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CISG CASE PRESENTATION

Switzerland 11 February 2003 Commercial Court St. Gallen (Audio CDs case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030211s1.html]

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

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Case identification

DATE OF DECISION: 20030211 (11 February 2003)

JURISDICTION: Switzerland

TRIBUNAL: Handelsgericht [Commercial Court] St. Gallen

JUDGE(S): Dr. R. Germann (Präsident); W. Siegwart (Vizepräsident); H. Eisenhut, T. Stalder, J. Wick (Handelsrichter); R. Nobs (Gerichtsschreiber)

CASE NUMBER/DOCKET NUMBER: HG.2001.11-HGK

CASE NAME: I... AG v. M... SA

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Switzerland (plaintiff)

BUYERS' COUNTRY: France (defendants)

GOODS INVOLVED: Audio CDs


Case abstract

SWITZERLAND: Handelsgericht St. Gallen [HG.2001.11-HGK] 11 February 2003

Case abstract [*] prepared by dr. Andrea Vincze [**]

Facts of the case

Plaintiff, a Swiss Seller, deals in audio CDs among other products. According to Seller's presentation, on 14 February 2000, Buyer no. 1 and Buyer no. 2, the French Defendants, ordered CDs of the Harlem Gospel Singers: 3,000 double CDs of "Live at the Cologne Philharmonic Hall" [hereinafter, "Cologne CDs"], and 3,000 of "Live in Paris" [hereinafter, "Paris CDs"].

   -    On 18 February 2000, Seller sent Buyer no. 2 three samples of the CDs ordered. In a fax on 19 February 2000, Seller confirmed the order and also stated therein that Buyer no. 2 will receive two sample CDs. Buyer no. 2 also confirmed the order in its fax on 21 February 2000.
 
   -    The 6,000 CDs were delivered to Buyer no. 1 in February 2000 for which Seller sent an invoice for French francs [Frf] 264,000 on 21 February 2000. Seller stated that 5,600 CDs were sent back in the period between 8 and 12 May 2000. Buyer no. 1, however, transferred to Seller Frf 17,600 which equals the total price for 200 double Cologne CDs (Frf 52 each) and 200 Paris CDs (Frf 36 each).

Jurisdiction

Since Buyer no. 1 had its place of business in France and Seller's place of business was in Switzerland, a cross-border transaction took place. Pursuant to Art. 5 LugÜ [*], the court having jurisdiction for a dispute is the court where the performance shall take place if the subject of the proceedings is either a contract or contractual claims. In the instant case, the purchase price was subject of the dispute, therefore Art. 5 LugÜ was found to be applicable. Consequently, the place of payment is relevant here and not the fulfilment of any other claim. The issue of place of performance is dependant upon the law applicable to the contract which is the CISG in the case at hand (cf. Art. 118(1) IPRG [*] and Art. 3 of the Hague Convention [*]).

Pursuant to Art. 57(1)(a) CISG, if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller's place of business. As Seller had its place of business in St. Margrethen, Switzerland, territorial jurisdiction of the relevant Commercial Court is substantiated (cf. Art. 14 ZPO [*]).

Merits of the case

Seller stated that it held out a sample to Buyer. Seller mentioned in its offer that Buyer no. 1 would receive samples within two days, but Buyer no. 1 did not refer to those sample CDs in its acceptance. Moreover, it is questionable whether, at the time of acceptance, the sample CDs were received by Buyer no. 1. Therefore, there is no basis for concluding that the contract was accepted based on those sample CDs.

Buyer no. 1 has stated that the "Paris CD" was not that of the show which was distributed by Sony in 2000 but an older version of the CD. Seller stated that there was no explanation why the "Cologne CDs" were sent back. However, it seems that several versions were being distributed under the same title at the same time. In the instant case, it is questionable which version the parties originally intended to contract for.

Yet, this question can remain open because Buyer(s) failed to object to the non-conformity in time.

   -    Pursuant to Art 38(1) CISG, the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances and, pursuant to Art. 39(1) CISG, the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. The term non-conformity of the goods is be interpreted broadly; besides defects in quantity, deliveries of inappropriate quality are also covered by this term.
 
   -    The period within which examination of the goods shall take place depends on the particular circumstances. Seller must perform promptly and in cases where the goods shall be sent to the buyer, the above-mentioned period begins when the buyer receives the goods (cf. Art 38(2) CISG). The length of the period to examine the goods depends on the exact circumstances of the case, especially on the type of the goods and the defect. The period shall be in accordance with the time needed for examining the goods.

Buyer(s) should have examined the goods within a few working days. However, defects with regard to one of the CDs ordered were objected to only on 5 June 2000, which was three months after receipt of the goods. There is no evidence that objection took place earlier than that. Objections were not made within a reasonable time after defects were discovered because in the case of evident defects the period to object begins when the period to examine the goods expires. In case of defective delivery, as Buyer no. 1 stated, the basis of the problem is an evident defect of the goods. Therefore, Buyer no. 1 lost all its rights provided for in Art. 45 et seq. CISG based on defective performance (cf. Art. 39(1) CISG). Consequently, Buyer no. 1 should have performed all its contractual obligations, especially it should have taken delivery of and paid for the goods even if performance was defective.

The court, however, pointed out that there are exceptions to the above rule laid down in Arts. 40 and 44 CISG.

The amount of the claim in question has to be determined. Pursuant to Seller's offer on 19 February 2000, the conditions of sale included the buyer's right to return 25 percent of the goods. Subsequently, Seller claimed Frf 198,000 which equals exactly the purchase price reduced by the above 25 percent. In addition, Seller explained that the right to reduction was a simple gesture of goodwill. Hoping that the purchase price would still be paid and the business relationship could go on, such a gesture was offered to Buyer no. 1. Yet, as the purchase price became the subject of court proceedings, there was no place for being tolerant any more.

There was nothing in the documents which would support this position of the Seller. The word "return rights" was used in the fax containing the offer. Yet, Seller later stated in the payment notice it sent to Buyer that Frf 198,000 was still due, i.e., "the amount due end of April". Whether Seller had really offered a gesture of goodwill or anything similar towards Buyer no. 1 could not be substantiated in the instant case. The court found that the notice in question should be judged on the basis of the "return rights" provided for in the contract. The fact that the amounts of money mentioned in various documents submitted by the parties are the same and the clear wording of the notice show that exactly Frf 198,000 was due. This amount shall still be reduced by Frf 17,600, i.e., the price of the 400 CDs which were delivered to Buyer no. 1 and the price of which it deducted. Therefore, the amount claimed was found to be Frf 180,400, i.e., Euro 27,501.80.

Seller also requested 5 percent interest on the amount claimed, due from 24 May 2000. Pursuant to the bill of delivery of 29 February 2000, the following methods of payment were agreed upon: 50 percent of the purchase price was to be paid within 60 days after taking delivery of the goods. The second instalment was to be paid 90 days after the buyer had issued invoices towards its own customers. In the notice on 24 May 2000, Seller set a Nachfrist concerning the first instalment and requested payment at the end of May 2000. For the second instalment, it set a payment deadline until mid-June 2000.

Pursuant to Art. 78 CISG, if a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it. As the CISG does not provide for the interest rate, it should be determined based on the national law that is found applicable pursuant to the conflict of laws provisions. Art. 104(1) OR [*] provides for a 5 percent interest rate.

The obligation to pay interest is governed by Art. 78 CISG as soon as the amount becomes due; a payment notice is not required. Pursuant to Art. 59 CISG, the buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller. Pursuant to Art. 58(1) if the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal in accordance with the contract and this Convention. The above provisions clearly indicate that they are of dispositive nature; therefore the parties are free to modify these rules and create a completely different agreement.

According to the bill of delivery, there was no specific delivery date set for either the first or the second instalment. It cannot be determined from the documents when the goods were delivered to Buyer no. 1 (cf. Art. 59 CISG). The notice of 24 May 2000 is, therefore, of dual significance - firstly, the significance of the fact that the parties departed from Art. 59 CISG and consequently calculation of interest on the first instalment is irrelevant from the 61st day after delivery (cf. Art. 78 CISG); secondly, the notice included precisely determined delivery dates.

The notice on 31 May 2000 concerning the first instalment is therefore completely justified if the original delivery date, yet undeterminable, was not complied with. Interest is, therefore, due from 1 June 2000.

Since the goods were sent back to Seller, it must have been aware of the fact that Buyer no. 1 would not issue any invoices to its own customers and that it would not comply with a determinable delivery date concerning the second instalment. In spite of that, Seller unilaterally set a delivery date for mid-June 2000. This behavior cannot be complained about with regard to clear indications of Buyer no. 1. Interest on the second instalment, i.e., Frf 99,000 (Euro 15,092.45) was found to be due from 15 June 2000.


FOOTNOTES

* For the purposes of this abstract, the Swiss Plaintiff is referred to as [Seller], and the French Defendant is referred to as [Buyer]. Amounts in European currency are indicated as [Euro]; amounts in the former French currency (French francs) are indicated as [Frf].

Note on other abbreviations: Hague Convention = Convention On The Law Applicable To International Sale Of Goods, The Hague, 1955; IPRG = Bundesgesetz über das Internationale Privatrecht, 18. Dezember 1987 [Federal Code on Swiss International Private Law]; LugÜ = Luganoer Gerichtsstands- und Vollstreckungsübereinkommen [Lugano Convention between the EU and EFTA countries on the Jurisdiction and Enforcement of Foreign Judgments]; OR = Obligationsrecht [Swiss Law on Contracts]; ZPO = Zivilprozessordnung [Swiss Code on Civil Procedure].

** Dr. Andrea Vincze 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, in 2002. Currently, she is a Ph.D. candidate at that university, working on her research project on international commercial arbitration and ICSID arbitration.

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Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 38 ; 39(1) ; 57(1)(a) ; 63 ; 78 [Also cited: Articles 6 ; 40 ; 44 ; 58(1) ; 59 ]

Classification of issues using UNCITRAL classification code numbers:

38A [Buyer's obligation to examine goods: time for examining goods];

39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller with reasonable time];

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

63A [Seller's notice fixing additional final period for performance];

78B [Rate of interest]

Descriptors: Payment, place of ; Jurisdiction ; Examination of goods ; Lack of conformity notice, timeliness ; Nachfrist ; 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

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

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 (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/900.pdf>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 35 para. 10

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Case text (English translation)

Queen Mary Case Translation Programme

Commercial Court (Handelsgericht) St. Gallen

11 February 2003 [HG.2001.11-HGK]

Translation [*] by Jan Henning Berg [**]

Edited by Institut für ausländisches und internationales
Privat- und Wirtschaftsrecht der Universität Heidelberg
Daniel Nagel, editor
[***]

On 11 February 2003, the Commercial Court (Handelsgericht) St. Gallen, President Dr. R. Germann, Vice President W. Siegwart, Commercial Judges H. Eisenhut, T. Stalder and J. Wick, handed down this decision in the dispute between Plaintiff [Seller] and the joint Defendants [Buyers] concerning the former's legal action.

[SELLER]'S CLAIMS

  1. [Seller] requests the Court to order the [Buyers] to pay as joint debtors the sum of French francs [f] 246,400 (= Euros [EUR] 37,563.44) plus interest of 5% since 24 May 2000.

  2. Furthermore, it is requested that the [Buyers] bear all costs of the proceedings.

FACTS

1. [Seller] is a corporation which is seated in St. Margrethen in the Canton St. Gallen, Switzerland. According to its own submission, it is mainly engaged in the sale of audio CDs (statement of claim, p. 1). [Buyer 1] is a corporation under French law and registered with the commercial register of Nanterre, France (statement of claim, p. 2). Originally, it had been domiciled in Gennevilliers, but moved its seat in the course of the present proceedings to Levallois, France. [Buyer 2] is domiciled in Levallois, as well.

2. According to [Seller]'s statements, the [Buyers] had ordered CDs from [Seller] on 24 February 2000: 3,000 double-CDs "Live at the Cologne Philharmonic Hall" and 3,000 CDs "Live at Paris", both performed by the Harlem Gospel Singers. On 18 February 2000, [Seller] sent [Buyer 2] three samples of each ordered CD (statement of claim, pp. 7 and 8). By fax dated 19 February 2000, [Seller] confirmed the above-mentioned order and indicated at the same time that [Buyer 2] would receive two samples of the CDs (statement of claim, p. 6). this order was confirmed by [Buyer 2]'s fax of 21 February 2000 (statement of claim, p. 4). The 6,000 CDs were delivered in February 2000 to [Buyer 1]. On 21 February 2000, [Seller] invoiced the purchase price of f 264,000 in total (statement of claim, p. 9). Pursuant to [Seller]'s submission, 5,600 of the CDs had been returned between 8 and 12 May 2000. On 25 May 2000, [Buyer 1] transferred the sum of f 17,600 to [Seller]'s account. This corresponds to the purchase price for 200 double-CDs "Live at the Cologne Philharmonic Hall" (f 52 each) and 200 CDs "Live in Paris" (f 36 each) (statement of claim, p. 11).

3. On 31 January 2001, [Seller] filed the present action before the Commercial Court with the request as set out above. The [Buyers] were served with the statement of claim; the [Buyers] were requested to submit their statements of defense within thirty days. The serving was effected via judicial assistance on 1 June 2001. As the [Buyers] let the time limit elapse without having taken any action, the President of the Court set the [Buyers] a time limit of ten days on 6 July 2001 in order to file their defense and threatened to continue the proceedings (Art. 61 ZPO [*]) and, respectively, to deny consideration of any later statement (Art. 165(2) ZPO). The letter was served on [Buyers] via judicial assistance on 13 July 2001. Since [Buyers] let this time limit elapse once again, proceedings continued in accordance with Art. 61 ZPO, i.e., the exchange of written submissions was closed and the parties were summoned to the oral hearing before the Commercial Court of the Canton St. Gallen on 22 April 2002. [Seller]'s legal representative participated in the hearing, while the [Buyers] remained absent. The summons had been served [Buyer 2] early enough. Therefore, the oral hearing was held under Art. 173 ZPO despite its absence. The Commercial Court dismissed [Seller]'s action because [Buyer 2] lacked the capacity to be sued.

According to the documents which have been transmitted to the Commercial Court by the assisting judicial authority (Tribunal de Grande Instance de Nanterre), it has not been possible to serve [Buyer 1] with the summons to the oral hearing on 22 April 2002 early enough. As a result, the oral hearing was rescheduled to 26 November 2002. In the meantime, [Buyer 1] chose attorney Dr. Christoph Rohner as its legal representative. The latter requested the Court to postpone the date of the hearing so that he could familiarize himself with the state of the proceedings. Therefore, [Buyer 1] was summoned once again to the present hearing by letter of 9 December 2002. On 17 December 2002, attorney Rohner resigned. By fax of 10 February 2003, [Buyer 1] made its statements concerning the subject matter of the proceedings and submitted some documents. [Seller] requested by its fax of 11 February 2003 not to give any consideration to [Buyer 1]'s submissions which had been made on the day before.

[Buyer 1] has not participated in today's oral hearing.

REASONING OF THE COURT

1.  a) [Buyer 1] has its seat in France. [Seller] has its seat in Switzerland. This means the present case has an international dimension. Pursuant to Art. 5 No. 1 of the Convention of 16 September 1988 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Lugano Convention; SR [*] 0.275.11), a jurisdiction is given at the place of performance, provided that the proceedings are concerned with a contract or claims arising out of contract.

The dispute between the parties concerns the payment of the purchase price, which -- beyond doubt -- falls within the term of "matters relating to a contract" in terms of the Lugano Convention. In addition, this payment is the obligation which forms the subject matter of the present action. Therefore, it must be geared to the place where this obligation was to be performed and not to the place where the characteristic performance under the contract was to be effected (cf. Lucien William Valloni, Der Gerichtsstand des Erfüllungsortes nach Lugano- und Brüsseler Übereinkommen, Dissertation Zürich 1998, pp. 217-227; Gerhard Walter, Internationales Zivilprozessrecht der Schweiz, 3rd. ed., p. 181). The notion of place of performance is to be determined according to the law applicable to the contract, which is the United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (CISG; SR 0.221.211.1) in the case at hand. This follows from Art. 118(1) of the Federal Statute of 18 December 1987 on Private International Law (IPRG [*]; SR 291) in conjunction with Art. 3 of the Hague Convention on the Law Applicable to International Sale of Goods of 15 June 1955 (SR 0.221.211.4).

Pursuant to Art. 57(1)(a) CISG, the buyer must pay the purchase price at the seller's place of business if he is not bound to pay the price at any other particular place (cf. Anton K. Schnyder / Ralf Michael Straub, in: Heinrich Honsell, Kommentar zum UN-Kaufrecht, Berlin/Heidelberg 1997, Art. 57 CISG margin numbers 26 et seq.; Gerhard Walter, loco citato, p. 190). [Seller] has its seat in St. Margrethen. Therefore, the Commercial Court has territorial jurisdiction over this dispute.

According to Art. 14(1) ZPO [*], the Commercial Court has subject-matter jurisdiction to consider disputes between parties which have been registered with the Swiss commercial register or any corresponding foreign register, if the dispute is concerned with the mutual business relationship and the value of the dispute exceeds f 30,000. These prerequisites are fulfilled in the present case. [Seller] is registered with the Swiss commercial register. [Buyer 1] is registered with the respective French register. Moreover, the present dispute has obviously arisen out of the business relationship between the parties. In particular, the commercial register states that the purpose of [Buyer 1]'s business is the distribution of "produits musicaux sous quelque forme que ce soit" (statement of claim, p. 2). The value of the dispute exceeds f 30,000.

      b) Since [Buyer 1] has not taken part in the exchange of written submissions, its absence in today's hearing is without bearing on the continuation of the proceedings. No new hearing had to be scheduled and the hearing could take place despite [Buyer 1]'s absence (Art. 173(3) ZPO).

      c) On 10 February 2003, [Buyer 1] sent a fax which contained its legal and factual statements concerning the present legal action. It also submitted a number of documents. [Seller] requests to disallow this submission due to the fact that it had been submitted too late.

Art. 164(1) ZPO provides that a subsequent submission is admissible if it contains factual assertions or requests for the taking of evidence, which could not have been brought before the Court at an earlier date despite reasonable care or if it is required by the right to be heard in court. Due to the fact that [Buyer 1] has refrained from participating in the exchange of written submissions and fails to provide any reason which would explain that it was only possible to make submissions and submit evidence at this point in time, these submissions cannot be accepted.

2. On the basis of the written offer of 19 February 2000 (statement of claim, p. 6) and the written acceptance of 21 February 2000 (statement of claim, p. 4), the Court assumes that a valid contract of sale has been concluded.

      a) [Seller] submits that the contract of sale was based on product samples which had been provided beforehand. It is true that it has stated in its offer that [Buyer 1] would receive product samples within the following two days, however, [Buyer 1]'s declaration of acceptance makes no reference to these sample CDs. In any case, it is doubtful whether [Buyer 1] had already obtained the respective samples at the time of its acceptance. Therefore, the contract has not been concluded on the basis of product samples

      b) The following items were sold under the contract of sale: Harlem Gospel Singers - "Live at the Cologne Philharmonic Hall" and Harlem Gospel Singers - "Live in Paris" (statement of claim, pp. 3, 4, and 6). [Buyer 1] has stated that the CD "Live in Paris" did not contained the particular performance of the year 2000, which had been sold by Sony. Instead, [Seller] had delivered an old version of the CD (statement of claim, p. 10). [Seller] states that [Buyer 1] had failed to provide any reason for the return of the CDs "Live at the Philharmonic Hall". Apparently, different versions of the CDs, however, with an identical title, seem to be in circulation. In the present case, it is doubtful which particular goods have been agreed upon by the parties in their contract of sale.

However, this issue may remain unresolved. Even if the delivered goods lacked conformity with the contract, [Buyer 1] would have failed to notify the lack of conformity within reasonable time. Under Art. 38(1), the buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it (Art. 39 CISG). The concept of lack of conformity is to be interpreted broadly. It covers both defective deliveries of the correct type of goods as well as deliveries of a wrong type of goods (cf. Ulrich Magnus, in: Honsell, loco citato, Art. 39 margin number 6).

The time limit for the examination is as short as possible under the circumstances. The buyer has to act quickly. If the contract involves carriage of the goods, the period for examination commences at the time when the goods have arrived at their destination (Art. 38(2) CISG). The exact duration of the examination period depends on the objective circumstances of the individual case, in particular on the type of goods and the nature of the lack of conformity. The period also depends on the time which is necessary to carry out the examination (Ulrich Magnus, in: Honsell, loco citato, Art. 38 margin numbers 20 et seq.).

In the present case, a lack of conformity as alleged by [Buyer 1] could have been determined easily and quickly. It can be assumed that it would have been possible for [Buyer 1] to perform its duty of examination within a few working days. The lack of conformity concerning the first CD was notified only on 5 June 2000 and therefore more than three months after the receipt of the goods. There are no indications to the effect that [Buyer 1] had notified the non-conformity already at an earlier point in time. The notification has not been given within a reasonable period of time after the alleged non-conformity could have been discovered, because in cases of an evident non-conformity the time period for notification commences when the period for examination expires (Magnus, in: Honsell, loco citato, Art. 39 margin number 16). In case of a delivery of a wrong type of goods -- as asserted by [Buyer 1] -- an evident lack of conformity can be readily assumed. Thus, even in case of a delivery that was not in conformity with the contract, [Buyer 1] would have lost all rights to rely on this lack of conformity pursuant to Art. 45 et seq. CISG (Art. 39(1) CISG). Thus, it would be obliged to perform all of its obligations under the contract, in particular to accept the goods and make payment, even if the delivery has not been in conformity with the contract.

Arts. 40 and 44 CISG contain exceptions to the general principle mentioned above. The buyer will be relieved from its duty to examine and notify under Arts. 38 and 39 CISG, if the seller knew or could not have been unaware of the lack of conformity and did not disclose it to the buyer (Art. 40 CISG). Moreover, the buyer may reduce the price if he has a reasonable excuse for his failure to give the required notice (Art. 44 CISG). However, [Buyer 1] has not relied on either of these provisions.

       c) At this stage, the extent of [Seller]'s claim must be ascertained. According to [Seller]'s offer of 19 February 2000, the standard terms of sale contained a right of the buyer to return 25% of the goods (statement of claim, p. 6/2). Subsequently, [Seller] issued a reminding notice for payment of the sum of f 198,000 (statement of claim, p. 12). This corresponds exactly to the purchase price, reduced by 25%. [Seller] claims that it granted the reduction on the basis of mere goodwill. It applied the reduction in favor of [Buyer 1] under the expectation that the purchase price would be paid and that the commercial relationship could be continued. Due to the fact that the purchase price had to be claimed by way of legal action, there was no longer any basis for goodwill; therefore the full purchase price had to be claimed.

However, the documents do not support this assertion by [Seller]. Its offer makes an express reference to "return rights" of the buyer. [Seller] then clarifies in its reminding notice, that only a sum of f 198,000 was owed ("[…] the amount due end of April"). The reminder does not contain any reservation. Due to these circumstances, [Seller] may not rely on this being an act of mere goodwill or an offer for settlement. Rather, this reminding notice must be seen in the light of the right of return which had been determined in the contract. The corresponding amounts and the unambiguous wording of the reminding notice clearly indicate that [Buyer 1] does not owe more than f 198,000. This sum is subject to a reduction of f 17,600, which has been paid by [Buyer 1] for the 400 CDs which have not been returned to [Seller] (statement of claim, p. 11).

As a conclusion to this, [Seller] is entitled to claim f 180,400 (EUR 27,501.80).

[Seller] claims a default interest of 5% on the sum claimed since 24 May 2000. According to the bill of delivery of 29 February 2000, the following payment terms had been stipulated:

   -    50% of the purchase price is to be paid 60 days after receipt of the goods; and
 
   -    The second installment must be paid 90 days after the buyer has issued the invoice to its customer (statement of claim, p. 9).

In its reminding notice of 24 May 2000, [Seller] set a time limit to pay the first installment and demanded payment by the end of May 2000. A time limit was set for the second installment: by the middle of June 2000.

According to Art. 78 CISG, the seller is entitled to interest if the buyer fails to pay the purchase price. However, the CISG does not govern the applicable interest rate. Pursuant to the leading doctrine, the interest rate must be determined with recourse to the domestic law applicable to the contract by way of conflict of laws rules (Magnus, in: Honsell, loco citato, Art. 78 margin number 12). The interest rate of 5% as claimed by [Seller] corresponds to the Swiss provision of Art. 104(1) OR [*]Hence, it cannot be contested.

The claim for interest arises as soon as the underlying claim becomes mature according to Art. 78 CISG. A reminding notice is not necessary. Art. 59 CISG provides that, in general, a claim becomes mature at the point in time determined in the contract or by the CISG. If the buyer is not bound to pay the price at any other specific time, he must pay it when the seller places either the goods or documents controlling their disposition at the buyer's disposal (Art. 58(1) CISG). However, the wording of these provisions implies that they are at the disposal of the parties. The parties may under Art. 6 CISG derogate from or vary the effect of any of the Convention's provisions.

According to the bill of delivery, no particular date of maturity has been agreed upon, neither for the first nor for the second installment. Moreover, it cannot be definitely ascertained from the documents at which point in time the delivery actually reached [Buyer 1] (Art. 59 CISG). In this respect, [Seller]'s reminding notice of 24 May 2000 has a twofold meaning:

   -    First, it indicates that the parties assumed the existence of a contract which -- in deviation from Art. 59 CISG -- required a reminding notice (this is corroborated by item no. 1 of [Seller]'s legal claim). Insofar, the calculation of default interest with respect to the first installment cannot be based on the 61st day after delivery of the goods (Art. 78 CISG).
 
   -    Second, [Seller] has specified particular dates of maturity in its reminding notice for the first time.

[Seller] was entitled to demand payment by [Buyer 1] by 31 May 2000, because the original date of maturity has apparently elapsed in the meantime, despite the fact that no specific date can be definitely determined. Consequently, [Buyer 1] owes default interest since 1 June 2000. Considering the transfer of f 17,600 on 25 May 2000, the remainder of the first installment amounts to f 81,400 (EUR 12,409.35).

Due to the return of the goods to [Seller], the latter knew that [Buyer 1] would not issue any invoice to its customers to the effect that the second installment would not become mature. Instead, [Seller] determined a date of maturity in the middle of June 2000. Following the clear indications by [Buyer 1], there cannot be any objection to this conduct. Thus, [Buyer 1] owes default interest for the second installment (worth f 99,000 = EUR 15,092.45) since 15 June 2000.

3. Due to this outcome of the proceedings, three quarters of the court fees have to be borne by [Buyer 1] and one quarter has to be borne by [Seller] (Art. 264(2) ZPO [*]). The fee for the decision of the Court is set at f 4,000. The certification fee has already been applied with respect to the decision of 22 April 2002.

The costs which have been incurred by the parties are allocated according to the same ratio which applies to the court fees. In order to compensate for the difference between these fractions, [Seller] may claim compensation from [Buyer 1] in respect to half of its costs (GVP [*] 1983 No. 56). [Seller]'s legal representative has submitted a cost note over f 15,328.35. Half of this sum (= f 7,664.20) is to be compensated by [Buyer 1].

DECISION

The Commercial Court holds:

  1. [Buyer 1] is ordered to pay [Seller] EUR 27,501.80 plus 5% interest on 12,409.35 since 1 June 2000 and on 15,092.45 since 15 June 2000.

  2. [Seller] bears one quarter of the decision fee of 4,000, while [Buyer 1] bears three quarters.

  3. [Buyer 1] is ordered to compensate [Seller]'s party costs in the amount of f 7,664.20

An appeal against this decision is admissible before the Federal Supreme Court (Bundesgericht). A nullity plea may be brought before the Court of Cassation (Kassationsgericht) of the Canton St. Gallen.

The appeal before the Federal Court can be submitted within thirty days after the serving of this decision in writing to the office of the Commercial Court St. Gallen, Klosterhof 1, 9001 St. Gallen.

An appeal may be brought only as a means to rely on a violation of Federal laws and of international contracts concluded by the Federation.

The decision subject to the appeal shall be attached.

The nullity plea can be submitted within thirty days after the serving of this decision in writing to the Court of Cassation of the Canton St. Gallen, Marktgasse 3, 9004 St. Gallen. A nullity plea may be based on a violation of Cantonal laws as well as factual findings which are evidently in contradiction to the case file or arbitrary. With the nullity plea, the Court of Cassation shall receive a certification fee in the amount of half a decision fee as demanded by the Commercial Court. The decision subject to the appeal shall be attached.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Switzerland is referred to as [Seller], the First Defendant of France is referred to as [Buyer 1] and the Second Defendant of France is referred to as [Buyer 2]. Amounts in the uniform European currency (Euro) are indicated as [EUR]. Amounts in the former currency of France (French francs) are indicated as [f].

Translator's note on other abbreviations: GVP = St. Gallische Gerichts- und Verwaltungspraxis [Collection of Judicial and Administrative Practices of the Canton St. Gallen]; IPRG = Bundesgesetz über das Internationale Privatrecht [Swiss Federal Statute on the Conflict of Laws]; OR = Obligationenrecht [Swiss Code on the Law of Obligations]; SR = Systematische Sammlung des Bundesrechts [Official database of Swiss federal legislation]; ZPO = Zivilprozessordnung des Kantons St. Gallen [Code on Civil Procedure of the Canton St. Gallen].

** Jan Henning Berg has been a law student at the University of Osnabrück, Germany and at King's College London. He participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem C. Vis (East) Moot.

*** Ph.D. candidate Daniel Nagel has studied law at the University of Heidelberg and at the University of Leeds.

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Pace Law School Institute of International Commercial Law - Last updated December 18, 2008
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