Switzerland 11 February 2003 Commercial Court St. Gallen (Audio CDs case) [detailed abstract available]
[Cite as: http://cisgw3.law.pace.edu/cases/030211s1.html]
DATE OF DECISION:
JURISDICTION:
TRIBUNAL:
JUDGE(S):
CASE NUMBER/DOCKET NUMBER: HG.2001.11-HGK
CASE NAME:
CASE HISTORY: Unavailable
SELLER'S COUNTRY: Switzerland
BUYER'S COUNTRY: France
GOODS INVOLVED: Audio CDs
SWITZERLAND: Handelsgericht St. Gallen [HG.2001.11-HGK] 11 February 2003
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.
Go to Case Table of ContentsAPPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
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:
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: Unavailable
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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