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CISG CASE PRESENTATION

Netherlands 23 April 2003 Appellate Court 's-Gravenhage (Rynpoort Trading v. Meneba Meel) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/030423n1.html]

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

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Case identification

DATE OF DECISION: 20030423 (23 April 2003)

JURISDICTION: Netherlands

TRIBUNAL: Hof 's-Gravenhage [Hof = Gerechtshof = District Appeal Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 99/474

CASE NAME: Rynpoort Trading & Transport NV et al. v. Meneba Meel Wormerveer B.V. et al.

CASE HISTORY: Rechtbank ruling of 14 January 1999 [reversed]

SELLER'S COUNTRY: Netherlands (defendant)

BUYER'S COUNTRY: Belgium / Mozambique (plaintiff)

GOODS INVOLVED: Wheat flour


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 8 ; 9 ; 25 ; 26 ; 35 ; 49 ; 77 ; 82

Classification of issues using UNCITRAL classification code numbers:

7A33 [Application of good faith standards]

8A [Interpretation of party's statements or other conduct: intent of party making statement or engaging in conduct];

9B [Implied agreement on international usages, standard];

25B [Definition of fundamental breach: substantial deprivation of expectation, etc.];

26A [Effective declaration of avoidance];

35A [Conformity of goods to contract: quality, quantity and description required by contract];

49A [Buyer's right to avoid contract: grounds for avoidance];

77A [Obligation to take reasonable measures to mitigate damages];

82A [Buyer would have right to avoid contract except: inability to return goods in same condition]

Descriptors: Good faith ; Intent ; Usages and practices ; Fundamental breach ; Conformity of goods ; Avoidance ; Mitigation of loss ; Restitution

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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 (Dutch): [2003] Nederlandse Jurisprudentie (NJ) No. 713

Translation (English): Text presented below; (German): [3/2004] Internationales Handelsrecht 119-120; CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/903.pdf>

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Gerechtshof [Appellate Court] 's-Gravenhage 23 April 2003

Translation [*] by Patrick Bout [**]

Case information

Court: Appeal Court 's-Gravenhage (Gerechtshof)
Date: April 23, 2003
Number:      99/474
Source: NJ 2003/713

Laws and regulations

CISG: 7, 8, 9, 25, 26, 35, 49(2)(b), 77, 82
Food and Drugs Act (Warenwet) hereafter FDA: 4
FDA resolution for flour and bread (Warenwetbesluit Meel en Brood):    2, 3
Execution exemption (FDA) (uitvoeringsvrijstelling): 2 (c and d)

[EXECUTIVE SUMMARY]

International sales contract concerning sales of wheat-flour; delivery of the wheat-flour containing a bread enhancing substance which contains potassium bromate; this does not comply with the demands of the Dutch FDA (Warenwet) as well as the international standard for the product, which leads to intervention by the government and constitutes a fundamental breach of the contract between the parties; no exceeding of the term valid for right of avoidance of the contract; the deterioration of the product as a result of the distraint of it by the local government is of no influence on the right of avoidance of the contract.

ABSTRACT

(1) [Buyer] (Plaintiff in first instance, Appellant in appeal) purchased wheat-flour from [Seller] (Defendant in first instance and appeal) which was destined for Mozambique. Upon delivery the wheat-flour was confiscated by the authorities in Mozambique, because [Seller] had added a bread enhancing substance to the wheat-flour which contains potassium bromate, to prolong the period the goods will keep their quality. The use of this additive is prohibited in both The Netherlands and the European Union (EU) and does not conform to the standard of the Codex Alimentarius. [Buyer] has declared the contract avoided based on a fundamental breach of the contract and claims a judicial declaration as such from the Court. [Buyer] bases this claim on the assumption that [Seller] has not lived up to its obligations under the contract between the parties. The Court of First Instance decided that the actions of [Seller] did not constitute a fundamental breach of contract as is meant in article 25 of the CISG. [Buyer] appeals this decision.

(2) (Cons. 5-6:) This Court is of the opinion that fax messages between the parties during the negotiations prior to the conclusion of the contract clearly show that the quality of the wheat-flour that was to be delivered was a very important aspect for [Buyer]. The reactions and statements of [Seller] could reasonably be regarded by [Buyer] as a warranty, meaning that the wheat-flour would at least conform to the international standard that was applicable at that time; [Buyer] had no reason to understand this reaction as a mere recommendation without further meaning. If [Seller] did not have the intention to use an international standard, [Seller] - based on the concept of good faith present in international trade - would have been obligated to explicitly point out to [Buyer] that the added bread enhancing substance was not according to EU regulation or to the standard of the Codex Alimentarius as a result of the use of potassium bromate. The plea of [Seller], that the addition of potassium bromate is a company secret is not convincing; a company secret should not be protected in jure if good faith demands that there is a duty to inform the other party.

(3) (Cons. 7-9:) Adding potassium bromate to wheat-flour has been prohibited since 1986 in The Netherlands and since 1990 within the EU. Potassium bromate is considered to be a substance that may cause cancer and so may damage DNA structures. In 1994, potassium bromate was removed from the list of admitted food additives of the Codex Alimentarius, which is designed to protect the health of consumers and to promote fair trade ("fair practices") in the trade of food products. [Seller] does not deny being aware of these restraints and recommendations. Apparently [Seller] warrants to [Buyer] the "very high standard of the improvers that we add ...", but at the same time adds potassium bromate to the wheat-flour, while knowing that this is contrary to Dutch and EU enforced regulations as well as with the recommendations of the Codex Alimentarius. The Court agrees with [Buyer] that [Seller], by adding potassium bromate to the wheat-flour, did not deliver a product which corresponds to the demands as were set in the contract between parties. A different opinion would implicate that a seller from a highly developed country would be able to deliver goods not suitable for human consumption to a buyer from a lesser developed country, without a sanction following from the contract. The Court is of the opinion that the breach of contract by [Seller] should be considered fundamental in the sense of article 25 of the CISG. The defect of the goods could not be cured, as the addition of the potassium bromate could not be undone.

(4) (Cons. 10-12:) Furthermore, the Court considers that following both article 4 of the Dutch FDA (Warenwet), article 2 and 3 of the FDA resolution for flour and bread (Warenwetbesluit Meel en Brood), and the Execution Exemption and its accompanying note, the system of the mentioned rules implies that it is prohibited to produce, make or trade flour which is enriched with an additive that contains potassium bromate. The export of such products to different countries is to be understood as being part of the term "trade" as mentioned before. [Seller] cannot claim one of the exemptions of article 2 sub c and d of the Execution Exemption. As a result, the prohibition of the appropriate Food and Drugs Act is applicable. This means that the Dutch authorities were entitled to interfere and as such any damages occurring from governmental actions should have been foreseeable to [Seller].

(5) (Cons. 14:) Following the above, the first appeal is valid and the District Court (Rechtbank) has concluded unjustly that there had been no fundamental breach of contract by [Seller] [...]. Because of this, the appealed sentence cannot be upheld, and the other pleas do not have to be taken into consideration.

(6) (Cons. 15 - 16:) Upon further evaluation of the pleas against the claim of [Buyer], this Court concludes that the plea of [Seller] that the notice of avoidance of the contract by [Buyer] was late, should be rejected.

With regard to the complete legal and factual circumstances, this Court considers the period between 20 November (date of confiscation of the first batch of flour), respectively, December 1996 (date of confiscation of the second batch of wheat flour) and 4 January 1997 (date of the notice containing the declaration of avoidance) - also taking into account the holiday season - was thus not too long, and that the reasonable period of time, mentioned in article 49(2)(b) of the CISG was not exceeded. Furthermore, this Court considers that the fact that the quality of the flour deteriorated as a result of the confiscation by the Mozambican authorities, cannot be held accountable to [Buyer]. There has been no act or neglect by [Buyer] that had a negative effect on the duration of the confiscation. The duration of the confiscation has to be regarded as a result of the addition of potassium bromate, which has to be for the account of [Seller].

(7) (Cons. 17:) Based on the aforementioned, this Court finds that [Buyer] could rightfully avoid the agreement as a result of the fundamental breach by [Seller]. This frees both parties from their duties under the agreement. [Seller] has to refund the purchase price already paid by [Buyer], raised with interest.

Upon which remittance follows to a next session in court to enable [Buyer] to specify its claim and prove it with additional documents.

[PARTIES]

- Rynpoort Trading &Transport NV, located in Brasschaat (Belgium),
- Ispigo de Ouro, located in Maputo (Mozambique),
- Mocambique International Trade LDA, located in Maputo (Mozambique), Appellants, hereafter to be referred to combined as: [Buyer] ..., solicitor Mr. R.S. Meijers [*]
versus  
- Meneba Meel Wormerveer B.V., trading under the name of World Flour, located in Wormerveer (The Netherlands),
- Maxeres NV, formerly known as Meneba NV, located in 's-Gravenhage (The Netherlands), hereafter to be referred to combined as [Seller] ..., solicitor Mr. H.C. Grootveld, [*]

THE CASE

[...]

Consideration of the appeal

[...]

2. In short [Buyer] demands a judicial declaration (verklaring voor recht) that the agreements of sale of goods between the parties are terminated, or at least have to be considered terminated, or at least are avoided, or at least demand avoidance of these agreements, with sentencing of [Seller] to cover the damages of [Buyer]. [Buyer] bases this demand - in short - on the fundamental breach by [Seller] by adding potassium bromate to the wheat flour that was delivered by [Seller], or on error and deceit of illegitimate actions.

3. No appeals have been brought against the facts that were established by the District Court (rechtbank) in its sentence of 14 January 1999, under 2.1, so these facts will be considered to be true and valid between parties.

Furthermore, it can be concluded that the United Nations Convention on Contracts for the International Sale of Goods (hereafter to be referred to as CISG) is applicable to the agreements mentioned above under 2.1 and that Dutch Law is applicable to the remaining. [...]

4. [Buyer]'s first appeal is directed to the rejection of the District Court's conclusions that:

  1. The flour was suitable for its intended purposes, which were export to and use of it in Mozambique, now that (the import of) flour enriched with potassium bromate was apparently de facto permitted in Mozambique at the time of passing of the risk of the goods; and that
  2. [Seller] delivered that which [Buyer] was entitled to based on the agreements, being "EEC wheat flour type 'Aigle du Nord' with bread improver", as it was neither stated nor proven that the flour delivered was not - in itself - similar to flour delivered under that brand name.

5. To answer the question whether [Seller] did in fact commit a fundamental breach of the agreements between the parties as is meant in article 25 CISG, it has to be established what has been the precise contents of these agreements, based on the explanation of the agreements between the parties in light of article 8 CISG. In this respect, the following undisputed statements and acts are noticeable:

  1. After having received an offer from United Belgian Mills NV (Ubemi) for three different types of flour, [Buyer] contacted [Seller].
  2. [Buyer] acted as commissary on behalf of Ispigo and MIT in the purchase of at first 6,000 and afterwards 7,000 tons of flour from [Seller]. [Seller] was fully aware that these goods were intended for the Mozambican market.
  3. A fax message by [Seller] to [Buyer], dated 26 August 1996, contains the following:

    "[...] Pleased to offer as follows: 6,000 metric tons BREAD FLOUR at US $284/mton gross for net FOB stowed pre-slung Antwerp.
    Flour specifications: protein min. 12% on dry matter (Nx6.25), moisture max. 14%, ash max. 0.60% on dry matter, bread improver included."
  4. A fax message of the same date by [Buyer] to [Seller] (Annex 3B Plea Note Kort Geding, first instance), contains the following:

    "[...] Pls advise your acceptance - enclosed brand required by client - however - not sure whether acceptable to copy, as per our info brand registered - can you find out? [...]
    P.S. was not able yet to find the analyses of the 'Aigle du Nord' - did find a general spec in which is mentioned "bread improver" protein 11.50% Min Nx6.25 on dry matter - moisture 14% max - ash 0.60% on dry matter..."
  5. A fax message by [Seller] to [Buyer], dated 27 August 1996 (Annex 4 Plea Note Kort Geding, first instance), contains the following:

    "[...] We are pleased to offer firm as follows: 6,000 metric tons gross BREAD Flour at US $277 per metric ton gross for nett FAS Antwerp pre-slung in barges.
    Flour specification: EEC wheat flour type 'Aigle du Nord' with bread improver, protein min. 12% Nx6.25 on dry matter, moisture max. 14%, ash max. 0.60% on dry matter..."
  6. A fax message by [Buyer] to [Seller], dated 28 August 1996 (Annex 6 Plea Note Kort Geding, first instance), contains the following:

    "[...] Following our telcon of this morning we counter your firm for reply ... as follows: 6,000 mt g/n Bread flour - type 'Aigle du Nord' with bread improver, protein min. 12% NX 6.25 on dry matter, moisture max. 14%, ash max. 0.60% on dry matter packing in ... bags ... as per annex to our fax ... of 26/08 'L'Aigle du Nord' black logo red text Luanda to be replaced by Maputo, at the following conditions:
    a) [...]
    b) [...]
    c) Duly signed statement granting [Buyer] resp. their buyers in Mozambique exclusivity
    L'Aigle du Nord brand and specification for Mozambique and 'kundenschutz' [...]
    P.S. [...] having passed on yr fax we may expect that our client requires statement from you that your flour is better than 'Angolissar' "
  7. A fax message by [Buyer] to [Seller], dated 28 August 1996 (Annex 8 Plea Note Kort Geding, first instance), contains the following:

    "[...] We are pleased to offer firm as follows: 6,000 metric tons gross BREAD FLOUR at US $290 per metric ton gross nett FOB stowed Antwerp pre-slung.
    Flour specifications: EEC wheat flour type 'Aigle du Nord' with bread improver, protein min. 12% Nx6.25 on dry matter, moisture max. 14%, ash max. 0.60% on dry matter. We herewith declare that we know the Angolissar flour from our experience on the Angola market (where we supply through Afrotrade), and confirm that the quality of our flour is even better, due to the fact that our flour has a higher protein content and by the very high standard of the improvers that we add during the production of the flour at the mill. [...]"

6. Both parties agree that these negotiations led to the conclusion of sales agreements in August and September 1996 for respectively 6,000 and 7,000 tons of wheat flour, with the following specifications:

"EEC wheat flour type 'Aigle du Nord' with bread improver, protein min. 12% Nx6.25 on dry matter, moisture max. 14%, ash max. 0.60% on dry matter".

From the fax messages, especially the faxes mentioned above under 5 d, f and g, it is apparent that the quality of the flour to be delivered was a very important issue for [Buyer]. Before the parties reached a final agreement, [Seller] declared that the flour that was to be delivered by it was of superior quality if compared to Angolissar flour, because of the higher protein content and the very high standard of the added bread improvers. With regard to the preceding request by [Buyer] in the Post Script to the fax message, as mentioned above in 5f, the following declaration by [Seller] in its fax message, mentioned above in 5g, has to be regarded as an explicit warranty regarding - among other things - the quality of the bread improver: this preceding request by [Buyer] with regard to the issue of the quality of the flour to be delivered entails that [Buyer] and also Ispigo and MIT, to whom this declaration was directed, reasonably could have understood this declaration to be a warranty and therefore did not have to regard that statement as just a recommendation without further meaning; [Buyer] could reasonably understand this statement in such a way that [Seller] had the intention to warrant that the bread improvers were at least of the quality according to the international standard of that time. It is neither mentioned nor proven that, based on the price level of the flour to be delivered, [Buyer] should have understood that the quality of the flour was not according to the international standard. Also the health statement "fit for human consumption" as was issued by [Seller] for both batches, could not have led [Buyer] to different thoughts. If [Seller] did not have the intention to apply an international standard through [Seller]'s statement as mentioned above in 5g, then, based on the principle of good faith to be upheld in international trade (article 7 CISG), [Seller] should have pointed out to [Buyer] that the quality of the bread improver was neither according to the standards of the EU during the last six months of 1996, nor according to the standards of the Codex Alimetarius, because of the use of potassium bromate. As it is neither stated nor proven that [Seller] has issued a statement to such effect to [Buyer], it has to be assumed that such a statement was indeed not issued. In those circumstances, it is not acceptable to assume that [Seller] would only be obligated to share information about the fact that the composition of the bread improver was not according to international standards in the event that [Buyer] had previously asked questions to that effect. The motivation that the addition of potassium bromate to the bread improver is a company secret, is not convincing. A company secret does not deserve protection in jure in a situation in which good faith demands to speak out. It cannot be assumed that [Seller] intended to apply the Mozambican rules, as [Seller] - in its Act of Reply (Conclusie van Antwoord) - implicitly admitted that it was not familiar with the content of the Mozambican law on this subject at that time.

7. [Seller] has added potassium bromate to the bread improver in a ratio of 25 ppm (parts per million), because of the profitable effect of it on the baking process and the date of tenability of the wheat in tropical countries. [Seller] has not informed [Buyer] that potassium bromate was added to the bread improver. The addition of potassium bromate to wheat has been prohibited since 1986 in The Netherlands, as a result of the FDA ("Warenwet"), and since 1990 in the EU. In a report that was brought out in 1992 (Evaluation of Certain Food Additives and Naturally Occurring Toxicans) by the "Joint WHO/FAO Expert Committee on Food Additives", potassium bromate was marked as a genotoxic carcinogen (a substance that causes cancer, damaging DNA). In 1994, potassium bromate was banned from the list of admitted food additives of the Codex Alimentarius. Both The Netherlands and Mozambique are cooperative and have agreed to usage of the norms of the Codex Alimentarius. The Codex Alimentarius focuses on protection of consumers health and the promotion of fair practices, by issuing - among other things - standards to be regionally or globally followed. [Seller] has not denied knowledge of these restrictions and recommendations, so in jure it can be assumed that [Seller] was familiar with these norms. The conclusion is that, on one hand, [Seller] guaranteed to [Buyer] "the very high standard of the improvers that we add during the production of the flour at the mill", while, on the other hand, [Seller] added potassium bromate to the wheat, knowing that this was in conflict with the laws of The Netherlands and the EU at that time, as well as in conflict with the recommendations of the Codex Alimentarius then.

8. This Court is of the opinion with [Buyer] that - by adding potassium bromate to the wheat - [Seller] has not delivered wheat of the quality that was agreed upon in the agreements, because of the fact that potassium bromate was not an allowed additive by the Codex Alimentarius during the second half of 1996 and because the export of wheat containing potassium bromate was even prohibited by The Netherlands and the EU.

Although the composition of the bread improver to be added was not specified in the contract that was concluded between the parties, [Buyer] could regard the declaration by [Seller] as stated above in 5g as a warranty by [Seller] that the quality of the bread improver would at least be according to international standards. The Codex Alimentarius should in this sense be regarded as the appropriate general standard, as both The Netherlands and Mozambique have agreed to the use of this Codex Alimentarius.

The appeal by [Seller] that scientifically there is a discussion about the recommendations from the Codex Alimentarius, does not alter the fact that in the second half of 1996 there were legal bans on this subject in The Netherlands and the EU as well as that the Joint WHO/FAO Expert Committee on Food Additives has expressed a clear point of view. The fact that during the time of delivery of the batches of wheat the import of wheat with potassium bromate was de facto allowed or tolerated in Mozambique, does not negate the foregoing, as [Seller] concludes and [Buyer] opposes. A contrary opinion would implicate that products unfit for human consumption could be delivered without contractual sanction by a seller from a highly developed country to a purchaser from a less developed country, who - due to the contract - may rightfully expect to have delivered to him a product that is reliable according to international standards and fit for human consumption.

9. Furthermore, according to this Court, the breach by [Seller] has to be considered fundamental under article 25 of the CISG.

Because the quality of the bread improver was not according to then valid international standards, the quality of the wheat on the date of delivery was clearly insufficient, as a result of the possibly harmful long-term effects for human health after consumption of products that were baked using this wheat.

The defect of the wheat could not be cured, because the addition of potassium bromate to the bread improver could not be made undone. It should have been absolutely foreseeable to [Seller], that by delivering wheat with a bread improver containing potassium bromate, it could cause damage to [Buyer] as purchaser.

10. Possible damage as a result of governmental intervention also has to be considered foreseeable, even when, at the time of the passing of the risk of the goods, the recommendations of the Codex Alimentarius were not implemented in Mozambican law and even though there was no general rule applicable in that region that legitimised the Mozambican authorities to interact by taking the batches of wheat into custody with regard to public health. In this situation, article 4 of the FDA (Warenwet) should be considered to be blocking export, because this article, combined with articles 2 and 3 of the FDA resolution for flour and bread (Warenwetbesluit Meel en Brood), among other things, meant a ban on preparing, making and trading wheat with a bread improver containing potassium bromate. This means that the Dutch authorities could already have interfered.

11. [Seller] argues that, because of articles 2 sub c and d of the Execution Exemption FDA (Uitvoerinsvrijstelling Warenwet), it had the right to export these batches of wheat. As far as this case is concerned, the article says the following:

The note of clarification to this act (Staatsblad 1993, 314, p. 5) provides:

"The working of the FDA (Warenwet) in principle extends itself to all available goods on Dutch soil, which means including those that are intended for export. This premise may lead to problems in case of goods that are intended for countries with differing rules. To prevent such problems the relevant Dutch rules should be declared void (under strict conditions) [...]

"Article 2 is the core of this act. Based on this article, the rules laid down in the rules as incorporated in the articles 4 through 9 of the FDA (Warenwet), are not applicable for goods that are intended for export, only if one of the situations mentioned in this article is applicable. [...] Rules with regard to reliability and safety are rules that incorporate general norms applicable to goods - also abroad - in order to be able to qualify these as reliable and safe. Safety means all demands with regards to safety in a smaller sense (including the presence or not of additives in eatable or drinkable goods, bacteriological norms, rules for construction or warnings) and to reliability. The term reliability does not just stand for functionality of the product, but, e.g., also for the nutritional content of eatable and drinkable goods. [...]

"Section c refers to two circumstances in which the above mentioned rules of the FDA (Warenwet) will also not be applicable. In the first circumstance that will be the case when all specific demands of the receiving country, which regularly will be incorporated in relevant national law, are met. Especially with regard to rules on reliability, it cannot be expected that such explicit rules are always available in every country. Often only generally formulated rules will be applicable. In that case, the explicit rules from the FDA are in principal applicable. In the second circumstance, the rules from the FDA are not applicable if the goods involved are at least according to international rules that have been agreed to on a level of federal governments in international concern, in the drafting of which the Dutch government have been involved. One can think of the CEN-norms or the standard of the Codex Alimentarius in that respect. [...]

"The first situation is that in which the laws of a country of destination are not contradictory to the fact that Dutch suppliers of goods fulfil specific demands in that country of destination regarding the composition of the goods, as far as no derogation is being done to the demands following the FDA that have been set with regard to safety and reliability of these goods. The second situation allows the addition of more or other food additives compared to the possibilities in the FDA, provided that the addition is necessary because of the climatic circumstances in the country of destination. For instance this goes for the desirability of the presence of anti-oxidants in milk powder, meant for use in tropical regions (as it helps against becoming rancid). [...]"

12. Following the FDA (Warenwet), the FDA resolution for flour and bread (Warenwetbesluit Meel en Brood), the Execution Exemption (FDA) and the above mentioned passages of the Note to the Execution Exemption, the system of the FDA provides that it is prohibited to prepare, manufacture and trade wheat with a bread improver containing potassium bromate. Trading has to be understood as such, that it covers all export abroad. This means that, unless an exceptive clause from the Execution Exemption is applicable, the same demands would be applicable to wheat either to be delivered in The Netherlands or in Mozambique and that export of the mentioned batches of wheat to Mozambique were not legally possible at that time. Between the parties, there is no dispute over the fact that in 1996 there were no specific rules in Mozambique providing that potassium bromate had to be added to bread improvers. Furthermore, the parties agree that in 1996 there were no international rules, in the drafting of which the Dutch government had been involved, which stated that potassium bromate had to be added to bread improvers. On the contrary, the standard norms of the Codex Alimentarius, as mentioned in the Note of clarification, state that no potassium bromate should be added. This shows that [Seller] cannot appeal to the exceptive clause in article 2 sub c of the Execution Exemption.

The exceptional circumstance mentioned sub d is also not applicable in this case. There is no specific demand to add potassium bromate to the bread improver, while such an addition would derogate the demands from the FDA for safety and reliability of these goods, according to the rules of the Dutch FDA. The necessity to add potassium bromate, because of the typical climatic circumstances in the Mozambique, also cannot be taken into account. The opinion that it is impossible to produce wheat with a good quality for tropical regions without using a bread improver with potassium bromate is contradicted by the ban on the addition of potassium bromate to wheat, as has been valid in South Africa since 1994 and Zambia since 1997. As [Seller] could not have made a valid appeal to these exceptive clauses, the ban on the preparation, manufacturing and trade of wheat with a bread improver containing potassium bromate as mentioned in the FDA is applicable. This means that the Dutch authorities had the possibility of intervention and as such the possibility of damage by governmental actions was foreseeable.

13. The fact that Inchape has tested the batches of wheat before shipment and has issued a Clean Report of Findings, cannot lead to a different judgment. Inchape is a company, appointed by the Mozambican government, that was requested to check the batches of wheat with regard to the issuance of an import license by the Mozambican government. The question whether an import license, can be issued with regard to the content of Mozambican law, cannot be related to the question of how the prior concluded agreement between [Seller] and [Buyer] has to be explained, and whether the batches of wheat that were delivered were according to what was agreed to.

14. Based on the above, the [Buyer]'s first appeal succeeds and the District Court has therefore unjustly judged that there was no fundamental breach. This means that the appealed sentence of that Court cannot remain based on this, and that the remaining appeals against that Court sentence do not have to be dealt with due to lack of importance. This Court finds no longer relevant advice by experts regarding the content on Mozambican FDA and the way this is maintained.

15. As the appealed sentence cannot remain, this Court will now further research the grounds of the claim and what has been brought against it in appeal. From what was considered above, it shows that this Court is of the opinion that a fundamental breach occurred in the compliance with the obligations from the agreement by [Seller]. Through a letter dated 4 January 1997, [Buyer] has avoided the agreements following articles 35 and 26 CISG. Appealing to article 49(1)(b) CISG, [Seller] argues that there was no ground for avoidance and that the declaration of avoidance was too late. Following the opinion of this Court that [Seller] committed a fundamental breach in the compliance of the obligations under the agreement, it is clear that this Court feels that this breach is sufficient ground for [Buyer] to avoid the agreement. For the answer to the question whether this avoidance was within a reasonable time, this Court finds the following circumstances of importance:

  1. The batch of wheat flour of 6,000 tons was shipped from Antwerp on 25 September 1996 and the batch of 7,000 tons was shipped from Sluiskil on 14 October 1996 to Maputo.

  2. The first batch of wheat flour arrived and was stored in Mozambique in October 1996. This batch was confiscated by the authorities on 20 November 1996 because of the encounter of approximately 23.5 ppm potassium bromate.

  3. The second batch of wheat flour arrived in Mozambique in December 1996 and was also confiscated afterwards by the authorities because of the presence of potassium bromate.

Furthermore, this Court points out that to this case not just the CISG is applicable, but that also EU law, Dutch law and Mozambican law are of influence, as well as the recommendations of the Codex Alimentarius. It is complicating that between the parties and the many experts consulted by them there is - until now - absolutely no agreement as to the content of the Mozambican FDA at that particular time and the powers for the Mozambican authorities following from it. With regard to the complicated legal and factual circumstances, this Court considers that the period between 20 November, respectively, December 1996, and 4 January 1997 - also taking into consideration the holiday season - is thus long that because of it a reasonable term of notice was exceeded. This Court rejects the appeal by [Seller] that the message of avoidance on 4 January 1997 was too late.

16. [Seller] furthermore appeals to article 82 CISG and brings forward that [Buyer] has lost the right to declare the agreement avoided because [Buyer] cannot return the goods to [Seller] roughly in a similar state as in which [Buyer] received them, for which [Buyer] is to blame. [Buyer] renounces this appeal.

The circumstance that the quality of the wheat deteriorated during the distraint by the Mozambican authorities, cannot be accounted to [Buyer]. [Buyer] could rely on the fact that the quality of the bread improver would conform to the content of the agreement with [Seller] and that the quality of the bread improver would not be the motive for actions by the Mozambican authorities. There has been no action or neglect by [Buyer] that has had a negative influence on the duration of the distraint.

It cannot be understood how [Buyer] could have informed [Seller] about the commotion that started in Mozambique mid-1996 about wheat flour with potassium bromate, considering the fact that [Buyer] had the right to reasonably expect that the quality of the bread improver would be at least according to the appropriate international situation, see Consideration 6. This commotion was therefore not relevant to this transaction.

Also the circumstance that the batch of 7,000 ton of wheat flour from Durban, South Africa, was still directed to Mozambique and unloaded there, while at that particular time the first batch had already been confiscated, cannot lead to a different outcome. [Buyer] has stated, which statements have not been appealed to, that:

    -     At that particular time [Buyer] had already paid all costs related to that batch;
 
    -     This wheat flour could certainly not be traded in South Africa because of the ban on the addition of potassium bromate to wheat flour there;
 
    -     The costs for unloading and alternative shipping were US $683,000 and US $600,000 to US $700,000, while [Seller] was not willing to contribute to these costs; and
 
    -     At that time there was still hope for a quick release of the confiscated batch of flour by the Mozambican authorities.

In these circumstances, [Buyer] cannot reasonably be blamed that [Buyer] also had the second batch of flour shipped to Mozambique. That the batches of flour were only released for re-export by the Mozambican authorities on 22 April 1997, cannot be for the account of [Buyer]. The prolonged duration of the distraint has to be indicated as a consequence of the addition of potassium bromate, which has to be for the account of [Seller].

17. Based on the foregoing, this Court is of the opinion that [Buyer] could rightfully declare the agreement avoided, following the fundamental breach by [Seller]. Because of this, both parties are freed from their obligations under the agreement. [Seller] will have to refund the purchase price already paid by [Buyer] with added interest, see article 82 CISG. Through an Act of Change / Increase of 2 April 1998 [Buyer] has specified its claim. With an Act of Reply [Seller] has disputed this specification. Afterwards, the question regarding the justness of the height of these amounts has not or almost not been dealt with in the debate between parties. The Court will appoint the case to a next session in order to enable [Buyer] to further specify its claim and base it on documents. Furthermore, [Buyer] claims damages to be made up by the Court. This claim is in principle applicable, since it can be assumed that [Buyer] has suffered damages as a result of the fundamental breach by [Seller]. The Court feels that these damages should perhaps be calculated now, and, in light of the debate between the parties, perhaps could be. The Court invites both parties to express themselves on this issue in a further Act. Because the claims of [Buyer], as far as they can be granted, are granted on the primary appeal, the secondary appeal (misleading conduct, deceit) does not have to be dealt with.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiffs-Appellants are referred to as [Buyer] and the Defendants are referred to as [Seller].

** Patrick Bout, legal counsel in The Netherlands, editor of <http://www.cisg.nl>.

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Pace Law School Institute of International Commercial Law - Last updated January 19, 2005
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