Switzerland 15 November 2002 Appellate Court Genève (Window frames case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/021115s1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: C/12709/2001
CASE HISTORY: 1st instance Tribunal de Premiére Instance 18 April 2002
SELLER'S COUNTRY: Belgium (plaintiff)
BUYER'S COUNTRY: Switzerland (defendant)
GOODS INVOLVED: Window frames
SWITZERLAND: Geneva Court of Justice [C/27897/1995] 15 November 2002
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/149],
CLOUT abstract no. 1402
Reproduced with permission of UNCITRAL
Abstract prepared by Thomas M. Mayer
Through a Californian broker, commercial company A of Geneva purchased from commercial company E of Washington 10,000 metric tons of concrete-reinforcing steel for resale to company S, having its headquarters in London and in turn acting on behalf of a Chinese final purchaser. Subsequently, the order was extended to include 800 metric tons of steel wire coils.
The goods had been loaded in Lithuania on a ship bound for China. The consignee, S, challenged the quality of the goods on their arrival at the destination and initiated arbitration proceedings against company A. At the outcome of the proceedings, company S received $180,000 in addition to $70,000 on account of non-conformities and late delivery. Later, company E claimed from company A the outstanding 10 per cent of the sale price that company A had withheld to cover any eventual warranty claims. Company A asserted a counterclaim for damages for the share of costs in excess of the outstanding balance that were incurred as a result of the arbitration proceedings and various expert opinions. The competent court allowed the claim and dismissed the counterclaim. Company A appealed against this judgement.
The Court of Justice rejected the appellant’s argument that a subsequent agreement relating to an inspection of the sold goods at the port of destination amounted to an amendment of the “free on board” clause agreed in the original contract. The court saw this merely as an extension of the prescribed time limit for reporting defects in the goods that had already been recorded during loading. The court found that the time limit had been respected and therefore allowed a claim against company A for damages on the grounds of defects in the goods. However, the court upheld as damages within the meaning of article 74 of the CISG only the $180,000 in favour of S awarded in the arbitration proceedings. The appeal concerning the difference between this amount and the outstanding balance of the sale price owed by company A was dismissed.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B [Scope of Convention (issues excluded): unfair competition, procedural matters: court states
that "the Convention does not cover procedural matters which depend on the law of the forum"
and that "the law of the forum is applicable in particular to evaluate damages and interest under
Art. 74 CISG and, theoretically, also to determine admissibility of an objection to price
reduction under Art. 50 CISG"]; 50A [Buyer's right to reduce price for non-conforming goods]; 74A ; 74C [General rules for measuring damages: loss suffered in consequence of breach;
Other problems: proof of damages]
4B [Scope of Convention (issues excluded): unfair competition, procedural matters: court states that "the Convention does not cover procedural matters which depend on the law of the forum" and that "the law of the forum is applicable in particular to evaluate damages and interest under Art. 74 CISG and, theoretically, also to determine admissibility of an objection to price reduction under Art. 50 CISG"];
50A [Buyer's right to reduce price for non-conforming goods];
74A ; 74C [General rules for measuring damages: loss suffered in consequence of breach; Other problems: proof of damages]
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language CISG-online.ch website <http://www.cisg-online.ch/cisg/overview.cfm?test=853>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation) [second draft]
Queen Mary Case Translation Programme
15 November 2002
Translation [*] by Andrea Vincze [**]
ACTING IN ORDINARY PROCEEDINGS
FACTS OF THE CASE
A. In a lawsuit sent to the Court Clerk of the Court of Justice on 27 May 2002, [Buyer] of Switzerland appeals a judgment rendered by the Court of First Instance on 18 April 2002 that ordered K SA to pay to [Seller] of Belgium the sum of 65,439.35 Swiss francs [Sf] plus 5% interest from 19 March 2001 as well as the costs.
The [Buyer] requested reversal of the appealed judgment and dismissal of all claims of [Seller]. The [Seller] requests confirmation of the appealed judgment.
B. The facts of the case are:
a. [Seller] is a public company [Société anonyme] in the industrial zone of Transinne, Belgium. In particular, it is engaged in selling PVC or aluminum window frames for buildings. [Buyer] is engaged in "trading materials for finishing work and installation of such materials", at its place of business in Geneva.
b. Having been hired to perform different works at a building site on route de Drize (hereinafter: the building site on Drize), [Buyer] ordered window frames from [Seller] Under Art. 4 of the general conditions of sale of [Seller], "delivery is performed to the client's place".
The [Seller]'s general conditions also provide the following:
"Art. 7: Warranty
Complaints regarding the quality of the products must be made to [our company] immediately, and in any case, before use or resale of the respective goods, and at the latest, within three days of delivery, by certified mail with proof of receipt when [the complaint] is about an apparent defect that was not resulted by the transportation.
In case of latent defects, the complaint must be communicated within three days after detection of the defect, by certified mail with proof of receipt. If the complaint proves to be justified, the seller will communicate this to the buyer and, if necessary, [the seller] reserves the right either to offer to take back the goods subject to the complaint and to replace them with identical goods, or to make a payment to the buyer up to the invoiced value in dispute, without being obliged to provide any further compensation. Return of the goods is subject to the consent of the seller.
If the seller performs after-sale services, a representative of the client must be present along with the seller's technical representative in order to accept the work done.
Art. 8: Payment conditions
In lack of a prior written agreement, the payment of our invoices shall take place in net value, without any discounts. Any payment delay must be calculated from the fixed due date of the payment, and entails the right to receive interest without prior warning or notice, at a 1.5% monthly rate, regardless of whether an entire month or a fraction of the month is involved. The seller reserves the right to deliver the goods and receive payment upon delivery, without stating a specific reason, or to demand payment prior to shipment. The storage expenses so incurred shall be paid by the buyer.
Art. 9: Non-payment; termination clause
[...] In case of collection beyond the contractual date of payment, taking into consideration the additional costs that we incurred, the invoiced sum will be increased under the non-deductible penalty clause, by a fixed rate of 15% but at least 1,500 francs, without regard to the particular costs incurred through the collection."
c. Upon delivery of an order by [Buyer] on 24 July 1997, [Seller] took back a certain number of window frames and replaced those with others, the length of which did not correspond to the parameters in the order.
Due to the replacement of the window frames, [Seller] decreased the invoiced sum by half, from 3,248.81 Sf to 1,624.40 Sf. In doing so, by mistake, [Seller] calculated a credit in favor of [Buyer] in the amount of 3,829.85 Sf.
On 2 October 1997, [Seller] informed [Buyer] of the latter error, specifying that [Buyer] should issue correction invoice no. 597 to [Seller] in the amount of 2,250.44 Sf (3,829.85 Sf minus 1,624.40 Sf).
d. Between August and November 1997, [Buyer] placed other orders for material with [Seller].
In its letter dated 20 March 1998, [Seller] requested [Buyer] to pay as soon as possible, the sum of 37,366 Sf representing the following, previously unpaid invoices:
|-||no. 4759 of 16 September 1997 for 868.73 Sf;|
|-||no. 4763 of 16 September 1997 for 599.65 Sf;|
|-||no. 4760 of 16 September 1997 for 1,897.65 Sf;|
|-||no. 597 of 3 October 1997 for 2,250 Sf;|
|-||no. 5771 of 22 October 1997 for 31,750 Sf.|
In a fax dated 25 March 1998, [Seller] requested [Buyer] to pay the sum of 37,366 Sf representing the above-mentioned unpaid invoices, threatening to apply the penalty clause (15% compensation) included in the [Seller]'s general conditions and to claim interest at the statutory rate.
On 1 April 1998, [Buyer] informed [Seller] that it wished to "make reservations concerning assembly of the defective edges of certain windows", adding that:
"The final acceptance of this building site shall take place soon, and the remaining amount will be paid when our client accepts the works done."
In a fax on 3 April 1998, [Seller] granted [Buyer] a five-day deadline to pay the sum due, specifying that it had sent its technician to the building site in order to overcome the problems communicated, and that he could not get access because [Buyer] refused to accompany him.
On the same day, [Buyer] replied as follows:
"[...], we believe that it is appropriate to obtain an expert opinion about the stated defects, which, of course, will take some time. Therefore, please do not disturb us with your various correspondences and we will keep contact with you regarding the situation by way of our attorney."
e. By certified mail on 2 June 1998, [Buyer] informed [Seller] about the "non-conformity of the windows" delivered to the building site on Drize, explaining that the "water discharge" defects generated deterioration of the material. [Buyer] asked [Seller] to act as soon as possible in order to eliminate this technical problem.
In a fax on 3 June 1998, [Seller] reminded [Buyer] that since the intervention by its technical service on the building site on Drize, [Buyer] did not perform the payment agreed upon. However, [Seller] accepted that a new technician was to be sent, on condition that [Buyer] agrees in writing to pay the sums due for the technical services after the intervention.
[Buyer] did not respond.
[Seller] assigned a credit risk insurance company with collection [of the debt] from [Buyer], without success.
f. In its letters on 5 and 19 March 2001, the Geneva counsel of [Seller] demanded that [Buyer] comply with the unpaid invoices, and pay a compensation of 15% and a monthly interest at 1.5%, that is:
|-||invoice no. 4759: 868.73 Sf + 130.30 Sf + 534.30 Sf;|
|-||invoice no. 4363: 599.65 Sf + 89.95 Sf + 368.80 Sf;|
|-||invoice no. 4760: 1,897. 65 Sf + 282.65 Sf + 1,167.05 Sf;|
|-||invoice no. 597: 2,250 Sf + 337.50 Sf + 1,350 Sf;|
|-||invoice no. 5571: 31,750 Sf + 4,762.50 Sf + 19,050 Sf.|
|Total: 65,439.35 Sf.|
[Buyer] did not pay this sum.
C. In the claim filed on 18 May 2001 with the Court of First Instance, [Seller] requested [Buyer] to pay 65,439.35 Sf, with 6% interest from 19 March 2001. [Seller] stated that it had delivered the goods in conformity with the specifications by [Buyer] in the orders. The total sum included in invoices no. 4759, 4760, 4763, 597 and 5771, plus 15% as a fixed compensation under the penalty clause and 1.58% default interest, amounted to 65,439.35 Sf on 19 March 2001. [Seller] alleged that the reservations made by [Buyer] regarding assembly of the edges of certain windows were irrelevant since it had refused the intervention by the technician in this regard.
In its reply on 16 November 2001, [Buyer] argued essentially for dismissal of the claims of [Seller], and subsidiarily to order [Seller] to prove the alleged facts. [Buyer] acknowledged that it owes the stated sums included in the invoices. However, [Buyer] alleged that it had suffered damages due to the defects of the goods delivered and acts of unfair competition by [Seller] [Buyer] stated that a part of the goods delivered to the building site on Drize had to be returned to [Seller], while another part also having defects had to be subject to "significant works to insure compliance with the regulations" (p. 4). The deadlines given to cure the defects caused delays at the building site, generating enormous losses to [Buyer]. According to [Buyer], such damages "largely offset the sum demanded" by [Seller]. Regarding the damages suffered as a result of unfair competition, [Buyer] stated that Company A., engaged in the same trade area, lured away one of its colleagues through [Seller], who was the shareholder [of company A]. The resulting damage also "largely" offset the sum of the unpaid invoices. [Buyer] believed that it had the right to dispute the debt representing the damages suffered and offset it against the debt towards [Seller]
At the hearing on 22 November 2001 before the court, the parties maintained their arguments.
Upon request of [Seller], the court ordered the appearance of the representatives [of the parties] for 24 January 2002.
As a result of the latter hearing, the court fixed the presentation of the pleadings for 7 March 2002, however, solely regarding admissibility of the arguments relating to the claims for compensation submitted by [Buyer] in its memorandum on 16 November 2001.
In its written submission of 28 February 2002, [Buyer] argued for admissibility of its arguments and dismissal of the claims of [Seller] With reference to the legal provision regarding reduction of the purchase price and regarding damages and interest due for the defects of the goods delivered, [Buyer] referred to its submissions nos. 11 and 12 for the calculations regarding the windows installed at the building site on Drize: if the total costs of the windows amounts to 334,995 Sf, during a negotiation with [Seller] the price was reduced to 294,904 Sf, in order to take into consideration the appropriate profit margin. According to [Buyer], that profit margin was not realized due to the defects. Adding 294,904 Sf to the 65,439.35 Sf claimed by [Seller], [Buyer] estimated that it has to pay an amount that is higher than the original price. [Buyer] admitted that the harm caused by the alleged acts of unfair competition was "difficult to measure in numbers". According to [Buyer], adding the damages that are "difficult to measure in numbers" to the damages caused by the defects equaled a sum that easily compensates the 65,439.35 Sf claimed by [Seller]; the [Buyer] also considered that its debt resulting from the price reduction and the damages suffered equaled at least 65,439.35 Sf.
In its submission of 1 March 2002, [Seller] argued that the arguments submitted by [Buyer] should be rejected, stating that its allegations in that respect were insufficient other than the fact that it did not state the amount of the damages submitted. [Seller] contested the alleged defaults regarding the delay of the notification by [Buyer]. In addition, [Buyer] failed to prove its losses and state the amount of the damages, so its claim for compensation was not justified.
D. In its judgment of 18 April 2002, the Court of First Instance accepted the arguments of [Seller] The court held that [Buyer] submitted two [requests] for compensation, each of which were higher than the claimed sum, without proving their existence or establishing their amount. In addition, the arguments of [Buyer] were not formulated precisely. Requesting compensation for damages without specifying its amount does not meet the procedural requirements. However, the merits of the debt giving rise to the claim were proved.
E. In support of its appeal, [Buyer] complained that the court found its arguments unfounded, or even inadmissible. [Buyer] submits that it did specify the amount of the damages. Regarding the acts of unfair competition, [Buyer] states that the [Seller] lured away [Buyer]'s employee in October 1997, following the dealings during the order process. According to [Buyer], the [Seller] financed a competitor company where the above-mentioned employee worked, and which is a company that "displays the same logo" as that of the [Seller]. Regarding the rest, [Buyer] maintains its first-instance arguments.
[Seller] contests that it had ever negotiated with the [Buyer] a global purchase price. The goods were delivered and invoiced for each order. The profit margins of [Buyer] did not concern [Seller]. The [Seller] did not participate in preparing the calculations included in [Buyer]'s exhibits 11 and 12. That calculation, prepared with the help of a "spreadsheet" does not correspond to anything. [Seller] notes that [Buyer] was satisfied with alleging a harm as a result of the defects and performing unilaterally a price reduction, without specifying the amount. In addition, [Buyer]'s argument regarding the price reduction presented on appeal is new. [Seller] argues that it received the notice about the defect on 1 April 1998, while the goods were delivered in the fall 1997. The notice expressed only vague concerns regarding the assembly of "certain windows". In addition, the [Buyer] alleges enormous losses regarding the building site on Drize without proving their existence or providing exact figures. Finally, [Seller] contests that it has any financial, judicial or commercial link with the [Buyer]'s employee. The latter employee voluntarily quit his job.
1. The appeal is admissible as it was filed in the form and within the deadline required (Arts. 296 and 300 LPC). The latter arguments presented at the first instance were made regarding a capital claim that was 8,000 Sf higher, as the court held on first instance. Therefore, this appellate court reviews the cause of action with a full power to examine (Art. 22, 24 and 25 LOJ; 291 LPC; SJ 1984, p- 466 para. 1).
2. The [Buyer] acknowledges that it owes the [Seller] the claimed sum. The [Buyer] contests the principal claim regarding the payment, specifically, [Buyer] seeks:
|-||Reduction of the purchase price due to non-conformity of the goods delivered; and|
|-||Damages and interest due defects in the goods delivered, and as a result of acts of unfair competition.|
a) In the presence of a foreign element, i.e., the [Seller]'s place of business is in Belgium, the federal law on private international law must be applied (LCIP [RS 291]), in which Art. 1(2) provides for supremacy of international treaties.
b) In case of an international sale involving Belgium and Switzerland, i.e., countries where the respective places of business of the parties are located, the Vienna Convention of 11 April 1980 applies (Art. 1(1)(b) CISG [RS 0.221.211.1]). Belgium ratified the Convention on 31 October 1996 and Switzerland ratified it on 21 February 1990, upon which it had entered into force in both countries on 1 November 1997 and on 1 March 1991, respectively.
The CISG provides comprehensive [regulation]. It governs the entire contract, formation thereof, rights and obligations of the parties and the consequences of non-performance. Theoretically, concurrent application of national law is excluded. However, the CISG does not cover procedural matters which depend on the law of the forum (SJ 2001 I 304; Neumayer/Ming, Commentaire de la Convention de Vienne sur les contrats de vente international de marchandises, Cedidac, no. 13 on Art. 4 CISG; Honsell, Kommentar zum UN-Kaufrecht, no. 29 on Art. 4 CISG). The law of the forum is applicable in particular to evaluate the damages and interest under Art. 74 CISG and, theoretically, also to determine admissibility of an objection to price reduction under Art. 50 CISG (Neumayer/Ming, op. cit., no. 1, note 8 on Art. 50 and no. 2 on Art. 74 CISG; Honsell, op. cit., no. 33 and 35 on Art. 74 CISG).
c) Under Art. 148(1) LDIP, the law applicable to the debt governs the limitation period and the peremptory term.
In case of "compliance with a debt through compensation", Art. 148(2) LDIP provides for application of the law that governs the debt concerning which payment is disputed. This law governs the admissibility, the conditions of the compensation -- in particular, if the respective performances are of the same nature or connected, if the debt the payment of which is disputed is due or has a specific character, and if a time-barred debt may be compensated, its implementation or its effects, such as the defining moment to determine whether the principal debt was complied with. (Bucher/Bonomi, Droit international privé, 2001, no. 1145; Dutoit, Commentaire de la loi fédérale du 18 décembre 1997, 2001, no. 6 on Art. 148 LDIP).
The competent Swiss judge evaluating the merits also examines the preliminary questions regarding substantive law, including compensation. He will stick to the substantive character of the lex causae, but is not bound by the procedures concerning solely the jurisdiction of the State of lex causae, as noted above. Therefore, it is the lex fori, in case of Swiss law, that applies to the formal condition of compensation, and in particular, to all questions concerning the notification regarding compensation and the civil procedure. (Bucher/Bonomi, op. cit., no. 1146; Dutoit, op. cit., no. 8 on Art. 148 LDIP; IPRG - Dasser, Bale, 1996, nos. 12, 13, 15 on Art. 148 LDIP; De Page, Traité élémentaire de droit civil belge, 1967, 3rd vol., p. 623).
ca) Art. 148(2) LDIP governs solely compensation of debts that do not arise out of the same contract. Otherwise, reciprocal debts are subject to the same law. Compensation for damages and interest as a result of defects of the goods sold is, therefore, governed directly by the CISG, and, subsidiarily, the procedural provisions of the forum, as already indicated (Dutoit, op. cit., no. 6 on Art. 148 LDIP).
cb) Regarding the claims arising out of the damage suffered due to acts of unfair competition, the CISG does not contain any relating provisions. Therefore, the law applicable to compensation must be determined with regard to the principle included in Art. 148(2) LDIP, i.e., [by applying] the provisions of the Swiss private international law regarding sales (IPRG - Dasser, op.cit. no. 2 on Art. 148 LDIP).
In accordance with Art. 118 LDIP and Art. 3(1) of the Hague Convention on the Law Applicable to International Sale of Goods, dated 15 June 1955, (hereinafter: Hague Convention [RS 0.221.211.4]), the national law applicable to a sales contract is, in this case, Belgian law, as Belgium is the [Seller]'s domicile. Therefore, Belgian substantive law applies to the material conditions of compensation as a result of an alleged harm caused by acts of unfair competition.
3. Under Art. 50 CISG, if the goods do not conform to the contract, the buyer may reduce the price by a unilateral expression of intent. The declaration regarding price reduction, as a unilateral exercise of a right to modify, must be communicated to the seller before it takes effect. The goods must be attributed a lower value due to the non-conformity. The price can be reduced only on a pro rata basis, using the appropriate method, without taking into consideration the repair costs. If the buyer had already paid the price, it has a claim for restitution under Art. 50 CISG (Tercier, op. cit., no. 1233, 1234 and 1237; Neumayer/Ming, op. cit., no. 1 on Art. 50 CISG). The CISG does not contain any provision on the time limit to declare a price reduction, and the buyer may always enforce it by way of a lawsuit. (Neumayer/Ming, op. cit., no. 1 on Art. 50 CISG).
The buyer may not claim restitution regarding a part of the purchase price without specifying the amount of price reduction. The buyer can provide that number after it makes the declaration on price reduction. In any case, the buyer must present the amount of the price reduction during the judicial proceedings against its contractual partner (Honsell, op. cit., no. 26 on Art. 50 CISG).
In the present case, the [Buyer] did not submit any specification regarding the quantity of the defective goods, and, within the present proceedings, did not present a sum regarding the price reduction it claims. In addition, it follows from the written documents of 16 November 2001 (p. 4 and 8) that the [Buyer] chose to repair the defective windows by itself, which makes it also impossible to determine their actual loss of value.
Considering the requirement to clarify under Art. 126 LPC, reduction of the purchase price due to defects cannot take place in this case.
4. Under Arts. 45(2) and 50 CISG, the buyer does not lose the right to request damages and interest under Arts. 74-77, if it can prove its arguments in another way. A claim for damages and interest exists parallel with a claim for replacement or repair of the goods, and a claim for price reduction (Neumayer/Ming, op. cit., no. 2 on Art. 45 CISG and no. 1 on Art. 50 CISG; Tercier, op. cit., no. 1248-1249).
Under Art. 74 CISG, damages [and interest] for breach of contract consist of a sum equal to the actual loss and the lost profit. Such damages [and interest] may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.
The damage to be compensated includes actual damages (damnum emergens), as well as lost profit (lucrum cessans). The mere possibility to obtain profit is not sufficient. The seller's liability is substantiated when there is a breach of contract, damages and causality. The seller must pay damages and interest even if he did not commit any default (Neumayer/Ming, op. cit., no. 1 on Art. 74 CISG; Tercier, op. cit, no. 12450).
Calculation of the damages is performed in a specific way. The creditor must be reinstated in the same position as the one that had occurred, should the sale had been performed in conformity with the contract (Neumayer/Ming, op. cit., no. 1 on Art. 74 CISG; Tercier, op. cit., no. 1256).
The Swiss judge must perform this calculation according to Art. 99(3) and 42(2) CO, observing the principles of civil procedure (Neumayer/Ming, op.cit., no. 2, note 18 on Art. 74 CISG; Honsell, op. cit., no. 33 and 35 on Art. 74 CISG).
Under Art. 42(1) CO, the burden of proof regarding damages rests on the party who claims it (Art. 8 CC). Under Art. 42(2) CO, if the exact amount of the damages cannot be established, the judge makes an equitable determination by considering the ordinary course of things and the measures taken by the aggrieved party. Such derogation from the principle regarding the burden of proof must be interpreted restrictively. It is still necessary that no evidence of harm exists, or that it cannot be demanded from the aggrieved party (ATF 105 II 87 para 3), and that the existence of damage is sufficiently convincing (ATF 98 II 34 para 2). Art. 42(2) CO does not contain an easy solution regarding a litigant who fails to submit evidence or impedes its administration. Its purpose is not to release the aggrieved party of its obligation to make every effort to state and prove the facts supporting that the harm exists and to appraise its extent (ATF 122 III 221 para 3a; ATF 116 II 225 para 3; Brehm, Berner Kommentar, on Art. 42 CO no. 46 ss., not. 50 and 51; Engel, Traité des obligations en droit Suisse, 1997, p. 505). The latter requirements suppose that a party on which the burden of proof lies has the responsibility to submit to the judge, to the extent possible, all elements allowing ex aequo et bono determination of the amount of damages (ATF 113 II 323 para 9c; 98 II 34 para 2; 97 II 216 para 1).
In its written submissions of 28 February 2002, in which the necessary information should have been communicated, without any explanation, the [Buyer] found it enough to refer to exhibits 11 and 12 regarding the calculation that was actually incorrect and incomprehensible regarding the costs of the goods and its possible profit margin. The [Buyer] failed to submit either any justification as to the costs and the works it did to make the goods conforming, as allegedly performed by the [Buyer], or any accounting records that would allow the court to assess the alleged lost profit.
Having failed to submit the necessary information, in support of the relating proof offered and in a timely manner, the [Buyer] is not entitled to request compensation for a harm allegedly suffered as a result of non-conforming delivery, as the court held it.
As the [Buyer] performs its commercial activities in Geneva, Swiss law applies.
The Court of Justice has jurisdiction in a civil law litigation arising out of application of federal law, regarding acts of unfair competition (LCD [RS 241]; Art. 1 of the Geneva law on acts of unfair competition, liquidation and similar operations and on game contests, dated 3 May 1991 (RSGe I 10]).
a) The LCD contains a general provision in Art. 2, defining an act of unfair competition; and a non-exhaustive list of examples is included in Arts. 3 to 8.
The [Buyer] complains, in particular, alleging that the [Seller] lured away one of its employees.
Acts to lure away employees in contempt of their employment contract are subject to Art. 4(a) LCD, according to which unfair competition is "one that incites a party to breach a contract with the purpose of concluding another contract with [the other party]," because the perpetrator wants to take the place of the [previous] employer; nevertheless, even systematic quitting by entire groups of workers is not considered unfair if the employees terminate their contracts in the appropriate and correct way (Kamen Troller, Manuel du droit Suisse des biens immateriels, 1996, vol. II, p. 967-968). A judgment of the Commercial Court of Saint-Gall dated 6 December 1983 (RSPI 1985 252) held that in this regard, "methodical luring of employees is not considered unfair by itself; it is justified only by reference to a breach of contract or when it is done for the purpose of exploiting the knowledge obtained by a competitor" (Dessemontet, Concurrence déloyale: texts législatifs et repertoires des arrest fédéraux et cantonaux, 1989, p. 406).
In this case, the [Buyer], which should prove the facts it presented (Art. 8 CC), did not submit any evidence regarding any objective and specific element that would allow one to determine whether the [Seller] incited its employee [with the intent] to breach his employment contract. The professional relations that the [Seller] had with [the employee] when he still worked for the [Buyer], do not directly mean that he was lured away.
For the above reasons, the [Buyer] was not entitled to compensation for the damages caused by an alleged act of unfair competition.
b) Another argument justifies the latter. Under Belgian law, compensation presupposes two fungible and due liquid debts between two parties (cf. Art. 1289, 1290 and 1291 of the Belgian Civil Code).
Under Swiss law, "liquid debt" ["liquidité"] means all debts the existence of which is certain and the amount of which is known. These two elements are essential. The debt must be certain regarding its existence. A future or possible debt is not a certain debt, as compensation for such debts may be contested (De Page, op. cit., p. 632-633; ATF 122 III 219 = JdT I 247-249; ATF 44 II 279 = JdT 1919 I 113).
In this case, none of the latter conditions is fulfilled. The [Buyer] indicated that it is incapable of stating the amount of its harm caused by the alleged unfair acts of the opposing party.
Ultimately, the appealed judgment must be confirmed in its entirety.
6. The [Buyer] that lost the case is ordered to pay the costs of the appeal.
FOR THE ABOVE REASONS
The court made the following judgment:
Regarding procedural issues
The court holds that the appeal filed by [Buyer] against judgment no. JTPI/4188/2002 rendered on 18 April 2002 by the Court of First Instance in case no. C/12709/2001-1 is admissible.
On the merits
|-||The judgment against the [Buyer] is confirmed; and|
|-||The Court orders [Buyer] to pay the costs of the appeal; that consists of procedural costs equaling 2,000 Sf including the attorneys' fees incurred by [Seller].|
|-||All other claims of the parties are dismissed.|
* All translations should be cross-checked against the original text. For purposes of this translation, Plaintiff-Appellee of Belgium is referred to as [Seller] and Defendant-Appellant of Switzerland is referred to as [Buyer]. Amounts in Swiss currency (Swiss francs) are indicated as [Sf].
** Andrea Vincze is a Fellow of the Institute of International Commercial Law of Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, and her LL.M. at Pace Law School. She is working on her Ph.D. on ICSID arbitration, and is researching international commercial law and ADR.Go to Case Table of Contents