seller] to reimburse the [Buyer] for an amount of Euro 291,558.75 (1,912,500 Ffr), to be increased with the judicial interest as of 6 December 1999.
- Directs the [Seller] to pay the costs of both procedures, and estimates these at the part of the [Buyer] as follows: first procedure: Euro 312.35 (12,600 Bfr); on appeal: Euro 446.21 (18,000 Bfr).

[...]


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant of Belgium is referred to as [Seller] and Defendant-Appellee of France is referred to as [Buyer]. Amounts in European currency are indicated as [Euro]; amounts in the currency of France (French francs) are indicated as [Ffr]; amounts in the currency of Belgium (Belgian francs) are indicated as [Bfr].

** Benoit Samyn practices law at Coudert Brothers LLP in Brussels. He graduated from Ghent University and has an LL.M. from Queen Mary, University of London and an MBA from Solvay Business School, Brussels.

*** Thalia Kruger, assistant of Private International Law, Katholieke Universiteit Leuven, where she is currently preparing a doctoral thesis on international jurisdiction. LL.B. Stellenbosch, South Africa.

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