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CISG CASE PRESENTATION

Hungary 2003 Szegedi Itelotabla [Appellate Court] (Spray pump case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030000h1.html]

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

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Case identification

DATE OF DECISION: 20030000 (2003)

JURISDICTION: Hungary

TRIBUNAL: Szegedi Itelotabla [Judicial Board of Szeged]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Gf.1. 30. 350/2003

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy [?] (plaintiff)

BUYER'S COUNTRY: Hungary [?] (defendant)

GOODS INVOLVED: Spray pumps with cap


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 78 [Also cited: Articles 3(1) ; 75 ; 76 ]

Classification of issues using UNCITRAL classification code numbers:

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

78B [Rate of interest]

Descriptors: Damages ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Hungarian): Birosagi Hatarozatok (2004/6) 456-457

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

Szegedi Itelotabla [Judicial Appellate Board of Szeged]

2003 [no exact date provided] [Gf.1.30.350/2003]

Translation by [*] Tamás Szabados [**]

Edited by Andrea Vincze [***]

I. The Vienna Convention on Contracts for the International Sale of Goods (CISG) applicable to the legal relation of the parties entitles the Buyer to declare the contract avoided, and the Buyer is obliged to pay damages to the Seller in this case as well (Article 76(1), (2), Articles 74 and 75 CISG).

II. If, in the case of the Buyer's avoidance, the Seller wrongly indicates the basis of his claim as recovery of the sale price and not as compensation, such an inaccurate indication of the basis of the Seller's claim does not result in rejection of a lawful claim for procedural reasons.

In view of the offer made by the Plaintiff [Seller] on 9 July 2001 containing all substantial terms of the contract, on 27 July 2001 the Defendant [Buyer] ordered the production of 600,000 pieces of type GL 18 and 600,000 pieces of type GL spray pumps with cap. The purchase price of the GL 18 type spray pump and cap was EUR 98/1000 pieces, that of the GL 20 type was EUR 96.80/1000 pieces. The [Seller] set the delivery date for September 2001, noting that the [Buyer] is obliged to pay off the purchase price in advance. The [Seller] produced the ordered items partly in its Italian factory and partly in its Chinese factory by end of August, beginning of September. On 18 September 2001, the [Buyer] declared the contract avoided.

In its claim, the [Seller] requested the Court to order the [Buyer] to pay EUR 117,054.96 and 11% interest thereon for the period between 1 October and the date of the payment. [Seller] explained that the special goods that were ordered were produced for the deadline determined in the contract, and they were lodged in [Seller]'s Italian store. The [Buyer] is obliged to pay the purchase price. Alternatively, [Seller] claimed the payment of damages equal to the purchase price or compensation based on section 6 of the Hungarian Civil Code (hereinafter: Ptk.).

The [Buyer]'s counterclaim was aimed at rejection of the [Seller]'s action. [Buyer] alleged that a supply contract was not concluded as the parties could not agree on the date of payment and that the order of 27 July 2001 was sent by an employee of the [Buyer] who was not authorized to make a declaration on behalf of the [Buyer].

In its judgment, the Court of First Instance rejected the [Seller]'s claim. In the reasoning of its judgment, the Court stated that a supply contract, within the meaning of section 379(1) Ptk., was concluded between the litigating parties. The [Buyer]'s employee who sent the offer negotiated regularly about his acts subject to his respective scope of activities based on the authorization obtained from [Buyer's] general manager authorized to act, therefore, the [Seller] had reasonable grounds to infer from the circumstances that this person has authority to conclude contracts (apparent authority). The Court emphasized that the declaration of avoidance was made by the same person. The Court pointed out that, pursuant to section 381(1) Ptk., the [Buyer] had the right to declare the contract avoided, subject to the obligation to pay damages. Nevertheless, the [Seller] demanded payment of the purchase price, which claim is unfounded with respect to termination of the contract. [Seller] could claim so-called reliance interest based on section 6 Ptk. if the supply contract had not been concluded. In the present case, there was privity between the litigating parties, hence a compensation claim based on section 6 Ptk. is unfounded.

The [Seller] filed an appeal against the judgment, in which it submitted that, without being bound to the legal title, the Court should have obliged the [Buyer] to pay damages equal to the purchase price. [Seller] also alleged that, in case of a declaration of avoidance by the Buyer, the Seller is entitled to total compensation which may exceed the purchase price of the unaccepted product.

The [Seller]'s appeal is predominantly well-founded.

The Court of First Instance correctly stated that a supply contract for foreign trade came into existence between the litigating parties by acceptance of the offer containing all necessary terms for the conclusion of a contract. As a result of the offer and acceptance thereof under unmodified terms, the Buyer's obligation to pay the purchase price became due directly before commencement of the delivery, that is, after production of the goods. According to the pro forma invoice sent to the [Buyer], payment was due before delivery; and an agreement with such content could be validly concluded pursuant to section 200(1) Ptk. The Buyer constantly urged production as soon as possible, and then [Buyer] avoided the contract, without offering any explanation, directly before its own contractual duty, i.e., payment of the purchase price, became due. As it is demonstrated by documents as well, the real reason of this was that the [Buyer] could purchase the same goods from another manufacturer for a lower price.

The parties requested application of Hungarian law in the proceedings. Hungarian law includes the Convention on Contracts for the International Sale of Goods concluded in Vienna on 11 April 1980, promulgated in Hungary by Legal Decree No. 20 of 1987 (1987.20. tvr).

   -    Pursuant to Article 3(1) CISG, contracts for the supply of goods to be manufactured or produced are governed by the Convention.
 
   -    Similarly to section 381(1) Ptk, the CISG also entitles parties to declare a contract avoided, however, the Buyer is obliged to pay damages to the Seller (Article 76(1), (2), Articles 74 and 75).

As a result of incorrect interpretation of the principle of being bound to the claim, the Court of First Instance drew the wrong legal conclusions from the correctly established facts. The principle of being bound to the claim is defined by section 215 of the Hungarian Code of Civil Procedure (Pp.). Accordingly, the court's decision cannot go beyond the claim and the counterclaim. According to consistent judiciary practice, being bound to the claim does not imply that the party is bound to the legal title as well. The task of the court is to judge the legal relation underlying the action, and its decision may not be hindered by the fact that the [Seller] incorrectly (wrongly) indicated the legal title of its claim. If the facts presented by the party presenting a claim prove to be true and these support the claim, then the action cannot be rejected only because of inaccurate identification of the legal title (Bírósági Határozatok [Judicial Decisions] Decision No. 193/2/111, Bírósági Határozatok Decision No. 2000/1/20).

In this case, the [Seller] claimed primarily the payment of the contractual consideration (purchase price), secondarily the payment of damages or compensation. The facts and the evidence presented by [Seller] established a claim for damages, correctly a claim for compensation for lawful declaration of avoidance; therefore, inaccurate identification of the legal title did not justify rejection of the claim. According to established, governing judicial practice, in case of a general, ordinary declaration of avoidance without stating the reasons, the obligee must put the obligor in the same financial position as if the avoidance had not occurred. Due to the duty to compensate for avoidance of the contract, the [Buyer] must pay such costs, expenses and other damages of the [Seller] or contractor, which would not have arisen in absence of the avoidance (Bírósági Határozatok, Decision No. 1995/4/229). The [Buyer] may declare the contract avoided at any time before the acceptance of the product. This right is usually exercised when the compensation for damages of the [Seller] or contractor means less economic loss for the [Buyer] than acceptance of the services which became useless in the meantime. In case of a declaration of avoidance made at a time close to the performance deadline, the damages increasingly approximate the amount of the consideration agreed upon, and even reaches that amount after the obligor's notification of readiness to deliver. (Decision No. 6 GK of the Economic Chamber of the Supreme Court).

In this case, the Buyer declared the contract avoided when the [Seller] had already produced the goods specified in the order. As a sale by the [Seller], specified in Article 75 CISG, did not take place concerning goods without and differing from the range of the producer's main profile and suitable only for special purposes, and as performance and the declaration of avoidance occured at the same time, the [Buyer] is obliged to pay a compensation equal to the contractual purchase price that became due directly before delivery. Nothing prevents [Buyer] from removing the goods, still being in the [Seller]'s possession, within a reasonable time after performance, and the [Seller] acknowledged its relating duty during the hearing before the Appellate Court.

The Appellate Court determined the rate of the default interest in line with the judicial practice concerning condemnation in foreign currency (Decision No. BH 1995/6/342). After considering the latter, based on section 253(2) Pp., the judgment of the Court of First Instance was partly altered and the [Buyer] was obliged to pay EUR 117,054.96 and interest thereon for the period between 1 October 2001 and the actual payment, at the interest rate for international financial markets published by the Hungarian National Bank. The judgment on rejection of an interest claim in excess of the latter amount was confirmed. (Judicial Appellate Board of Szeged [Szegedi télõtbla] Gf. I. 30.350/2003).


FOOTNOTES

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

** Tamás Szabados is a Ph.D. candidate at Eötvös Lóránd University, Hungary. Currently, he is an LL.M. student at University College, London.

*** Dr. Andrea Vince is a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She received her law degree from the University of Miskolc, Hungary, and her LL.M. in Comparative Law at Pace Law School. Her research areas include the CISG, international commercial arbitration and investment arbitration.

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Pace Law School Institute of International Commercial Law - Last updated August 29, 2008
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